Attorney General's Opinion
Attorney General Richard Blumenthal
November 20, 1997
The Honorable Nancy Wyman
55 Elm Street
Hartford, CT 06106
Dear Ms. Wyman:
We have reviewed your request for guidance concerning questions you have raised regarding Social Security (FICA) payments for Special Deputy Sheriffs. Your letter to us states that the State was deemed liable to the Internal Revenue Service (IRS) for the employees' (deputies') share of FICA payments which the State failed to withhold from their wages for the period from December 27, 1991 through April 30, 1992. Your inquiry raised the following questions:
1. Given that the State is liable to the IRS for the employee share of FICA payments, if the State pays the Deputies' share of the obligations to the IRS, can the Comptroller, or the Bureau of Collection Services as its agent, still seek reimbursement from the Special Deputy Sheriffs for those payments?
2. If so, what legal means can be used to collect such reimbursement?
In response to your first question, once the State pays the employee share of FICA payments to the IRS on behalf of the deputies,1 the Comptroller may seek reimbursement directly from the deputies for the FICA payments or through the Department of Administrative Services Business Center for Collection Services (formerly Bureau of Collection Services) pursuant to the provisions of Conn.. Gen. Stat. 4a-12(a)(4), and through a referral to the Attorney General for collection assistance if the employment of the former procedures have not proven successful.2
Under federal law, an employee is primarily liable for his share of Federal Insurance Contributions Act, or FICA payments, and the employer is secondarily liable. See Central Illinois Publishing Service Co. v. United States, 435 U.S. 21, 32 (1978). Federal income taxes and FICA taxes are imposed upon earnings of the employee, and are collected by the employer by deducting for the benefit of the IRS the amount of those taxes from the employee's wages at the time the wages are paid. 26 U.S.C. 3102(a). Every employer required to deduct the FICA tax is liable to the IRS for the payment of the tax, 26 U.S.C. 3102(b), regardless of whether the employer actually deducted the tax from the employee's wages. 26 C.F.R. 31.3102-1(c). Consequently, "both the employee and employer are liable for the employee's [unpaid] share of FICA taxes, although the intent is that the employer will collect it from the employee, [and] the employee is ultimately liable for [his/her share of] the tax imposed by section 3101." Rev. Rule. 86-111, 1986,38 I.R.B. 5, citing 26 C.F.R. 31.3102-1(c).
The above federal law creates a situation wherein both the employer and employee are liable to the IRS for the employee's share of FICA taxes, but with ultimate recognition of the employee's primary liability for his/her own share of those taxes.
With the exception of 3509 of the IRC (see footnote 2), neither federal nor state statutes expressly address the employer's right to seek reimbursement from the employee where the employer has failed to initially withhold, and then is required to pay the employee's share of the FICA tax out of the employer's own funds to the IRS. Because federal law, however, lays the primary and ultimate liability for the FICA debt upon the employee, the State, as employer herein, has a valid claim against the deputies for reimbursement of the debt it paid in their behalf.
In response to your second question, the Department of Administrative Services' Business Center for Collection Services (BCCS) has legal authority to institute extra-judicial collection efforts, and, if necessary, to seek collection assistance from the Office of the Attorney General; to bring suit itself in small claims court for debts under $2,500.00; or to file claims against probate estates. Additionally, BCCS may notify the Commissioner of Revenue Services to withhold payment of any state income tax refund due to any of the deputies; in this latter case, any such deputy would have the right to contest the validity or amount of the claim at an administrative hearing. Conn. Gen. Stat. 12-742.
Finally, if after an appropriate investigation is conducted by your office, you determine that the individual debts owed by deputy sheriffs are, as a practical matter, uncollectible, then your office may consider availing itself of the cancellation of debts procedure outlined in Conn.. Gen. Sec. 3-7. If this procedure is to be followed, your investigations and conclusions should set forth the circumstances for your conclusions, as for example, that the deputy sheriff cannot be located; has died and his/her estate is closed or insolvent; he/she has no ascertainable assets or income; or only assets or income that are legally exempt from legal process.
We trust that the foregoing discussion is sufficient for your needs, but please feel free to contact us should you or your staff have any further need for our assistance.
Very truly yours,
Judith A. Brown
Assistant Attorney General
1 It is our understanding that your office has previously been advised by the IRS that any such payment will result in additional income taxable to the deputies. Old Colony Trust Co. v. Comm'r of Internal Revenue, 279 U.S. 716 (1929).
2 This opinion assumes that the sheriffs did not make the requisite payments to the IRS on their own. Additionally, please note that if the unpaid $116,730.21 employee share noted in your letter was billed to the State by the IRS under 26 U.S.C. 3509(a)(2), which assesses only a 20% billing against the employer, the State cannot thereafter recover the monies it paid to the IRS from the employees. See 26 U.S.C. 3509(d)(1)(B). We are assuming, however, that this $116,730.21 sum was not billed to you under that section by the IRS because the section does not apply where an employer deducts income taxes but not FICA taxes, and it is our understanding, based on further communications from your office, that it was only FICA taxes that were not deducted by the State. Also, the 20% liability imposed under Section 3509 represents the employer's modified liability for the employee's share of FICA taxes, while the employee's liability to the IRS remains unaffected by the employer's payment of the 20% billing.