9/13/11: The Union is pleased to announce that the IRS, in a ruling requested by NTEU Chapter 293, has determined in our favor that the SEC and its payroll processor incorrectly over-reported wages for recipients of back pay awards in the within grade increase (WIGI) case. The SEC has reported to the Union that it will be providing corrected W-2 forms to WIGI recipients who received their back pay in 2010. The agency also indicated that it will be correcting OASDI, Medicare, and state and Federal income tax withholding for WIGI recipients who received their back pay award in 2011.
The WIGI award calculations by the SEC were comprised of two parts, an alleged “overpayment” to the employees for the period from May 19, 2002 to November 8, 2002 (which the SEC called the "Offset"), and the underpayment of wages from November 8, 2002 going forward to the present. Each WIGI recipient was paid the net of these two amounts, less taxes, etc., withheld.
A problem arose, however, when NBC/DOI, the payroll processor for the SEC, determined that these employees’ current W-2 wages should include the gross underpayment of wages for the entire period without netting the amount of the Offset. For that reason, the W-2 forms issued to those employees who received WIGI awards in 2010 reflected gross wages prior to subtracting the Offset noted on these employees’ WIGI statements. This resulted in an overstatement of income, which in many cases was a substantial overstatement.
After making every effort to resolve this issue amicably with the SEC and its payroll provider, NTEU Chapter 293 hired tax counsel, Richard A. Levine of Roberts & Holland LLP, to challenge NBC/DOI's tax treatment. Even after carefully explaining their mistake to the SEC and NBC/DOI, however, they refused to correct it. Since this error was costing SEC employees who were WIGI recipients thousands of dollars in tax overpayments, the Union compelled NBC/DOI to request a private letter ruling from the IRS on this matter.
We are pleased to announce that in a ruling dated August 30, 2011, the IRS has concluded that NBC/DOI incorrectly over-reported W-2 wages for WIGI recipients in 2010. We are working with human resources to ensure implementation of the ruling and see to it that corrected W-2 forms will be issued to affected employees.
For those employees who received WIGI payments in 2010, the SEC has already reported to the Union that it will issue corrected W-2's for 2010. Some employees may have already received a corrected W-2. When you receive the form, you should speak to your tax advisor about how to file your income tax return for 2010, or how to file an amended income tax return if you have already filed, based on the revised W-2 to be issued. At present, we do not have the date by which these corrected forms will be issued.
For those employees who received WIGI payments in 2011, taxes may have been over-withheld from WIGI wages because the withholding was based on the gross WIGI wages prior to subtracting the Offset. The SEC has reported to the Union it will be adjusting OASDI, Medicare, and state and Federal income tax withholding for these WIGI recipients.
The Union wishes to thank NTEU member Samuel Engelson of the NYRO for bringing this issue to the Union’s attention and formulating and organizing our response, and also Richard Levine for his invaluable tax advice.