USPS Local Tax Withholding

GAO commented on the practicality of the U.S. Postal Service (USPS) extending its withholding of employee local workplace taxes to locations with 25 or more employees. GAO noted that: (1) the diversity and complexity of local government tax formulas would require payroll software modifications each time a local government is added to the USPS payroll system or changes its tax formula; (2) local governments do not provide USPS with timely notification of changes to their tax formulas or laws which often causes incorrect withholding; (3) USPS is sometimes required to calculate and prorate workplace taxes for employees, such as truck drivers and rural letter carriers, who travel through more than one municipality during the course of their workday; (4) it will cost between $2,000 and $2,500 for each software modification when a local government tax formula is added or changed in the payroll system; and (5) to avoid increasing administrative and software reprogramming costs, USPS officials have suggested collecting a standard rate of withholding for all local governments.