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Federal Agency Certifying Requirements of Federal Income Taxes Withheld From U.S. Government Employees --31-MAR-2014

Federal Agency Certifying Requirements of Federal Income Taxes Withheld From U.S. Government Employees (and Federal Pension Recipients) Residing in American Samoa,  the Commonwealth of the Northern Mariana Islands, and Guam

Section 1 below  sets forth the legal authorities requiring Federal agencies to certify to the Internal Revenue Service (IRS) the amount of federal income taxes withheld from amounts paid to U.S. government employees working in, as well as federal civilian and military pensioners residing in, American Samoa, the Commonwealth of the Northern Mariana Islands (CNMI), and Guam. As noted in Subsections 1(d) and 1(e), these special certifying requirements do not apply to Federal agencies who have employees working in Puerto Rico or the U.S. Virgin Islands.  

Section 2 describes what “Federal income taxes” are subject to these certification procedures.

Section 3 contains the procedures federal agencies must follow to certify to the IRS the amount of “Federal income taxes” paid to and deposited into the U.S. Treasury.

1.   Special Certifying Requirements for Federal Agencies

a.     American Samoa

Sections 931(a) and (d)(1) and section 7654 of the Internal Revenue Code, 26 U.S.C. (IRC) provide that the U.S. government is required to transfer (“cover over”) to the Treasury of American Samoa the Federal income taxes withheld on amounts paid to military and civilian employees and pensioners who are residents of American Samoa.  The effect of these provisions is that the Federal government transfers on at least an annual basis the Federal income taxes withheld or collected from its employees and pensioners who are residents of American Samoa to the American Samoa Treasury. In order for the Federal government to cover over these income taxes as required by law, Federal agencies must certify the amount of Federal income taxes withheld or collected from its employees and pensioners pursuant to the certification procedures contained in Section 3.

b.     Commonwealth of Northern Mariana Islands

IRC section 7654 (of the applicable 1954 Code) and Title 48 U.S.C. section 1681, [Public Law 94 241, section 703 (b)] provide that the U.S. government is required to cover over to the Treasury of the CNMI the Federal income taxes withheld on amounts paid to military and civilian employees and pensioners who are residents of the CNMI.  The effect of these provisions is that the Federal government transfers on at least an annual basis the Federal income taxes withheld or collected from its employees and pensioners who are residents of the CNMI to the CNMI Treasury.  In order for the Federal government to cover over these Federal income taxes as required by law, Federal agencies must certify the amount of Federal income taxes withheld or collected from its employees and pensioners pursuant to the certification procedures contained in Section 3.  As discussed and provided in the Note below, Federal agencies are not required to certify the amount of local CNMI taxes that are withheld or collected.

NOTE REGARDING FEDERAL AGENCIES WITH EMPLOYEES IN THE CNMI -- The U.S. Treasury Department and the CNMI Division of Revenue and Taxation entered into an agreement under 5 USC 5517 in December 2006.  Under this agreement, all federal employers (including the Department of Defense) are required to withhold CNMI income taxes (rather than Federal income taxes) and deposit the CNMI taxes with the CNMI Treasury for employees whose regular place of federal employment is in the CNMI.  Federal employers are also required to file quarterly and annual reports with the CNMI Division of Revenue and Taxation.  The 5517 agreement is not applicable to payments made to pensioners and compensation paid to members of the U.S. Armed Forces who are stationed in the CNMI but have a state of legal residence outside the CNMI.

c.     Guam

IRC section 7654 (of the applicable 1954 Code) and Title 48 U.S.C. section 1421(h) provide that the U.S. government is requiried to cover over to the Treasury of Guam the Federal income taxes withheld on amounts paid to military and civilian employees and pensioners who are residents of Guam. The effect of these provisions is that the Federal government transfers on at least an annual basis the Federal income taxes withheld or collected from its employees and pensioners who are residents of Guam to the Guam Treasury.  In order for the Federal government to cover over these Federal income taxes as required by law, Federal agencies must certify the amount of Federal income taxes withheld or collected from its employees, pursuant to the certification procedures contained in  Section 3.

d.     Puerto Rico

These special certifying requirements do not apply to Federal agencies who have employees working in Puerto Rico.

NOTE REGARDING FEDERAL AGENCIES WITH EMPLOYEES IN PUERTO RICO -- The U.S. Treasury Department and Puerto Rico entered into an agreement under 5 USC 5517 in November 1988.  Under this agreement, all federal employers (including the Department of Defense) are required to withhold Puerto Rico income taxes (rather than Federal income taxes) and deposit the Puerto Rico taxes with the Puerto Rico Treasury for employees whose regular place of federal employment is in Puerto Rico.  Federal employers are also required to file quarterly and annual reports with the Puerto Rico tax department. The 5517 agreement is not applicable to payments made to pensioners and compensation paid to members of the U.S. Armed Forces who are stationed in Puerto Rico but have a state of legal residence outside Puerto Rico.

e.     U.S. Virgin Islands

These special certifying requirements do not apply to Federal agencies who have employees working in the U.S. Virgin Islands.

2.    “Federal Income Taxes” from American Samoa, the CNMI, or Guam

For purposes of these cover over certification requirements, the term “Federal income taxes” includes Federal income taxes that have been withheld from compensation and other amounts paid to and deposited into the U.S. Treasury on any of the following:

    a.     Federal government civilian employees who are residents of American Samoa, the CNMI, or Guam.
    b.    Recipients (including survivors) of Federal pensions (civilian or military) who are     residents of American Samoa, the CNMI, or Guam.
    c.     Military personnel stationed in American Samoa, the CNMI, or Guam.
    d.     Military personnel not stationed in American Samoa, the CNMI, or Guam but who have a state of legal residence  in any of these territories.
    e.     Employees of a service or social organization associated with a military or civilian agency in American Samoa, the CNMI, or Guam.

3.     Certification Procedures

All departments and agencies of the Federal government (as well as service and social organizations associated with a military or civilian Federal entity) that withhold Federal income taxes on amounts paid to employees and pensioners of the United States (or any agency thereof) as provided herein, must certify to the Internal Revenue Service each calendar quarter the total amount of Federal income taxes withheld that have been deposited into the U.S. Treasury.  Federal agencies must submit a separate certification for Federal income taxes creditable to American Samoa, the CNMI, and Guam, as applicable.  

Except as provided below, these certifications should be in the form of a letter and should include each of the following:

        (1)     A citation to IRS Publication 80, Federal Tax Guide for Employers in the U.S. Virgin Islands, Guam, American Samoa, and the Commonwealth of the Northern Mariana Islands, as the authority for the certification;
        (2)     Name of the Federal certifying agency or department;
        (3)     The certifying agency’s employer identification number (EIN);
        (4)     The calendar quarter and fiscal year covered by the certification;
        (5)     The total number of individuals covered by the certification; and
        (6)     The aggregate dollar amount of Federal income taxes withheld on all individuals        covered by the certification.

A Federal government department or agency that submits a certification on behalf of another department or agency must include the name and EIN of each subordinate or designated federal department or agency included, along with the required data for each subordinate or designated department or agency.  In this instance, the certifying agency must send the certification at least on an annual basis, no later than February 14.  

In addition, Federal government agencies certifying for compensation paid to military personnel not stationed in American Samoa, the CNMI, or Guam but who have a state of legal residence in one of these territories must provide each servicemember’s name,  social security number, amount of annual salary paid, and total amount of annual Federal income tax withheld.

The amounts shown in the certification must agree with the amounts of Federal income tax withheld and reported on the quarterly Federal tax return(s) of the agency (Form 941).

Federal agencies must submit these certifications on a quarterly basis no later than 45 days after the close of each calendar quarter as follows: 

            First quarter (ending March 31) -- due May 15
            Second quarter (ending June 30) -- due Aug 14
            Third quarter (ending September 30) -- due Nov 14
            Fourth quarter (ending December 31) -- due Feb 14

Federal agencies should mail this certification to the following address:

            Internal Revenue Service
            Revenue Systems and Analysis
            Attn: OS:CFO:FM:RA:S (77K St)
            1111 Constitution Avenue, N.W.
            CFO/FM - Mail Stop 6167
            Washington, DC 20224  
            Facsimile # (202) 803-9691

Page Last Reviewed or Updated: 02-Apr-2014