It's a Ticking Time Bomb
As of January 2011, the Army requires all contractors to use WAWF for submitting invoices to the DFAS Columbus, Rome or Indianapolis payment offices.
This public website was made available through the Federal Funding Accountability and Transparency Act of 2006. The site includes information on all federal contract and grant awards. Prime contractors and subcontractors are listed for public disclosure.
Buried deep within the Tax Increase Prevention and Reconciliation Act of 2005 (TIPRA), signed by President Bush in 2006, is a provision that will require 3% withholding on all government payments for products and services made by the federal, state and local governments with expenditures of $100 million or more. In addition, the withholding will apply to the total contract amount and not to net revenue generated.
The entire U.S. government, including all federal agencies, the executive branch, the legislative branch and the judicial branch, is required to follow TIPRA Section 511, which contains the 3% provision. All state governments are also required to follow Section 511. All political subdivisions of a state government or every instrumentality of such subdivisions unless the instrumentality makes annual payments for property or services of less than $100 million must follow Section 511. In other words, if you sell to the governmentâ€”federal or stateâ€”you will be subject to 3% withholding on all government payments.
Withholding is required at time of payment from government agencies. GBG recommends that companies become familiar with Form 945 before the December 31, 2011 implementation date. Contractors must certify that they are current on federal taxes and that no delinquent federal taxes are due. Once certifications can be reviewed and approved by the Internal Revenue Service, withholdings will be returned.
NACM, together with the other members of the Government Withholding Relief Coalition, understands the hardship this mandate will have on businesses and government agencies. The profit margin on government contracts is very limited and companies stand to lose the funds needed to operate and grow their businesses. These companies will be forced to stop selling to the government, raise prices or cut budgets. Government agencies will have to increase accounting staff and implement costly training to make sure they are in compliance with the mandateâ€”all at a time when said agencies are decreasing spending.
NACM is working diligently on annulling this additional tax. By working in a unified manner, we have the opportunity to get members of Congress behind repeal legislation to remove this unfair and burdensome mandate once and for all.
If you are interested in a teleconference on this subject, please email email@example.com by February 15. Please type "3% withholding" in the subject line. Depending on the response, a training teleconference will be made available with date to be announced.
Other Government Tax Delinquency Crackdowns
In 2009, the Central Contractor Registration (CCR) Database included a debt flag for all federal contracting agencies to view during the contracting period. That same year, the Treasury Department expanded the offset program to include state debt. On January 20, 2010, the OMB released a memo requiring the IRS to review the certifications of non-delinquency in taxes that are required on all federal contracts. It also made recommendations that companies with serious tax delinquencies should be prevented from receiving contracts and to make contractor certifications more easily available. Currently, companies that provide false certifications during the claims process can be penalized, have contracts suspended and be debarred under the False Claims Act. Likewise, the National Defense Authorization Act FY2011 includes Section 403 or H.R. 5013, which requires potential federal contractors and grantees to submit certifications as to whether they have a seriously delinquent tax debt and authorizes the Secretary of the Treasury to verify the certifications.
Defense Finance and Accounting Service (DFAS) 2011 Tentative Open House Schedule
May 25, August 17 and November 16, 2011. There is no charge to attend the day of training, except traveling costs to Columbus, OH. Click here for more information on attending a DFAS Open House.
WAWF Version 5.0
WAWF Version 5.0, which contains significant changes, will be available on February 14, 2011. Click here to preview this version.
What is a DoDAAC?
The Department of Defense Activity Address Code (DoDAAC) is a six-digit code that uniquely identifies a unit, activity or organization that has the authority to requisition and/or receive material. Your contract will state your DODAAC. DoDAACs are also being used to track DoD entities for intra-governmental transactions across the federal government.