logo

Date: September 12, 2013

Bulletin Number: 1264

line

Subject

New Procedure for the Processing of Internal Revenue Service (IRS) Issued Lock-In Letters

Purpose

To inform agencies of the new procedure for processing Internal Revenue Service (IRS) notices 2800C (Lock-in Letter), 2808C (Lock-in Modification Letter) and 2809C (Lock-In Release Letter).

Affected Employees

Employees who are issued an IRS lock-in letter.

Effective Date(s)

Immediately

Background

Lock-in letters are issued by the IRS when they determine that an employee is either not entitled to claim exempt status, or is not entitled to claim more than a specified number of withholding allowances.

The lock-in letter informs the employer to limit the employee’s withholding allowances at a specified number before a specified date. Employers failing to honor the IRS lock-in requirement could face penalty and may be liable for any taxes not withheld from the employee.
 
Previously, OSC received these letters and forwarded them to the appropriate agency for processing in PayServ.  Agencies then changed the employee’s withholding allowance as detailed in the lock-in letter.

To streamline this process and ensure compliance, OSC will now process all IRS issued lock-in letters.

OSC Actions

Upon receipt of a Lock-in Letter (2800C), Lock-In Modification Letter (2808C) or Lock-In Release Letter (2809C) OSC will implement the required change in PayServ.

OSC will then:

  • Notify the agency Payroll Officer of the change via email from the Tax and Compliance mailbox.  
Provide the agency Payroll Officer with two copies copy of the lock-in letter; one to be retained in the employee’s record and the other to be provided to the employee.

Agency Actions

Agencies must no longer make changes to an employee’s tax data record in PayServ in response to a lock-in letter.

Agencies must:

  • Inform the employee of the lock-in letter
  • Provide the employee with a copy of the lock-in letter.
  • Retain a copy of the lock-in letter in the employee’s record.

Questions

Questions regarding this bulletin may be sent to the Tax and Compliance mailbox.