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U.S. DEPARTMENT OF LABOR
Employment and Training Administration
Washington, D. C. 20210

CLASSIFICATION

UI

CORRESPONDENCE SYMBOL

TEUFA

ISSUE DATE

11/30/98

RESCISSIONS

None

EXPIRATION DATE

11/30/99

DIRECTIVE

:

UNEMPLOYMENT INSURANCE PROGRAM LETTER NO. 10-99

 

TO

:

STATE EMPLOYMENT SECURITY AGENCIES

 

FROM

:

GRACE A. KILBANE
Director
Unemployment Insurance Service

 

SUBJECT

:

Revised Process for Payment of Federal Tax Withholdings from Unemployment Benefits

 

  1. Purpose. To announce a new procedure for paying amounts of voluntary withholding to the Internal Revenue Service (IRS) and encourage States adoption of the procedure.

  2. References. Unemployment Insurance Program Letter (UIPL) No. 32-96; UIPL 17-95 and Change 1.

  3. Background. The General Agreement on Tariffs and Trade, enacted on December 8, 1994, required States to deduct and withhold Federal income taxes from unemployment benefits upon claimants' requests. The moneys withheld are currently transferred to the IRS by the State issuing the benefit payment, generally through the Electronic Funds Transfer Payment System (EFTPS).

    The Bureau of Public Debt (BPD) in the U.S. Treasury has offered to make tax withholding transfers directly from each State's account in the Unemployment Trust Fund to the IRS through the Unemployment Trust Fund Accounting System (UTFAS), which is used to make deposits to and withdrawals from the Unemployment Trust Fund (UTF). The specific system operations are explained in the next section.

    The new process should prove more efficient because States can then use the UTFAS for all UTF transactions. There will be only one transfer for all withholding payments, and that transfer can be done daily, much like making daily deposits to the State UTF account.

  4. System Operations. Accountants in the BPD, Trust Fund Management Branch (TFMB), will use the FEDTAX II system to make transfers to the IRS using the State's Employer Identification Number (EIN). Each State will notify the TFMB of the daily withholding amount by entering a book transfer in the UTFAS. This book transfer will move the withholding amount from the State UTF account to a UTF income tax liability account daily. From the liability account, TFMB will upload to the FEDTAX II the withholding information, and then the withholding amount will be transferred to the IRS. Specific instructions will be sent in an update to the UTFAS user's manual. Each State will continue to prepare and mail 1099s and file the Form 945 using its own EIN.

  5. Action required. SESA Administrators are encouraged to use the UTFAS for withholding payments by registering with the BPD. To register, each State should send a letter providing the following information:

    1. The EIN the State uses for 945 filing.

    2. The "name record" used for 945 filing.

    3. The name and phone number of the State point of contact for withholding issues.

    4. Authorization for the BPD, Office of Public Debt Accounting, Division of Federal Investments, Trust Fund Management Branch, to make payments from the State UTF account to the IRS.

    The letter should be signed by the same person authorized to enter or amend banking arrangements and drawdowns from the UTF or to delegate such authority. The letter should be sent to:

    Bureau of Public Debt
    Attention: Deborah Ali
    PO Box 1328, Room 114HB
    Trust Fund Management Branch
    Parkersburg, WV 26106-1328

  6. Inquiries. Questions should be addressed to the appropriate Regional Office.