Finance

We have created Handbook F-66E, Investment Policies and Procedures - Postal Support and Information Systems. It contains requirements for performance metrics, a clearly defined risk analysis process, and enhanced program compliance status reporting for investments that require a Decision Analysis Report (DAR). We will not distribute printed copies.

Handbook F-66E is available on the Postal ServiceTM PolicyNet Web site.

• Go to http://blue.usps.gov.

• Under "Essential Links" in the left-hand column, click on References.

• Under "References" in the right-hand column, under "Policies," click on PolicyNet.

• Then click on HBKs.

(The direct URL for the Postal Service PolicyNet Web site is http://blue.usps.gov/cpim.)

We are in the process of revising the other modules in the F-66 series - F-66A, F-66B, F-66C, and F-66D. We will announce the availability of these additional modules on the Postal Service Intranet in future Postal Bulletin articles.

— Capital Program and Evaluation,
Finance, 1-5-06

The article "Notice: 2005 Tax Information" published in Postal Bulletin 22170 (12-22-05, pages 46-48 and 73-76) contained an incorrect address for Internal Revenue Service Form 1099. Employees must mail questions regarding or requests for duplicate copies of Form 1099 for contract cleaners to the following address:

CONTRACT CLEANERS UNIT
SAN MATEO ACCOUNTING SERVICE CENTER
2700 CAMPUS DR
SAN MATEO CA 94497-9426

— Payroll, Finance, 1-5-06

Internal Revenue Service (IRS) regulations permit employees who anticipate no federal tax liability for 2006 to continue to claim total exemption from federal tax withholding provided they owed no federal taxes for 2005. These regulations also require that a new Form W-4, Employee's Withholding Allowance Certificate, be submitted every calendar year. Because of PostalEASE, however, employees no longer need to file a hardcopy Form W-4.

IRS filing requirements concerning Form W-4s are met by either logging onto PostalEASE via the Postal ServiceTM Intranet at blue.usps.gov, click PostalEASE, or by calling PostalEASE toll-free at 877-477-3273. Follow the Form W-4 instructions provided by PostalEASE, and your form will be updated for calendar year 2006.

Employees currently in an exempt status who do not use PostalEASE to submit a new Form W-4 claiming a continuation of their exempt status will have their status converted to taxable, effective pay period 05-06. For exempt information on a Form W-4 to remain effective into the next year, the IRS requires completion, submission, and acceptance of the form no later than February 15. Since February 15 falls within pay period 04-06, the new information on the Form W-4s must be entered into PostalEASE by no later than Friday, February 3.

Employees who claimed exempt status for 2005 who do not update in PostalEASE will have federal taxes withheld at the rate that would normally be applicable to single employees with no dependent allowances. Employees with a current exempt status (as of pay period 26-05) will receive printed messages on their earnings statement during pay periods 02-06 and 03-06 reminding them that a new Form W-4 is required.

Reminders

• Personnel offices must not provide tax advice to employees concerning the completion of Form W-4s.

• In January 2004, the practice of sending certain hard copies of the forms to the Eagan Accounting Service Center was discontinued since all employees must now use PostalEASE to update their Form W-4s. The IRS now follows different procedures to review Form W-4 information.

— Payroll,
Finance, 1-5-06

The purpose of this notice is to ensure that employees are aware of changes in income reporting requirements made by the Internal Revenue Service (IRS). The changes apply to calendar year 2005 earnings.

The IRS has changed the manner in which an attorney's fees awards are to be treated for tax reporting purposes based upon the Supreme Court's decision in Commis- sioner v. Banks, 125 S. Ct. 826 (2005). Previously, when a payment of an attorney's fees was made directly to the attorney, only the payment to the attorney was reported to the IRS on Form 1099-MISC, Miscellaneous Income. In Commissioner v. Banks, the Supreme Court concluded that an attorney's fees awarded as part of a plaintiff's settlement of an employment discrimination suit are gross income to the plaintiff just like any other economic gain. Thus, these fees cannot be excluded from the plaintiff's gross income for tax purposes by assigning the gain in advance to another party, such as the plaintiff's attorney.

Following are a number of different situations requiring variations in the reporting requirements:

Separate Attorney Fees

The accounting service center (ASC) will report any attorney's fees payment as income to the employee on the employee's Form 1099-MISC. Further, the ASC also will report any attorney's fees payment made directly to an attorney on the attorney's Form 1099-MISC.

Back Pay or Wages

Where the payment to the employee constitutes back pay or wages, the entire amount (including any amount that the employee may subsequently pay to his or her attorney from the back pay or wages) will be reported on the employee's Form W-2 (and will be subject to income tax withholding). Where the employee alone is to receive a check from the Postal ServiceTM (and the employee is required to pay his or her attorney from that amount), the ASC will not issue a Form 1099-MISC to the employee's attorney.

Payment Jointly to Employee and Attorney

If the payment is issued to both the employee and the attorney, then the ASC must report the entire amount of the payment (assuming that the payment is not for back pay or wages due the employee) on Form 1099-MISC for the employee. In addition, the ASC will report the entire amount of the payment (less any withholding) to the attorney on Form 1099-MISC.

— Payroll,
Finance, 1-5-06