USPS Local Tax Withholding

GAO commented on the practicality of the United States Postal Service (USPS) extending its withholding of employee local government taxes to a greater number of U.S. local governments. GAO noted that USPS officials stated that: (1) a lower federal local tax withholding threshold would be burdensome; (2) modifications to the USPS automated payroll system software would be required every time a local government was added to the payroll system or changed its tax formula; (3) it would cost between $2,000 and $2,500 for each withholding modification; (4) local governments do not provide USPS with timely notification of changes to their tax formulas or laws, which often causes incorrect withholding; (5) reciprocal taxation rules between local taxing jurisdictions are not always clear and result in conflicts over withholding rights; (6) postal facilities located near state borders have employees that reside in nearby states, which requires considerable USPS effort to determine what local taxes to withhold; and (7) one approach to simplifying withholding would be to have a standard withholding rate for all local governments.