Purpose

To provide agencies with information regarding OSC’s revised tax refund policy for employees who were/are on a paid Workers’ Compensation leave and the leave was entered after the weekly processing of the Workers’ Compensation programs

Affected Employees

All employees on an approved paid Workers’ Compensation leave that was entered into PayServ after the weekly processing of the Workers’ Compensation programs

Effective Date(s)

Effective the beginning of pay periods 3L/3C, paychecks dated 5/15/19 (Administration) and 5/23/19 (Institution)

Background

The NYS payroll system (PayServ) processes employee income tax withholding using the percentage method on the annual basis (refer to IRS Publication 15 for additional information).

Due to late reporting of Workers’ Compensation paid leave transactions in PayServ, OSC must periodically clean up employee records to ensure accurate Workers’ Compensation earnings that should be excluded from tax withholdings. The periodic cleanup can produce a large taxable gross adjustment. This adjustment, when annualized for income tax purposes, can generate excessive refunds of Federal and State income taxes.

For employees in this situation, there is a risk of penalties for under withholding. To mitigate this risk, OSC will no longer issue Federal and State income tax refunds when processing the periodic cleanup. Taxable gross wages will continue to be adjusted.

The weekly cleanup process for leaves that are entered timely by agencies will continue to refund Social Security, Medicare, Federal, State and Local taxes, if applicable. For these paychecks, the refund method in the Workers' Comp Earning Exclusions page in PayServ will be “Payline”.

The periodic cleanup process will change for leaves that are entered late by agencies, and are not picked up by the weekly process. Periods of paid leave that are excludable from taxes will be identified, the amount of taxes that need to be refunded will be calculated, and only the refunds of Social Security and Medicare taxes will be issued. For these paychecks, the refund method in the Workers' Comp Earnings Exclusions page in PayServ will be “Bal Adj Req” or “Bal Adj Pst”. See Attachment A for examples of these transactions on the Workers' Comp Earnings Exclusions page.

Attachment B provides examples of when the Weekly cleanup process is sufficient and when the Periodic cleanup process must be utilized. For additional information and reference please refer to Payroll Bulletin 1404 (Refund of Taxes Withheld while Employees on Paid Workers’ Compensation Leaves).

OSC Actions

• Modify the periodic Workers' Compensation cleanup program to no longer process refunds of Federal and State income taxes
• Continue to process refunds of Social Security and Medicare taxes for this period
• Notify agencies via the PayServ bulletin board when the periodic cleanup is processed and when the refund of Social Security and Medicare taxes is issued
• Continue the weekly cleanup process to refund Social Security, Medicare, Federal, State and Local taxes, if applicable

Agency Actions

Inform all affected employees of this change

Questions

Questions regarding this bulletin may be directed to the Workers’ Compensation mailbox.