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

CLASSIFICATION

UI

CORRESPONDENCE SYMBOL

TEUPDI

ISSUE DATE

August 15, 1996

RESCISSIONS

None

EXPIRATION DATE

August 31, 1997

DIRECTIVE

:

UNEMPLOYMENT INSURANCE PROGRAM LETTER NO. 32-96
 

TO

:

ALL STATE EMPLOYMENT SECURITY AGENCIES
 

FROM

:

MARY ANN WYRSCH
Director
Unemployment Insurance Service
 

SUBJECT

:

Voluntary Withholding of Federal Income Taxes From Unemployment Insurance Benefits

  1. Purpose. To provide State Employment Security Agencies (SESAs) with answers to procedural questions for implementing voluntary withholding of Federal income taxes from Unemployment Insurance (UI) benefits.

  2. References. Section 702 of Public Law (P.L.) 103-465; Unemployment Insurance Program Letter (UIPL) No. 17-95; UIPL No. 17-95, Change 1; and UIPL No. 35-95.

  3. Discussion. On December 8, 1994, the President signed P.L. 103-465, the Uruguay Round Agreements Act, commonly known as the General Agreement on Tariffs and Trade (GATT), which, in part, required States to deduct and withhold Federal income taxes from UI benefits upon claimants' requests, beginning January 1, 1997. Subsequent to enactment of P.L. 103-465, UIPL No. 17-95 and UIPL No. 17-95, Change 1, were issued to notify the SESAs of the requirements of GATT and to offer draft legislative language for SESAs to implement the voluntary withholding program. Additional instructions were provided in UIPL No. 35-95. The National Office (NO) coordinated implementation efforts and has been working with the national office of the Internal Revenue Service (IRS) to provide answers to questions concerning procedures for implementation of the program. Answers provided by the IRS to procedural questions are attached.

  4. Action Required. SESA Administrators are asked to provide the information in the attachment to appropriate staff and to assure that all necessary action is taken to implement voluntary withholding of Federal income taxes effective January 1, 1997.

  5. Inquiries. Inquiries should be directed to Darlyne Herring or Rett Hensley at 202-219-5616.

  6. Attachment. Procedural questions and answers for implementing and conducting the program for voluntary withholding of Federal income taxes from UI benefits.