Federal Travel Regulation; Temporary Duty (TDY) Travel Allowances (Taxes); Relocation Allowances (Taxes), 32340-32354 [2011-13356]
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Executive Order 12866 (58 FR 51735,
October 4, 1993);
• Does not impose an information
collection burden under the provisions
of the Paperwork Reduction Act (44
U.S.C. 3501 et seq.);
• Is certified as not having a
significant economic impact on a
substantial number of small entities
under the Regulatory Flexibility Act
(5 U.S.C. 601 et seq.);
• Does not contain any unfunded
mandate or significantly or uniquely
affect small governments, as described
in the Unfunded Mandates Reform Act
of 1995 (Pub. L. 104–4);
• Does not have Federalism
implications as specified in Executive
Order 13132 (64 FR 43255, August 10,
1999);
• Is not an economically significant
regulatory action based on health or
safety risks subject to Executive Order
13045 (62 FR 19885, April 23, 1997);
• Is not a significant regulatory action
subject to Executive Order 13211 (66 FR
28355, May 22, 2001);
• Is not subject to requirements of
section 12(d) of the National
Technology Transfer and Advancement
Act of 1995 (15 U.S.C. 272 note) because
application of those requirements would
be inconsistent with the Clean Air Act;
and
• Does not provide EPA with the
discretionary authority to address, as
appropriate, disproportionate human
health or environmental effects, using
practicable and legally permissible
methods, under Executive Order 12898
(59 FR 7629, February 16, 1994).
In addition, this rule does not have
Tribal implications as specified by
Executive Order 13175 (65 FR 67249,
November 9, 2000), because the SIP is
not approved to apply in Indian country
located in the state, and EPA notes that
it will not impose substantial direct
costs on Tribal governments or preempt
Tribal law.
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List of Subjects in 40 CFR Part 52
Environmental protection, Air
pollution control, Carbon monoxide,
Incorporation by reference,
Intergovernmental relations, Lead,
Nitrogen dioxide, Ozone, Particulate
matter, Reporting and recordkeeping
requirements, Sulfur oxides, Volatile
organic compounds.
Authority: 42 U.S.C. 7401 et seq.
Dated: May 20, 2011.
Al Armendariz,
Regional Administrator, Region 6.
[FR Doc. 2011–13872 Filed 6–3–11; 8:45 am]
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GENERAL SERVICES
ADMINISTRATION
41 CFR Parts 301–11, 302–2, 302–3,
and 302–17
[FTR Case 2009–307; Docket 2009–0013;
Sequence 1]
RIN 3090–AI95
Federal Travel Regulation; Temporary
Duty (TDY) Travel Allowances (Taxes);
Relocation Allowances (Taxes)
Office of Governmentwide
Policy (OGP), General Services
Administration (GSA).
ACTION: Proposed rule.
AGENCY:
GSA is proposing to amend
the Federal Travel Regulation (FTR) by
incorporating recommendations of the
Governmentwide Relocation Advisory
Board (GRAB) concerning calculation of
reimbursements for taxes on relocation
expenses. In addition, this proposed
rule alters the process for calculating
reimbursements for taxes on extended
temporary duty (TDY) benefits to correct
errors and to align that process with the
proposed changes to the relocation
income tax process.
DATES: Interested parties should submit
comments in writing on or before
August 5, 2011 to be considered in the
formulation of a final rule.
ADDRESSES: Submit comments
identified by FTR case 2009–307 by any
of the following methods:
• Regulations.gov: https://
www.regulations.gov.
Submit comments via the Federal
eRulemaking portal by inputting ‘‘FTR
Case 2009–307’’ under the heading
‘‘Comment or Submission.’’ Select the
link ‘‘Send a Comment or Submission’’
that corresponds with FTR Case 2009–
307. Follow the instructions provided to
complete the ‘‘Public Comment and
Submission Form.’’ Please include your
name, company name (if any), and ‘‘FTR
Case 2009–307’’ on your attached
document.
• Fax: 202–501–4067.
• Mail: General Services
Administration, Regulatory Secretariat
(MVCB), 1275 First Street, NE., Room
783E, ATTN: Hada Flowers,
Washington, DC 20417.
Instructions: Please submit comments
only and cite FTR case 2009–307 in all
correspondence related to this case. All
comments received will be posted
without change to https://
www.regulations.gov, including any
personal information provided.
FOR FURTHER INFORMATION CONTACT: The
General Services Administration,
Regulatory Secretariat (MVCB), 1275
SUMMARY:
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First Street, NE., Washington, DC 20417,
(202) 501–4755, for information
pertaining to status or publication
schedules. For clarification of content,
contact Mr. Ed Davis, Office of
Governmentwide Policy (MT), General
Services Administration, at (202) 208–
7638 or e-mail at ed.davis@gsa.gov.
Please cite FTR case 2009–307.
SUPPLEMENTARY INFORMATION:
A. Request for Input on the Final
Effective Date
GSA recognizes that implementing
the final rule that will result from this
proposed rule will be challenging and
time-consuming, both for Federal
agencies and software providers. To
help set a final effective date that allows
adequate time to implement the final
rule, GSA requests comments from
affected parties on how much time they
will need to change their systems and
processes to implement the eventual
final rule.
B. Background
The GSA Office of Governmentwide
Policy seeks to incorporate best
practices from Federal agencies and the
private sector into the policies that GSA
issues. To this end, GSA created the
GRAB, consisting of Government and
private industry relocation experts, to
examine Government relocation policy.
The GRAB was chartered under the
Federal Advisory Committee Act on July
9, 2004, and it submitted its ‘‘Findings
and Recommendations’’ on September
15, 2005. The GRAB ‘‘Findings and
Recommendations’’ and corresponding
documents may be accessed at GSA’s
Web site at https://www.gsa.gov/grab.
The GRAB made a number of
recommendations with regard to taxes,
and GSA has developed this proposed
rule in response to those
recommendations.
GSA has worked with the Executive
Relocation Steering Committee (ERSC),
an interagency group chartered by GSA,
to analyze the GRAB recommendations
regarding taxes. The first product of the
analysis by the ERSC was a set of four
principles:
• ‘‘Substantially all’’—Federal
agencies are required by 5 U.S.C. 5724b
to reimburse ‘‘substantially all’’ of the
additional income taxes incurred by
employees as a result of relocation and
to reimburse ‘‘all’’ of the taxes imposed
on any reimbursement for taxes.
• Fair and equitable—In personnel
matters, the Government seeks to treat
all employees fairly and equitably. A
key piece of this is transparency.
Everyone must be able to see and
understand how the benefits are being
computed. Another key piece is seeking
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to treat all civilian transferees equally,
regardless of grade level.
• Relative simplicity—The tax
process is necessarily complex because
relocation has so many parts. However,
it is important to keep this process as
simple as possible, so that agencies can
and will perform all of the calculations
accurately, so that employees can verify
the calculations, and so that employees
will be more likely to believe that they
are being treated fairly and equitably.
• Minimizing cost—It is, of course,
very important to balance the three
objectives above against the overall cost
of reimbursing employees for the taxes
that they incur. It is important,
therefore, to seek to limit
reimbursement to ‘‘substantially all’’ of
each transferee’s tax liability, to the
extent that this can be done without
making the process overly complex.
C. Major Changes in This Proposed
Rule
This proposed rule completely
replaces FTR part 302–17. It also
removes FTR part 301–11, subpart E,
and it replaces FTR part 301–11,
Subpart F, which regulates taxes
involved in extended TDY benefits.
The major changes in this proposed
rule are:
Taxes on extended TDY benefits—
The existing FTR part 301–11, subpart
E, addresses only tax years 1993 and
1994 and is therefore obsolete. FTR part
301–11, subpart F, includes several
substantial errors and does not agree
with either the existing FTR part 302–
17 or this proposed rule. This proposed
rule deletes part 301–11, subpart E, and
it replaces part 301–11, subpart F in its
entirety. This proposed rule also
eliminates the lump sum process for
reimbursing taxes on extended TDY
benefits. This process is seldom used
and, therefore, creates more confusion
than benefit.
Question and answer format—This
proposed rule puts part 302–17 into
question and answer format to conform
to the remainder of the FTR. GSA notes
that the GRAB recommended that GSA
move in the other direction, taking all
of the FTR back to its old format. GSA
has considered and rejected this GRAB
recommendation. GSA continues to
believe that the question and answer
format is easier to read and understand
for the large majority of users.
Eliminating use of two tables for
Federal tax rates—GSA examined the
tax tables for the past seven years and
determined that the difference in tax
rates from year to year is not large
enough to justify formulas complex
enough to account for year-to-year
changes in Federal tax rates.
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Standardizing usage of the terms
‘‘withholding tax allowance’’ (WTA) and
‘‘relocation income tax allowance’’
(RITA)—The existing part 302–17 is not
entirely clear in its use of these two
terms. The proposed rule seeks to clarify
these terms and, to this end, it changes
the title of part 302–17 to ‘‘Taxes on
Relocation Expenses.’’
Fraudulent claims—The existing part
302–17 includes a paragraph, at § 302–
17.10(c), about fraudulent claims made
against the United States, especially in
the context of the ‘‘Statement of Income
and Tax Filing Status.’’ The statutes on
fraudulent claims remain in effect and
unchanged. However, these statutes
apply to the entire relocation process,
not just reimbursement for taxes on
relocation expenses, and GSA therefore
has added a new section to FTR part
302–2 to address fraudulent claims
made at any point during the relocation
reimbursement process. This new
section directly mirrors section 301–
52.12 covering fraudulent claims with
regards to TDY benefits.
New definitions—The proposed rule
includes definitions for 13 terms in a
glossary that is specific to part 302–17.
Many of these terms are defined in the
text of the existing part 302–17; the
proposed rule gathers these 13
definitions into one place for easy
reference in the new section 302–17.1.
Limitations and Federal income tax
treatments—The proposed rule provides
a table in section 302–17.8 that
summarizes allowances, limitations,
and tax treatment for each relocation
reimbursement, allowance or direct
payment to a vendor provided by the
FTR.
Correcting the taxability of household
goods transportation expenses—The
existing section 302–17.3(b) states that
the expenses for transportation of
household goods (HHG) are taxable.
This was true when the existing FTR
302–17 was published. However, in
1993 the IRC section on fringe benefits
was amended to exclude from income
certain moving expenses that are
reimbursed and otherwise would be
deductible. At the same time the IRC
was amended to make fewer moving
expenses deductible. One result was
that the HHG shipment remained as a
deductible expense.
Correcting the withholding rate for
supplemental wages—The withholding
rate of 28 percent for supplemental
wages used in the current FTR 301–11,
subpart F and 302–17.7 is incorrect. The
correct rate is 25 percent, and this is the
rate used in this proposed rule, at § 302–
17.24. This rate is scheduled to revert to
28 percent on January 1, 2011, absent
legislative action. If and when this rate
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changes, GSA will correct the new part
302–17 to reflect the change.
Allowing a one-year RITA process—
The GRAB’s ‘‘Findings and
Recommendations’’ clearly says that a
one-year RITA process is the standard in
the private sector because it is quicker
and simpler. The GRAB strongly
recommended that the Federal
government adopt a one-year process. In
addition to its complexity, the existing
two-year process for calculating taxes on
relocation expenses creates a burden for
many lower-grade transferees, because
they are more likely to be required, in
the second year, to repay an overreimbursement in the first year. On the
other hand, discussions with Federal
agencies have made it clear that moving
to a one-year process will be challenging
at best, and many are reluctant to move
in that direction. In addition, as some
have noted, the two-year process does
result in a somewhat more accurate
reflection of the actual tax impact on the
employee. Therefore, this proposed rule
offers the one-year RITA process to
agencies as an option, alongside the
existing two-year process. It also
includes, at new section 302–17.103, a
short discussion of the benefits and
drawbacks of the one-year and two-year
processes. See also new sections 302–
17.32, 302–17.33, and subparts F and G.
Making the WTA optional—A number
of Federal agencies have made the WTA
optional to the employee. Nothing in tax
law or existing regulations prohibits this
practice, and in some cases declining
the WTA may be advantageous to the
employee. This proposed rule explicitly
gives the agencies permission to make
the WTA optional and provides
guidance and explanation for both the
agency and the employee.
Moving from earned income to
taxable income—As the ERSC reviewed
the GRAB’s recommendations, it
recognized that using taxable income
(instead of using earned income like the
existing part 302–17), would provide a
simpler process and would bring the
taxes reimbursement calculation closer
to the target of ‘‘substantially all.’’
Moving to taxable income resolves
several of the issues that the GRAB
raised, including issues with capital
gains and self-employment income. See
new sections 302–17.40, 302–17.50, and
302–17.63 for information on how
taxable income is used.
Eliminating the Government-unique
tax tables—Moving to taxable income
will also make it unnecessary for GSA
to publish special tax tables each year.
Transferees and agencies will be able to
use the tables published by the Internal
Revenue Service (IRS) and state and
local tax authorities.
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Failure to file the ‘‘Statement of
Income and Tax Filing Status’’ in a
timely manner—The existing § 302–
17.7(e)(2) makes the entire WTA an
excess payment if the employee fails to
file the statement or the RITA claim in
a timely manner. Because the WTA is an
advance payment on the employee’s
reimbursable income tax expenses,
agencies are entitled to recover it if an
employee fails to properly document
their income taxes. Therefore, this
proposed rule continues these
requirements on the employee and the
agency, except in the case of an
employee who declines the WTA. In
this case, if the employee fails to file the
‘‘Statement of Income and Tax Filing
Status’’ and/or the RITA claim in a
timely manner, this proposed rule
allows the agency to close the file
without paying the RITA. See new
sections 302–17.53, 302–17.65, and
302–17.102.
Recalculation of RITA—The existing
part 302–17 makes no provision for the
employee to request recalculation. Most
private sector companies do allow
employees to request recalculation, at
least in some circumstances, though the
percentage of private sector employees
who do request recalculation is small.
The proposed rule makes it possible for
Federal employees to request
recalculation, provided they filed and/
or amend their ‘‘Statement of Income
and Tax Filing Status’’ in a timely
manner. See the new section 302–17.33.
Agency responsibilities—The existing
part 302–17 mentions some agency
responsibilities in the context of other
provisions. The proposed rule, in
conformity with the rest of the FTR, lists
the agency responsibilities together in
the new subpart H.
Information about state and local tax
laws—GSA informally circulated a draft
version of this proposed rule to various
Federal agencies asking for input.
Several agencies objected to what they
thought were new or additional burdens
stemming from requirements to know
and utilize state and local tax laws.
However, current section 302–
17.10(b)(2) already places this
requirement on agencies, stating ‘‘* * *
is incumbent upon the appropriate
agency officials to become familiar with
the state and local tax laws that affect
their transferring employees.’’ In short,
this proposed rule is not imposing any
new requirements on agencies regarding
knowledge of state and local tax law. At
the same time, this rule carries forward
from the current 302–17 the
requirement that the employee find and
provide the applicable state and local
marginal tax rates.
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D. Changes to the Current FTR
This proposed rule—
• Deletes part 301–11, subpart E.
• Replaces part 301–11, subpart F in
its entirety.
• Adds new § 302–2.7.
• Replaces one sentence in § 302–
3.502(b).
• Replaces part 302–17 in its entirety.
E. Executive Order 12866 and Executive
Order 13563
Executive Orders 12866 and 13563
direct agencies to assess all costs and
benefits of available regulatory
alternatives and, if regulation is
necessary, to select regulatory
approaches that maximize net benefits
(including potential economic,
environmental, public health and safety
effects, distributive impacts, and
equity). Executive Order 13563
emphasizes the importance of
quantifying both costs and benefits, of
reducing costs, of harmonizing rules,
and of promoting flexibility. This is not
a significant regulatory action and,
therefore, was not subject to review
under Section 6(b) of Executive Order
12866, Regulatory Planning and Review,
dated September 30, 1993. This rule is
not a major rule under 5 U.S.C. 804.
F. Regulatory Flexibility Act
This proposed rule is not required to
be published in the Federal Register for
notice and comment as per the
exemption specified in 5 U.S.C.
553(a)(2); therefore, the Regulatory
Flexibility Act, 5 U.S.C. 601, et seq.,
does not apply. However, this proposed
rule is being published to provide
transparency in the promulgation of
Federal policies.
G. Paperwork Reduction Act
The Paperwork Reduction Act does
not apply because the proposed changes
to the Federal Travel Regulation do not
impose recordkeeping or information
collection requirements, or the
collection of information from offerors,
contractors, or members of the public
that require the approval of the Office of
Management and Budget under 44
U.S.C. 3501, et seq.
H. Small Business Regulatory
Enforcement Fairness Act
This final rule is also exempt from
congressional review prescribed under 5
U.S.C. 801 since it relates solely to
agency management and personnel.
List of Subjects in 41 CFR Parts 301–11,
302–2, 302–3, and 302–17
Government employees, Travel and
transportation expenses, Income taxes.
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Dated: March 14, 2011.
Kathleen Turco,
Associate Administrator.
For the reasons set forth in the
preamble, under 5 U.S.C. 5701–5739,
GSA proposes to amend 41 CFR parts
301–11, 302–2, 302–3, and 302–17 as set
forth below:
PART 301–11—PER DIEM EXPENSES
1. The authority for part 301–11
continues to read as follows:
Authority: 5 U.S.C. 5707.
Subpart E—[Removed and Reserved]
2. Remove and reserve subpart E.
3. Revise subpart F to read as follows:
Subpart F—Taxes on Extended TDY
Benefits
Sec.
301–11.601 What is a taxable extended TDY
assignment?
301–11.602 What factors should my agency
consider in determining whether to
authorize extended TDY?
301–11.603 What are the tax consequences
of extended TDY?
301–11.604 What are the procedures for
calculation and reimbursement of my
WTA and ETTRA for taxable extended
TDY?
301–11.605 When should I file my
‘‘Statement of Income and Tax Filing
Status’’ for my taxable extended TDY
assignment?
Subpart F—Taxes on Extended TDY
Benefits
§ 301–11.601 What is a taxable extended
TDY assignment?
A taxable extended TDY assignment
is a TDY assignment that continues for
so long that, under the IRC the
employee is no longer considered
‘‘temporarily away from home.’’ The
IRC, at 26 U.S.C. 162(a), states: ‘‘* * *
the taxpayer shall not be treated as
being temporarily away from home
during any period of employment if
such period exceeds 1 year.’’ You are no
longer ‘‘temporarily away from home’’ as
of the date that you and/or your agency
recognize that your assignment will
exceed one year. That is, as soon as you
recognize that your assignment will
exceed one year, you must notify your
agency of that fact, and they must
change your status immediately.
Similarly, as soon as your agency
recognizes that your assignment will
exceed one year, your agency must
notify you of that fact and change your
status. The effective date of this status
change is the date on which it was
recognized that you are no longer
‘‘temporarily away from home’’ as
defined in the IRC.
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(a) If you believe that your temporary
duty assignment may exceed one year,
you should carefully study IRS
Publication 463, ‘‘Travel, Entertainment,
Gift, and Car Expenses,’’ to determine
whether you are or will be considered
‘‘temporarily away from home’’ under
this provision. If you are not or will not
be considered ‘‘temporarily away from
home’’ under this provision, then you
are on taxable extended TDY.
(b) The IRC makes an exception for
certain Federal personnel involved in
investigation or prosecution of a Federal
crime. Specifically, 26 U.S.C. 162(a),
continues: ‘‘The [above quotation from
26 U.S.C. 162(a)] shall not apply to any
Federal employee during any period for
which such employee is certified by the
Attorney General (or the designee
thereof) as traveling on behalf of the
United States in temporary duty status
to investigate or prosecute, or provide
support services for the investigation or
prosecution of, a Federal crime.’’
§ 301–11.602 What factors should my
agency consider in determining whether to
authorize extended TDY?
Your agency should consider the
factors discussed in § 302–3.502 of this
Subtitle in determining whether to
authorize extended TDY.
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§ 301–11.603 What are the tax
consequences of extended TDY?
(a) If you are on a taxable extended
TDY assignment, then all allowances
and reimbursements for travel expenses,
plus all travel expenses that the
Government pays directly on your
behalf in connection with your TDY
assignment, are taxable income to you.
This includes all allowances,
reimbursements, and direct payments to
vendors from the day that you or your
agency recognized that your extended
TDY assignment is expected to exceed
one year, as explained in § 301–11.601.
(b) Your agency will reimburse you
for substantially all of the income taxes
that you incur as a result of your taxable
extended TDY assignment. This
reimbursement consists of two parts:
(1) The Withholding Tax Allowance
(WTA). See part 302–17, subpart B of
this Subtitle for information on the
WTA; and
(2) The ‘‘Extended TDY Tax
Reimbursement Allowance’’ (ETTRA)
(in previous editions of the FTR this
was known as the ‘‘Income Tax
Reimbursement Allowance’’).
(c) The WTA and ETTRA for taxable
extended TDY assignments cover only
the TDY benefits described in FTR
Chapter 301, Subchapter B. On an
extended TDY assignment, you are not
eligible for the other benefits that you
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would have received if your agency had
permanently relocated you.
§§ 302–2.7—302–2.22 [redesignated as
§§ 302–2.8—302–2.23]
§ 301–11.604 What are the procedures for
calculation and reimbursement of my WTA
and ETTRA for taxable extended TDY?
5. Redesignate §§ 302–2.7—302–2.22
as §§ 302–2.8—302–2.23, respectively,
and add new § 302–2.7 to read as
follows:
(a) If your agency knows from the
beginning of your TDY assignment that
your assignment qualifies as taxable
extended TDY, then your agency will
withhold an amount as a WTA and pay
that as withholding tax to the IRS until
your extended TDY assignment ends.
The WTA itself is taxable income to
you, so your agency increases, or
‘‘grosses-up,’’ the amount of the WTA,
using a formula to reimburse you for the
additional taxes on the WTA.
(b) If your agency realizes during a
TDY assignment that you will incur
taxes (because, for example, the TDY
assignment has lasted, or is going to last,
longer than originally intended), then
your agency will compute the WTA for
all taxable benefits received since the
date it was recognized that you are no
longer ‘‘temporarily away from home’’
(See § 302–11.601 for more information
on the meaning of ‘‘temporarily away
from home’’). Your agency will pay that
amount to the IRS, and then will begin
paying WTA to the IRS until your
extended TDY assignment ends.
(c) For your ETTRA, your agency will
use the same one-year or two-year
process that it has chosen to use for the
relocation income tax allowance (RITA).
(d) See part 302–17 of this subtitle for
additional information on the WTA and
RITA processes.
Note to § 301–11.604: If your agency
chooses to offer you the choice, the WTA is
optional to you. See §§ 302–17.61 through
302–17.69.
§ 302–2.7 What happens if I attempt to
defraud the Government?
If you attempt to defraud the
Government:
(a) You forfeit reimbursement
pursuant to 28 U.S.C. 2514; and
(b) You may be subject under 18
U.S.C. 287 and 1001 to one, or both, of
the following:
(1) A fine of not more than $10,000,
and/or
(2) Imprisonment for not more than 5
years.
PART 302–3—RELOCATION
ALLOWANCES BY SPECIFIC TYPE
6. The authority for part 302–3
continues to read as follows:
Authority: 5 U.S.C. 5738; 20 U.S.C. 905(a).
7. Amend § 302–3.502 by revising the
second sentence in paragraph (b) to read
as follows:
§ 302–3.502 What factors should we
consider in determining whether to
authorize a TCS for a long-term
assignment?
*
*
*
*
*
(b) * * * The Withholding Tax
Allowance and the Extended TDY Tax
Reimbursement Allowance allow for the
reimbursement of Federal, state, and
local income taxes incurred as a result
of taxable extended temporary duty
assignments (see §§ 301–11.601—301–
11.605 of this Subtitle). * * *
*
*
*
*
*
8. Revise part 302–17 to read as
follows:
§ 301–11.605 When should I file my
‘‘Statement of Income and Tax Filing Status’’
for my taxable extended TDY assignment?
PART 302–17—TAXES ON
RELOCATION EXPENSES
You should file your ‘‘Statement of
Income and Tax Filing Status’’ for your
taxable extended TDY assignment at the
beginning of your extended TDY
assignment or, as soon as you or your
agency realizes that your TDY
assignment will incur taxes. You should
provide the same information as the
sample ‘‘Statements of Income and Tax
Filing Status’’ shown in part 302–17,
subpart F (one-year process) or subpart
G (two-year process) of this Subtitle.
Sec.
302–17.0 How are the terms ‘‘I’’ and ‘‘you’’
used in this part?
PART 302–2—EMPLOYEE ELIGIBILITY
REQUIREMENTS
4. The authority for part 302–2
continues to read as follows:
Authority: 5 U.S.C. 5738; 20 U.S.C. 905(a).
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Subpart A—General
302–17.1 What special terms apply to this
part?
302–17.2 Why does relocation affect
personal income taxes?
302–17.3 What is the Government’s
objective in reimbursing the additional
income taxes incurred as a result of a
relocation?
302–17.4 Why is the reimbursement for
substantially all, and not exactly all, of
the additional income taxes incurred as
a result of a relocation?
302–17.5 Who is eligible for the
withholding tax allowance and the
relocation income tax allowance?
302–17.6 Who is not eligible for the WTA
and the RITA?
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302–17.7 Is there any circumstance under
which the WTA and the RITA are not
paid even though I would otherwise be
eligible?
302–17.8 What limitations and Federal
income tax treatments apply to various
relocation reimbursements?
302–17.9 Who is responsible for knowing
which relocation expenses are taxable
and which expenses are nontaxable?
302–17.10 Which expenses should I report
on my state tax returns if I am required
to file returns in two different states?
302–17.11 When is an expense considered
completed in a specific tax year?
302–17.12 Where can I find additional
information and guidance on WTA and
RITA?
302–17.13 How are taxes on extended TDY
benefits and taxes on relocation
allowances related?
Subpart B—The Withholding Tax Allowance
(WTA)
302–17.20 What is the purpose of the WTA?
302–17.21 What relocation expenses does
the WTA cover?
302–17.22 What relocation expenses does
the WTA not cover?
302–17.23 What are the procedures for my
WTA?
302–17.24 How does my agency compute
my WTA?
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Subpart C—The Relocation Income Tax
Allowance (RITA)
302–17.30 What is the purpose of the RITA?
302–17.31 What are the procedures for
calculation and payment of my RITA?
302–17.32 Who chooses the one-year or
two-year process?
302–17.33 May I ask my agency to
recalculate my RITA?
Subpart D—The Combined Marginal Tax
Rate (CMTR)
302–17.40 How does my agency calculate
my CMTR?
302–17.41 Is there any difference in the
procedures for calculating the CMTR,
depending on whether my agency
chooses the one-year or two-year RITA
process?
302–17.42 Which state marginal tax rate(s)
does my agency use to calculate the
CMTR if I incur tax liability in more than
one state, and how does this affect my
RITA and my state tax return(s)?
302–17.43 What local marginal tax rate(s)
does my agency use?
302–17.44 What if I incur income tax
liability to the Commonwealth of Puerto
Rico?
302–17.45 What if I incur income tax
liability to the Commonwealth of the
Northern Mariana Islands or any other
territory or possession of the United
States?
Subpart E—Special Procedure if a State
Treats an Expense as Taxable Even Though
It Is Nontaxable Under the Federal IRC
302–17.46 What does my agency do if a
state treats an expense as taxable even
though it is nontaxable under the Federal
IRC?
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Subpart F—The One-Year RITA Process
302–17.50 What information should I
provide to my agency to make the RITA
calculation possible under the one-year
process?
302–17.51 When should I file my
‘‘Statement of Income and Tax Filing
Status’’ under the one-year process?
302–17.52 When should I file an amended
‘‘Statement of Income and Tax Filing
Status’’ under the one-year process?
302–17.53 What happens if I do not file and
amend the ‘‘Statement of Income and Tax
Filing Status’’ in a timely manner?
302–17.54 How does my agency calculate
my RITA under the one-year process?
302–17.55 What does my agency do once it
has calculated my RITA under the oneyear process?
302–17.56 What do I do, under the one-year
process, once my agency has provided
my W–2(s)?
Subpart G—The Two-Year RITA Process
302–17.60 How are the terms ‘‘Year 1’’ and
‘‘Year 2’’ used in the two-year RITA
process?
302–17.61 Is the WTA optional under the
two-year process?
302–17.62 What information do I put on my
tax returns for Year 1 under the two-year
process?
302–17.63 What information should I
provide to my agency to make the RITA
calculation possible under the two-year
process?
302–17.64 When should I file my
‘‘Statement of Income and Tax Filing
Status’’ under the two-year process?
302–17.65 What happens if I do not file the
‘‘Statement of Income and Tax Filing
Status’’ in a timely manner?
302–17.66 How do I claim my RITA under
the two-year process?
302–17.67 How does my agency calculate
my RITA under the two-year process?
302–17.68 What does my agency do once it
has calculated my RITA under the twoyear process?
302–17.69 How do I pay taxes on my RITA
under the two-year process?
Subpart H—Agency Responsibilities
302–17.100 May we use a relocation
company to comply with the
requirements of this part?
302–17.101 What are our responsibilities
with regard to taxes on relocation
expenses?
302–17.102 What happens if an employee
fails to file and/or amend a ‘‘Statement of
Income and Tax Filing Status’’ prior to
the required date?
302–17.103 What are the advantages of
choosing a one-year or a two-year RITA
process?
Authority: 5 U.S.C. 5724b; 5 U.S.C. 5738;
E.O. 11609, as amended.
§ 302–17.0 How are the terms ‘‘I’’ and ‘‘you’’
used in this part?
The pronouns ‘‘I’’ and ‘‘you’’ and their
variants throughout this part refer to the
employee.
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Subpart A—General
§ 302–17.1
this part?
What special terms apply to
The following definitions apply to
this part:
Allowance:
(1) Money paid to the employee to
cover future expenses, such as the
miscellaneous expense allowance (see
part 302–16 of this chapter for
information about the miscellaneous
expense allowance);
(2) Money paid to the employee to
cover past expenses, such as the
relocation income tax allowance (RITA)
under the two-year tax process
described in part 302–17, subpart G; or
(3) A limit established by statute or
regulation, such as the 18,000 pound net
weight allowance for household goods
shipments (see part 302–7 of this
chapter for information about the 18,000
pound net weight allowance).
City means any unit of general local
government as defined in 31 CFR
215.2(b).
Combined marginal tax rate (CMTR)
means a single rate determined by
combining the applicable marginal tax
rates for Federal, state, and local income
taxes, using the formula provided in
§ 302–17.40. If you incur liability for
income tax in the Commonwealth of
Puerto Rico, see § 302–17.44.
County means any unit of local
general government as defined in 31
CFR 215.2(e).
Gross-up used as a noun, has two
related meanings in this part. It is either:
(1) The process that your agency uses
to estimate the additional income tax
liability that you incur as a result of
relocation benefits and taxes on those
benefits; or
(2) The result of the gross-up process.
Note to the definition of gross-up: The
gross-up allows for the fact that every
reimbursement of taxes is itself taxable.
Therefore, the gross-up calculates the
amount an agency must reimburse an
employee to cover substantially all of
the income taxes incurred as the result
of a relocation.
Internal Revenue Code (IRC) means
Title 26 of the United States Code,
which governs Federal income taxes.
Local income tax means a tax
imposed by a recognized city or county
tax authority that is deductible for
Federal income tax purposes as a local
income tax under the IRC, at 26 U.S.C.
164(a)(3). (See the definitions for the
terms city and county in this section.)
Marginal tax rate (MTR) means the tax
rate that applies to the last increment of
taxable income after taxable relocation
benefits have been added to the
employee’s income. For example, a
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married employee who files jointly has
a taxable income of $120,000. According
to the IRS 2010 Tax Rate Schedules,
taxable income between $68,000 and
$137,700 is taxed at the 25 percent tax
rate; therefore, the $120,000 taxable
income of the employee and spouse is
in this range, so they have a 25 percent
marginal tax rate. If the employee
receives $30,000 of taxable relocation
benefits, the taxable income for the
employee and spouse is now $150,000,
which is in the next highest tax bracket.
In this example, the employee and
spouse now have a Federal marginal tax
rate of 28 percent once the taxable
relocation benefits have been added to
their income.
Reimbursement means money paid to
you to cover expenses that you have
already paid for out of your own funds.
Relocation benefits means all
reimbursements and allowances that
you receive, plus all direct payments
that your agency makes on your behalf,
in connection with your relocation.
Relocation income tax allowance
(RITA) means the payment to the
employee to cover the difference
between the withholding tax allowance
(WTA), if any, and the actual tax
liability incurred by the employee as a
result of their taxable relocation
benefits; RITA is paid whenever the
actual tax liability exceeds the WTA.
State means any one of the several
states of the United States, the District
of Columbia, the Commonwealth of
Puerto Rico, the Commonwealth of the
Northern Mariana Islands, or any other
territory and possession of the United
States.
State income tax means a tax imposed
by a state tax authority that is
deductible for Federal income tax
purposes under the IRC, specifically 26
U.S.C. 164(a)(3).
Withholding tax allowance (WTA)
means the amount paid to the Federal
IRS by the agency as withholding of
income taxes for any taxable relocation
allowance, reimbursement, or direct
payment to a vendor.
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§ 302–17.2 Why does relocation affect
personal income taxes?
When you are relocated from one
permanent duty station to another, you
are reimbursed by your employing
agency for certain expenses. The IRC
requires that you report many of these
relocation benefits, including some that
your agency pays on your behalf, as
taxable income. When you receive
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taxable benefits, you must pay income
tax on the amount or value of those
benefits. However, 5 U.S.C. 5724b also
requires that your agency reimburse you
for substantially all of the additional
Federal, state, and local income taxes
you incur as a result of any taxable
relocation benefits. A reimbursement for
taxes is also a taxable benefit on which
you must pay additional taxes.
§ 302–17.3 What is the Government’s
objective in reimbursing the additional
income taxes incurred as a result of a
relocation?
The Government’s objective is to
reimburse transferred employees for
substantially all (not exactly all—see
§ 302–17.4) of the additional Federal,
state, and local income taxes incurred as
a result of a relocation, including the
taxes on the taxable relocation benefits
and the taxes on the reimbursement for
taxes.
§ 302–17.4 Why is the reimbursement for
substantially all, and not exactly all, of the
additional income taxes incurred as a result
of a relocation?
Because of the complexity of the
calculations, which involve not only
Federal income tax but also the income
tax rates of many states and localities,
it is not reasonable for the Government
to compute the exact impact of
relocation on an affected employee’s
taxes. Making a good faith effort to
reimburse substantially all additional
income taxes is sufficient. The statute
where this appears, at 5 U.S.C. 5724b
does not define substantially all. This
part provides the description through its
provisions.
§ 302–17.5 Who is eligible for the
withholding tax allowance and the
relocation income tax allowance?
(a) The withholding tax allowance
(WTA) and the relocation income tax
allowance (RITA) are the two
allowances through which the
Government reimburses you for
substantially all of the income taxes that
you incur as a result of your relocation.
You are eligible for the WTA and the
RITA if your agency is transferring you
from one permanent duty station to
another, in the interest of the
Government, and your agency’s
reimbursements to you for relocation
expenses result in you being liable for
additional taxes.
(b) If your agency chooses to offer you
the choice, the WTA is optional to you.
See 302–17.61 through 302–17.69.
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§ 302–17.6 Who is not eligible for the WTA
and the RITA?
You are not eligible for the WTA or
the RITA if you are:
(a) A new appointee;
(b) Assigned under the Government
Employees Training Act; or
(c) Returning from an overseas
assignment for the purpose of separation
from Government service.
§ 302–17.7 Is there any circumstance
under which the WTA and the RITA are not
paid even though I would otherwise be
eligible?
If you violate the 12-month service
agreement under which you are
relocated, your agency will not pay the
WTA or the RITA to you, and you must
repay any relocation benefits paid prior
to the violation.
§ 302–17.8 What limitations and Federal
income tax treatments apply to various
relocation reimbursements?
(a) If you were moving yourself for a
new job, with no help from your
employer, then you probably would be
able to deduct some of your relocation
expenses. However, if you are eligible
for WTA and RITA under this part, your
Federal agency reimburses you or pays
directly for many relocation expenses
that otherwise would be deductible.
Since you could have deducted these
expenses if you had paid them yourself,
the benefits you receive from your
agency for these ‘‘deductible’’ relocation
expenses are nontaxable. Therefore, you
do not report them as income and you
cannot take them as deductions.
(b) However, many other relocation
benefits are taxable income to you, the
employee, because you could not have
deducted them. You also may not
deduct the additional taxes you incur,
as a result of taxable benefits (except
that you may deduct state and local
income taxes on your Federal tax
return). Your agency will reimburse you
for most of these taxable expenses and
for substantially all of the additional
taxes that you incur as a result of the
taxable benefits.
(c) The table to § 302–17.8
summarizes the FTR allowances,
limitations, and tax treatment of each
reimbursement, allowance, or direct
payment to a vendor. See IRS
Publication 521, Moving Expenses, and
the cited FTR paragraphs for details.
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TABLE TO § 302–17.8—FTR ALLOWANCES AND FEDERAL INCOME TAX TREATMENTS
Entitlement
Summary of FTR allowance
FTR part or section
Meals while en route to the new duty
station.
Lodging while en route to the new duty
station.
The standard CONUS per diem for
meals and incidental expenses.
The standard CONUS per diem for
lodging expenses for the employee
only.
Actual cost or the rate established by
the IRS for using a POV for relocation.
Actual cost ............................................
§ 302–4.200 ...........
Taxable.
§ 302–4.200 ...........
Nontaxable provided the cost is reasonable according to the IRC.
Part 302–4 ............
Nontaxable.
Part 302–4 ............
Nontaxable.
Actual Expense Method: 10 days of
per diem plus transportation expenses—must be itemized;
or
Lump Sum Method: locality rate times
5 (one person) or times 6.25 (employee and spouse) for up to 10
days—no itemization required.
Actual Expense Method: Maximum of
120 days; full per diem for only the
first 30 days—itemization required;
or
Lump Sum Method: multiply number of
days allowed by .75 times the locality rate (30 days maximum)—no
itemization required.
Note: Additional TQSE allowances for
family members are less than the
benefit for the employee occupying
TQ alone.
Transportation of up to 18,000 pounds
Part 302–5 ............
Taxable.
Part 302–5 ............
Taxable.
§ 302–6.100 ...........
Taxable.
§ 302–6.200 ...........
Taxable.
§ 302–7.2 ...............
Temporary storage of up to 30 days
(However, see the section immediately below).
§ 302–7.8 ...............
Transportation of goods from your
former residence to your new residence is nontaxable.
Nontaxable.
Temporary storage of 60 plus 90 days,
NTE 150 days.
CONUS—TCS (per agency policy) or
isolated duty station only.
OCONUS—Agency policy ....................
§ 302–7.8 ...............
Taxable.
Part 302–8, Subpart B.
Part 302–8, Subparts C and D.
Part 302–9, Subpart D.
Part 302–9, Subparts B & C.
§ 302–10.3 .............
Taxable.
Nontaxable.
§ 302–11.300(a) ....
Taxable.
§ 302–11.300(b) ....
Taxable.
§§ 302–11.430 &
431.
Part 302–12 ..........
Taxable.
Transportation using your POV to your
new duty station.
Transportation to your new duty station
using a common carrier (an airline,
for example).
Per diem and transportation for
househunting trip.
Temporary quarters subsistence expenses (TQSE).
Shipment of household goods (HHG) ...
Temporary storage of household goods
in transit, as long as the expenses
are incurred within any 30 calendar
day period after the day your items
are removed from your old residence
and before they are delivered to the
new residence.
Temporary storage of household goods
beyond 30 days.
Extended storage of Household Goods
(HHG).
Transportation of privately-owned vehicle (POV).
CONUS—Agency discretion .................
OCONUS—Agency discretion ..............
Shipment of mobile home in lieu of
HHG.
Residence transactions:
• Sale of home ..............................
• Purchase of home ......................
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• Lease-breaking ...........................
Payments to Relocation Service Contractors.
Home Marketing Incentive Payment .....
Property Management Services ............
Miscellaneous expenses .......................
Withholding tax allowance .....................
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Limited to maximum allowance for
HHG.
Closing costs up to 10% of actual
sales price.
Closing costs up to 5% of actual purchase price.
Itemization required ..............................
According to agency policy and contracts.
See internal agency policies and regulations.
See internal agency policies and regulations.
$500 or $1,000; or ................................
Maximum of 1 or 2 weeks basic pay ...
25 percent of reimbursements, allowances, and direct payments to vendors.
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Part 302–14 ..........
Part 302–15 ..........
Tax treatments
Nontaxable.
Nontaxable.
Nontaxable.
Taxability determined on a case-bycase basis.
Taxable, but not eligible for WTA or
RITA.
Taxable.
§ 302–16.102 .........
§ 302–16.103 .........
Part 302–17, Subpart B.
Taxable.
Taxable.
Taxable.
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TABLE TO § 302–17.8—FTR ALLOWANCES AND FEDERAL INCOME TAX TREATMENTS—Continued
Entitlement
Summary of FTR allowance
FTR part or section
Relocation income tax allowance ..........
Based on income and tax filing status.
Part 302–17, Subpart C.
§ 302–17.9 Who is responsible for knowing
which relocation expenses are taxable and
which expenses are nontaxable?
Both you and your agency must know
which reimbursements and direct
payments to vendors are taxable and
which are nontaxable in your specific
circumstances. When you submit a
voucher for reimbursement, your agency
must determine whether the
reimbursement is taxable income at the
Federal, state, and/or local level. Then,
when you file your income tax returns,
you must report the taxable allowances,
reimbursements, and direct payments to
vendors as income. Your agency is
ultimately responsible for calculating
and reporting withholding accurately,
and you are ultimately responsible for
filing your taxes correctly.
§ 302–17.10 Which expenses should I
report on my state tax returns if I am
required to file returns in two different
states?
In most cases, your state tax return for
the state you are leaving should reflect
your reimbursement or allowance, if
any, for househunting expenses and
your reimbursement or direct payments
to vendors for real estate expenses at the
home you are leaving. All other taxable
expenses should be shown as income on
the tax return you file in the state into
which you have moved. However, you
and your agency must carefully study
the rules in both states and include
everything that each state considers to
be income on each of your state tax
returns.
§ 302–17.11 When is an expense
considered completed in a specific tax
year?
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A reimbursement, allowance, or direct
payment to a vendor is considered
completed in a specific tax year only if
the money was actually disbursed to the
employee or vendor during the tax year
in question.
§ 302–17.12 Where can I find additional
information and guidance on WTA and
RITA?
To find additional information and
guidance on WTA and RITA, see:
(a) IRS Publication 521, Moving
Expenses; and
(b) FTR Bulletins; GSA publishes
additional information on RITA,
including the illustrations and examples
of various RITA computations, in FTR
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Bulletins which are updated as
necessary. The current GSA FTR
Bulletins may be found at https://
www.gsa.gov/bulletins.
§ 302–17.13 How are taxes on extended
TDY benefits and taxes on relocation
allowances related?
(a) Taxes on extended TDY benefits
are computed using exactly the same
processes described in this part for the
WTA and RITA except that:
(1) The tax process for extended TDY
benefits uses the term ‘‘withholding tax
allowance ’’ (WTA) in exactly the same
fashion as the process for taxes on
relocation allowances; however, in
place of the term ‘‘relocation income tax
allowance,’’ the tax process for extended
TDY benefits uses the term ‘‘extended
TDY tax reimbursement allowance’’
(ETTRA); and
(2) All benefits are taxable under
extended TDY, so the sections of this
part that discuss which benefits are
taxable and which are not have no
relevance to ETTRA.
(b) See part 301–11, subpart F of this
title for additional information about
taxes on extended TDY benefits.
Subpart B—The Withholding Tax
Allowance (WTA)
§ 302–17.20
WTA?
What is the purpose of the
(a) The purpose of the WTA is to
protect you from having to use part of
your relocation expense reimbursements
to pay Federal income tax withholding;
it does not cover state taxes, local taxes,
Medicare taxes, or Social Security taxes
(see § 302–17.22(c) and (d)).
(b) If your agency chooses to offer you
the choice, the WTA is optional to you.
See 302–17.61 through 302–17.69.
§ 302–17.21 What relocation expenses
does the WTA cover?
The WTA covers certain allowances,
reimbursements, and/or direct payments
to vendors, to the extent that each of
them is taxable income. It does not
cover any allowance, reimbursement, or
direct payment to a vendor that is
nontaxable; that is, your agency will not
give you a WTA for anything that is not
considered taxable income to you (see
the table in § 302–17.8 for a summary of
tax treatment). In particular, the WTA
covers:
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Tax treatments
Taxable.
(a) En route meals and incidental
expenses—Reimbursements for meals
and incidental expenses while en route
are taxable and, therefore, are covered
by the WTA.
(b) Househunting trip—Travel
(including per diem and transportation)
expenses for you (and your spouse) for
one round trip to the new official station
to seek permanent residence quarters.
Househunting is covered regardless of
whether it is reimbursed under the
actual expense or lump sum method.
(See part 302–5 of this chapter.)
(c) Temporary quarters—Subsistence
expenses for you and your immediate
family during occupancy of temporary
quarters. Temporary quarters are
covered regardless of whether it is
reimbursed under the actual expense or
lump sum method. (See part 302–6 of
this chapter.)
(d) Extended storage expenses—
Extended storage for a temporary change
of station in CONUS or assignment to an
isolated duty station in CONUS, but
only if these expenses are allowed by
part 302–8 of this chapter and your
agency’s policy.
(e) Real estate expenses—Expenses for
the sale of the residence at your old
official station and purchase of a home
at your new official station. This can
also include expenses for settling an
unexpired lease (‘‘breaking’’ a lease) at
your old official station. (See part 302–
11 of this chapter. If you do not hold
full title to the home you are selling or
buying, see § 302–12.7 of this chapter.)
(f) Expenses paid by a relocation
company to the extent such payments
constitute taxable income to the
employee. The extent to which such
payments constitute taxable income
varies according to the individual
circumstances of your relocation, and by
the state and locality in which you
reside. (See IRS Publication 521,
Moving Expenses, and appropriate state
and local tax authorities for additional
information.)
(g) Property Management Services—
Payment for the services of a property
manager for renting rather than selling
a residence at your old official station.
(See part 302–15 of this chapter.)
(h) Miscellaneous expense
allowance—Miscellaneous expenses for
defraying certain relocation expenses
not covered by other relocation benefits.
(See part 302–16 of this chapter.)
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§ 302–17.22 What relocation expenses
does the WTA not cover?
§ 302–17.23
my WTA?
The WTA does not cover the
following relocation expenses:
(a) Any reimbursement, allowance, or
direct payment to a vendor that should
not be reported as taxable income when
you file your Federal tax return; this
includes but is not limited to en route
lodging and transportation, HHG
transportation, and transportation of
POVs.
(b) Reimbursed expenses for extended
storage of household goods during an
OCONUS assignment, if reimbursement
is permitted under your agency’s policy.
(c) State and local withholding tax
obligations. To the extent that your state
or local tax authority requires periodic
(such as quarterly) tax payments, you
are responsible to pay these from your
own funds. Your agency reimburses you
for substantially all of these payments
through the RITA process, but your
agency does not provide a WTA for
them. If required to by state or local law,
your agency may withhold these from
your reimbursement.
(d) Additional taxes due under the
Federal Insurance Contributions Act
including Social Security tax, if
applicable, and Medicare tax. Current
law does not allow Federal agencies to
reimburse transferees for these
employment taxes on relocation
benefits. However, your agency will
deduct for these taxes from your
reimbursements for taxable items.
(e) Any reimbursement amount that
exceeds the actual expense paid or
incurred. For example, if your
reimbursement for the movement of
household goods is based on the
commuted rate schedule but your actual
relocation expenses are less than that,
your tax liability for the difference is not
covered by the WTA or RITA.
(f) Home marketing incentive
payment. In accordance with FTR part
302–14, your agency may not provide
you either a WTA or RITA for this
incentive.
(g) Any recruitment, relocation, or
retention incentive payment that you
receive. Any withholding of taxes for
such payments is outside the scope of
this regulation. Rather, it is covered by
regulations issued by the Office of
Personnel Management, Treasury’s
Financial Management Service, and the
IRS.
(h) Any allowances, reimbursements,
and/or direct payments to vendors not
related to your relocation; for example,
a reimbursement for office supplies
would not be covered by the WTA, even
if it occurred during your relocation.
(a) Your agency prepares a relocation
travel authorization, which includes an
estimate of the WTA and RITA, to
obligate funds for your relocation.
(b) Your agency pays certain
allowances to you. Your agency also
pays vendors directly for other
relocation expenses.
(c) Your agency instructs you as to
whether to submit one voucher after you
have completed your relocation or to
submit vouchers at various points as
your relocation progresses plus another
when your relocation is completed.
(d) You submit your voucher(s) for
reimbursement of certain relocation
expenses.
(e) Your agency determines the extent
to which each allowance, each item on
your voucher(s), and each direct
payment to a vendor is nontaxable or is
taxable income to you under the IRC.
(f) For the taxable items, your agency
calculates your WTA and any
reimbursement(s) due to you in
accordance with § 302–17.24. Your
agency sets aside the amount of your
WTA and pays the IRS as a withholding
tax in accordance with IRS
requirements.
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What are the procedures for
§ 302–17.24 How does my agency
compute my WTA?
(a) Your agency computes your WTA
by applying the grossed-up withholding
formula below each time your agency
incurs a covered, taxable relocation
expense, regardless of whether it is a
reimbursement, allowance, or direct
payment to a vendor.
(b) The law currently provides for a
withholding rate of 25 percent for
‘‘supplemental wages’’ that are identified
separately from regular wages (This rate
has not always been 25 percent and may
change in the future; GSA will revise
the FTR to reflect any changes as
quickly as possible, but users of this
part should see IRS Publication 15,
Employer’s Tax Guide, for the most
current rate). Taxable payments for
relocation expenses are ‘‘supplemental
wages,’’ as defined in IRS Publication
15. However, you owe taxes on the
WTA itself because, like most other
relocation allowances, it is taxable
income. To reimburse you for the taxes
on the WTA itself, your agency
computes the WTA by multiplying the
reimbursement, allowance, or direct
payment to a vendor by 0.3333 instead
of 0.25. That is:
WTA = R/(1–R) × Expense
Where R is the withholding rate for
supplemental wages, or
WTA = 0.25/(1 ¥0.25) × Expense, or
0.3333 × Expense
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EXAMPLE 1—CALCULATING THE
WITHHOLDING TAX ALLOWANCE (WTA)
Househunting Trip Actual Expense Claim ......................
WTA = .3333 × $3,000 =
$999.90
Temporary Quarters Lump
Sum Allowance .................
WTA = .3333 × $5,000 =
$1,666.50
Total WTA $999.90 +
$1,666.50 = $2,666.40
3,000
5,000
Note: Your agency must deduct
withholding for Medicare and FICA (Social
Security) from your reimbursement for
expenses such as househunting, as the WTA
does not cover such expenses.
Subpart C—The Relocation Income
Tax Allowance (RITA)
§ 302–17.30
RITA?
What is the purpose of the
(a) The purpose of the RITA is to
reimburse you for any taxes that you
owe that were not adequately
reimbursed by the WTA. As discussed
in § 302–17.24, the WTA calculation is
based on the 25 percent income tax
withholding rate applicable to
supplemental wages. This may be
higher or lower than your actual tax
rate. The RITA, on the other hand, is
based on your marginal tax rate,
determined by your actual taxable
income and filing status, which allows
your agency to reimburse you for
substantially all of your Federal income
taxes. The RITA also reimburses you for
any additional state and local taxes that
you incur as a result of your relocation,
because they are not reimbursed in the
WTA process.
(b) The WTA may be optional to you.
See 302–17.61 for a discussion of
criteria for choosing whether or not to
accept the WTA. See 302–17.62 through
302–17.69 for procedures if you choose
not to accept the WTA.
§ 302–17.31 What are the procedures for
calculation and payment of my RITA?
The procedures for the calculation
and payment of your RITA depend on
whether your agency has chosen to use
a one-year or two-year RITA process.
See subpart F for the one-year process
and subpart G for the two-year process.
§ 302–17.32 Who chooses the one-year or
two-year process?
Your agency or a major component of
your agency determines whether it will
adopt a one-year or two-year RITA
process. Your agency may use the oneyear RITA process for one or more
specific categories of employees and the
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two-year process for one or more other
categories.
§ 302–17.33 May I ask my agency to
recalculate my RITA?
(a) Yes, you may ask your agency to
recalculate your RITA provided you
filed your ‘‘Statement of Income and Tax
Filing Status,’’ and amended it, if
necessary, in a timely manner. If, once
you have completed all Federal, state,
and local tax returns, you believe that
your RITA should have been
significantly different from the RITA
that your agency calculated, you may
ask your agency to recalculate your
RITA. This is true for either the one-year
or two-year process. With any request
for recalculation, you must submit a
statement explaining why you believe
your RITA was incorrect.
(b) Please note that your agency may
require that you also submit an
amended ‘‘Statement of Income and Tax
Filing Status’’ (if, for example, you
inadvertently did not report some of
your income in your original
Statement), your actual tax returns, or
both, as attachments to your request for
recalculation.
Note to § 302–17.33: Please see § 302–
17.55, if your agency uses a one-year RITA
process, or § 302–17.69, if your agency uses
a two-year RITA process, for more
information about positive and negative
RITA calculations.
Subpart D—The Combined Marginal
Tax Rate (CMTR)
§ 302–17.40 How does my agency
calculate my CMTR?
(a) The CMTR is a key element that
greatly enhances the accuracy of the
If:
calculation of your RITA. Your agency
uses the information on your ‘‘Statement
of Income and Tax Filing Status,’’ as
amended, to determine your CMTR, as
follows (see subparts F and G of this
part for information about the
‘‘Statement of Income and Tax Filing
Status’’).
(b) The CMTR is, in essence, a
combination of your Federal, state, and
local tax rates. However, the CMTR
cannot be calculated by merely adding
the Federal, state, and local marginal tax
rates together because of the
deductibility of state and local income
taxes from income on your Federal
income tax return. The formula
prescribed below for calculating the
CMTR, therefore, is designed to adjust
the state and local tax rates to
compensate for their deductibility from
income for Federal tax purposes.
(c) The formula for calculating the
CMTR is:
CMTR = F + (1¥F)S + (1¥F)L
Where:
F = Your Federal marginal tax rate
S = Your state marginal tax rate, if any
L = Your local marginal tax rate, if any
you (if any) by comparing your taxable
income to the most current state and/or
local tax tables provided by the states
and localities. Every Federal payroll
office and every provider of tax
calculation software has these tables
readily available, and the tables are also
available on the Web sites of the various
state and local taxing authorities.
§ 302–17.41 Is there any difference in the
procedures for calculating the CMTR,
depending on whether my agency chooses
the one-year or two-year RITA process?
No. The procedures for calculating the
CMTR are the same for the one-year and
two-year RITA processes.
EXAMPLE 2—CALCULATING THE
COMBINED MARGINAL TAX RATE
Percent
Federal marginal tax rate .....
State marginal tax rate .........
Local marginal tax rate .........
CMTR = 0.33 + (1.00¥0.33)(.06) +
(1.00¥0.33)(0.03) = .3903 or
39.03%
(d) Your agency finds the Federal
marginal tax rate by comparing your
taxable income, as shown in your
‘‘Statement of Income and Filing Status,’’
to the Federal tax tables in the current
year’s Form 1040–ES instructions (See
§§ 302–17.50 through 302–17.53 and
§§ 302–17.63 through 302–17.65 for
additional information on the
‘‘Statement of Income and Tax Filing
Status.’’)
(e) Your agency finds the state and
local marginal tax rates that apply to
§ 302–17.42 Which state marginal tax
rate(s) does my agency use to calculate the
CMTR if I incur tax liability in more than one
state, and how does this affect my RITA and
my state tax return(s)?
If two or more states that are involved
in your relocation impose an income tax
on relocation benefits, then your
relocation benefits may be taxed by both
states. Most commonly, your old and
new duty stations are in the two states
involved. The following table lays out
the possibilities:
Your agency will use the
following as the state marginal tax rate in the CMTR:
But:
Your RITA will include an
appropriate allowance for:
Taxes you incur in that
state.
...........................................
Each involved state taxes
a different set of your relocation benefits, with no
overlap.
Two or more involved
states tax some of your
same relocation benefits.
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Only one involved state
has a state income tax.
...........................................
The marginal tax rate of
the one state that taxes
income.
The average of the marginal tax rates for each
state involved.
All involved states allow
you to adjust or take a
credit for income taxes
paid to other states.
The marginal tax rate of
the state that has the
highest state income tax
rate.
Taxes you incur in all involved states.
One or more involved
states does not allow
you to adjust or take a
credit for income taxes
paid to other states.
The sum of all applicable
state marginal tax rates.
Taxes you incur in all involved states.
Two or more involved
states tax some of the
same relocation benefits.
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33
6
3
Taxes you incur in all involved states.
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Your action:
You pay the taxes required
by the state that taxes
income.
You file tax returns in each
involved state and pay
the applicable taxes.
You file tax returns in each
involved state, take the
appropriate credits and/
or adjustments, and pay
the applicable taxes.
You file tax returns in each
involved state, and pay
the applicable taxes.
This may result in paying taxes in more than
one state on the same
relocation benefits.
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§ 302–17.43 What local marginal tax rate(s)
does my agency use?
(a) If you incur local tax liability, you
provide the applicable marginal tax
rate(s) on your ‘‘Statement of Income
and Tax Filing Status. Your agency
validates the applicable local marginal
tax rate(s) and uses it (them) in the
CMTR formula.
(b) If you incur local income tax
liability in more than one locality, then
your agency should follow the rules
described for state income taxes in
§ 302–17.42 to calculate the local
marginal tax rate that will be used in the
CMTR formula and to compute your
RITA, and you should follow the rules
in § 302–17.42 to determine your
actions.
(c) If a locality in which you incur
income tax liability publishes its tax
rates in terms of a percentage of your
Federal or state taxes, then your agency
must convert that tax rate to a
percentage of your income to use it in
computing your CMTR. This is
accomplished by multiplying the
applicable Federal or state tax rate by
the applicable local tax rate. For
example, if the state marginal tax rate is
6 percent and the local tax rate is 50
percent of state income tax liability, the
local marginal tax rate stated as a
percentage of taxable income would be
3 percent.
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§ 302–17.44 What if I incur income tax
liability to the Commonwealth of Puerto
Rico?
A Federal employee who is relocated
to or from a point, or between points, in
the Commonwealth of Puerto Rico may
be subject to income tax by both the
Federal government and the government
of Puerto Rico. However, under current
Puerto Rico law, an employee receives
a credit on his/her Puerto Rico income
tax for the amount of taxes paid to the
Federal government. Therefore:
(a) If the applicable Puerto Rico
marginal tax rate, as shown in the tables
provided by the Commonwealth of
Puerto Rico, is equal to or lower than
the applicable Federal marginal tax rate,
then your agency uses the Federal
marginal tax rates and the formula in
§ 302–17.40(c) in calculating your
CMTR.
(b) If the applicable Puerto Rico
marginal tax rate, as shown in the tables
provided by the Commonwealth of
Puerto Rico, is higher than the
applicable Federal marginal tax rate,
and if all of the states involved either
have no income tax or allow an
adjustment or credit for income taxes
paid to the other state(s) and Puerto
Rico, then your agency uses the rate for
Puerto Rico in place of the Federal
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marginal tax rate in the formula in
§ 302–17.40(c).
(c) If the applicable Puerto Rico
marginal tax rate, as shown in the tables
provided by the Commonwealth of
Puerto Rico, is higher than the
applicable Federal marginal tax rate and
one or more of the state(s) involved does
not allow an adjustment or credit for
income taxes paid to the other state(s)
and/or Puerto Rico, then your agency
uses the formula below:
CMTR = P + S + L
Where:
P = Your Puerto Rico marginal tax rate
S = Your state marginal tax rate, if any
L = Your local marginal tax rate, if any
§ 302–17.45 What if I incur income tax
liability to the Commonwealth of the
Northern Mariana Islands or any other
territory or possession of the United
States?
Federal tax rules but are taxable under
state tax rules
All information, except ‘‘N,’’ can be
found in previous calculations (if
moving to, from, or within Puerto Rico,
follow the rules in 302–17.44 to
determine when to substitute ‘‘P’’ for
‘‘F’’).
‘‘N’’ is determined as follows:
1. Take the dollar amount of
reimbursements, allowances, and direct
payments to vendors treated as
nontaxable under Federal tax rules.
2. Subtract the dollar amount of
reimbursements, allowances, and direct
payments to vendors treated as
nontaxable by the state.
3. The difference represents ‘‘N.’’
(b) This calculation is the same,
regardless of whether your agency has
chosen to use the one-year or two-year
RITA process.
If you are relocated to, from, or within
the Commonwealth of the Northern
Mariana Islands or any territory or
possession of the United States that is
not covered by the definitions in § 302–
17.7 or § 302–17.44, your agency will
have to determine the tax rules of that
locality and then include those taxes in
your RITA calculation, as applicable.
Subpart F—The One-Year RITA
Process
Subpart E—Special Procedure if a
State Treats an Expense as Taxable
Even Though It Is Nontaxable Under
the Federal IRC
Statement of Income and Tax Filing
Status—One-Year Process
§ 302–17.46 What does my agency do if a
state treats an expense as taxable even
though it is nontaxable under the Federal
IRC?
(a) If one or more of the states where
you have incurred tax liability for
relocation expenses treats one or more
relocation expenses as taxable, even
though it (they) are nontaxable under
Federal tax rules, you may be required
to pay additional state income tax when
you file tax returns with those states. In
this case, your agency calculates a state
gross-up to cover the additional tax
liability resulting from the covered
relocation expense reimbursement(s)
that are nontaxable under Federal, but
not state tax rules. Your agency
calculates the state gross-up and then
adds that amount to your RITA. Your
agency will use this formula to calculate
the state gross-up:
F = Federal Marginal Tax Rate
S = State Marginal Tax Rate
C = CMTR
N = Dollar amount of covered relocation
expenses that are nontaxable under
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§ 302–17.50 What information should I
provide to my agency to make the RITA
calculation possible under the one-year
process?
You should provide the information
required in the following ‘‘Statement of
Income and Tax Filing Status.’’
The following information, which my
agency will use in calculating the RITA
to which I am entitled, was shown on
the Federal, state, and local income tax
returns that I (or my spouse and I) filed
for the 20ll tax year (this should be
the most recent year in which you filed).
Filing status:
b Single
b Head of Household
b Married Filing Jointly
b Qualifying Widow(er)
b Married Filing Separately
(a) Taxable income as shown on my
(our) IRS Form 1040: $ ll
Significant future changes in income
(including cost of living raises) that you
can foresee for the current year:
lIncrease
l Decrease
l
No Foreseeable Changes
(b) Approximate net amount of this
(these) change(s): $ ll
(c) Predicted taxable income for the
current tax year 20l =
Sum of (a) and (b) = $ ll
State you are moving out of :lll
Marginal Tax Rate: ll%
State you are moving into: lll
Marginal Tax Rate: ll%
Locality you are moving out of: lll
Marginal Tax Rate: ll%
Locality you are moving into: lll
Marginal Tax Rate: ll%
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§ 302–17.51 When should I file my
‘‘Statement of Income and Tax Filing Status’’
under the one-year process?
For the one-year process, you should
file this form as soon as you receive
your relocation orders, or as soon as you
file your tax returns for the most recent
tax year, whichever occurs later.
§ 302–17.52 When should I file an
amended ‘‘Statement of Income and Tax
Filing Status’’ under the one-year process?
You should submit an amended
‘‘Statement of Income and Tax Filing
Status’’ to your agency under the oneyear process whenever the information
on it changes, and you should continue
to amend it until you have received the
last W–2 from your agency in
connection with a specific relocation. In
particular, you should file an amended
version of this statement whenever:
(a) Your filing status changes;
(b) Your income changes enough that
your income, including WTA and RITA,
might put you into a different tax
bracket; or
(c) You have taxable relocation
expenses in a second or third year.
Note to § 302–17.52: Your agency will not
be able to use your original or amended
‘‘Statement of Income and Tax Filing Status’’
if you file it after the cut-off date established
by your agency in accordance with § 302–
17.54(b).
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§ 302–17.53 What happens if I do not file
and amend the ‘‘Statement of Income and
Tax Filing Status’’ in a timely manner?
If you don’t file the ‘‘Statement of
Income and Tax Filing Status’’ and/or
amend it when necessary, your agency
will switch to the 2-year process, and
because the WTA is an advance of your
income tax expenses, you will be liable
to repay the full amount of the WTA
that your agency has paid to the IRS.
See subpart G of this part.
§ 302–17.54 How does my agency
calculate my RITA under the one-year
process?
(a) Your agency provides allowances
to you, reimburses you for vouchers that
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you submit, and pays certain relocation
vendors directly, all during the calendar
year as described in subpart B of this
part. Some of these reimbursements,
allowances, and direct payments to
vendors are taxable income to you, the
employee, as described in subpart A of
this part. Your agency computes a WTA
and reports the WTA to the IRS as taxes
withheld for you for each of these
taxable reimbursements, allowances,
and direct payments to vendors.
Note to § 302–17.54(a): The WTA may be
optional to you. However, if your agency is
using a one-year RITA process, there is no
advantage to you in choosing not to receive
the WTA, because your agency will adjust
the WTA payment to the IRS. See 302–
17.55(a)(1).
(b) Your agency establishes a cutoff
date (for example, December 1), after
which it will not issue reimbursements
or allowances to you or make direct
payments to relocation vendors for the
rest of the calendar year.
(c) If the information on your
‘‘Statement of Income and Tax Filing
Status’’ changes after you have
submitted the initial version, you must
submit an amended ‘‘Statement of
Income and Tax Filing Status’’ no later
than your agency’s cutoff date.
(d) During the period between the
cutoff date and the end of the calendar
year, your agency calculates your RITA.
(e) Your RITA is itself taxable income
to you. To account for taxes on the
RITA, your agency will gross-up your
RITA by using a gross-up formula that
multiplies the grossed-up CMTR by the
total of all covered taxable relocation
benefits, and then subtracts your
grossed-up WTA from that total. That is:
Where
C = CMTR
R = Reimbursements, allowances, and direct
payments to vendors covered by WTA
Y = Total grossed-up WTAs paid during the
current year.
§ 302–17.55 What does my agency do
once it has calculated my RITA under the
one-year process?
(a) Your RITA is likely to be different
from the sum of the WTA computed and
reported during the year, because the
WTA is calculated using a flat rate,
established by the IRC, while the RITA
is calculated using the CMTR.
Therefore:
(1) If the calculation above results in
a negative value (that is, if your agency’s
calculation shows that it withheld and
reported too much money as WTA),
then your agency will send an
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adjustment to the IRS using Form 941.
In this case, your agency does not make
a RITA payment to you because you do
not need additional funds to pay your
taxes. That is, everything you need to
pay substantially all of your taxes was
included in the adjusted WTA, and that
is the amount that will appear on your
Form W–2.
(2) If the calculation above results in
a positive value (that is if your agency’s
calculation shows that it did not
withhold enough money for your
income taxes), then your agency will
pay your RITA to you before the end of
the calendar year and report it to the IRS
as part of your income for that year.
(b) Shortly after the end of the
calendar year, your agency will provide
one or two W–2 Forms to you. At your
agency’s discretion, you may receive
one W–2 that includes all of your
taxable relocation expenses, WTA, and
RITA (if any), along with your payroll
wages, or you may receive one W–2 for
your payroll wages and a separate one
for your taxable relocation expenses,
WTA, and RITA.
§ 302–17.56 What do I do, under the oneyear process, once my agency has provided
my W–2(s)?
(a) You must use all W–2(s) that you
have received to file your tax returns.
On those returns, you must include all
taxable relocation expenses shown on
your W–2(s) as income, including your
WTA and RITA (if any). Please note that
you must also include all WTA as
withholding, in addition to the standard
withholding from your payroll wages.
(b) If you finished your relocation
within one calendar year, and your
agency paid all of your relocation
reimbursements, allowances, and direct
payments to vendors in the same
calendar year, before the cutoff date,
then your tax returns for that calendar
year are the end of your relocation tax
process. If, on the other hand, your
agency reimburses you for relocation
expenses, or pays allowances or
relocation vendors on your behalf,
during a second (and possibly a third)
calendar year, then you and your agency
repeat the process above for each of
those years.
Subpart G—The Two-Year RITA
Process
§ 302–17.60 How are the terms ‘‘Year 1’’
and ‘‘Year 2’’ used in the two-year RITA
process?
(a) Year 1 is the calendar year in
which the agency reimburses you for a
specific expense, provides an
allowance, or pays a vendor directly. If
your reimbursements, allowances, and/
or direct payments to vendors occur in
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The above information is true and
accurate to the best of my (our)
knowledge. I (we) agree to notify the
appropriate agency official of any
significant changes to the above so that
appropriate adjustments to the RITA can
be made.
llllllllllllllllll
l
Employee’s signature
llllllllllllllllll
l
Date
llllllllllllllllll
l
Spouse’s signature
llllllllllllllllll
l
Date (if filing jointly)
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Federal Register / Vol. 76, No. 108 / Monday, June 6, 2011 / Proposed Rules
more than one calendar year, you will
have more than one Year 1.
(b) Year 2 is the calendar year in
which you submit your RITA claim and
your agency pays your RITA to you.
(c) In most cases:
(1) For every Year 1 you will have a
corresponding Year 2;
(2) Every Year 2 immediately follows
a Year 1; and
(3) Year 2 is the year in which you file
a tax return reflecting your remaining
tax liability for taxable
reimbursement(s), allowance(s), and/or
direct payments to vendors in each
Year 1.
(d) The table below offers a graphic
explanation of Year 1 and Year 2,
assuming that you begin your relocation
in 2010 and incurred additional
approved expenses in 2011 and 2012.
2010
2011
2012
First Year 1 ....................................
Second Year 1 and Year 2 for
2010.
Third Year 1 and Year 2 for 2011
§ 302–17.61 Is the WTA optional under the
two-year process?
(a) Yes. If your agency makes the
WTA optional to you, you may choose
to not receive the WTA.
(b) WTA is paid at a rate of 25
percent. When deciding whether or not
to receive the WTA, you should
consider the following:
(1) If you expect that your marginal
Federal tax rate will be 25 percent or
higher for the calendar year for which
you received the majority of your
2013
Year 2 for 2012.
relocation reimbursements, you may
want to elect to receive the WTA,
because your initial reimbursements
will be higher, as shown in the
following Example 3).
EXAMPLE 3—CLAIMS PAID WITH AND WITHOUT WTA
Allowance computed without WTA:
$1,000.00 Miscellaneous Expenses Allowance.
Minus
250.00 Federal Withholding Tax (25%).
Minus
14.50 Medicare Withholding Tax (1.45%).
Minus
62.50 FICA (Social Security) Tax (6.20%).
Equals
673.50 Amount due to the transferee.
Allowance computed with WTA:
$1,000.00 Miscellaneous Expenses Allowance.
Plus
333.30 Withholding Tax Allowance (25% of $1333.30).
Equals
1,333.30 Net allowance with WTA.
Minus
333.30 Federal Withholding Tax (25%).
Minus
19.33 Medicare Withholding Tax (1.45%).
Minus
82.66 FICA (Social Security) Tax (6.20%).
Equals
898.01 Amount due to the transferee.
mstockstill on DSK4VPTVN1PROD with PROPOSALS
(2) If you expect that your marginal
Federal tax rate will be less than 25
percent, you may want to decline the
WTA to avoid or limit possible
overpayment of the WTA, the so-called
‘‘negative RITA’’ situation (In a ‘‘negative
RITA’’ situation, you must repay some of
the WTA in Year 2). However, even if
your marginal Federal tax rate will be
less than 25 percent, you may want to
accept the WTA so that your initial
reimbursement is larger. Example 3
shows the relative reimbursements you
would receive by accepting and
declining the WTA, in the case of a
hypothetical $1000 Miscellaneous
Expense Allowance.
§ 302–17.62 What information do I put on
my tax returns for Year 1 under the two-year
process?
(a) Your agency provides allowances
to you, reimburses you for vouchers that
you submit, and pays certain relocation
vendors directly, all during the same
calendar year, as described in subpart B
of this part. Some of these
reimbursements, allowances, and direct
payments to vendors are taxable income
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to you, the employee. Your agency
computes a WTA and reports that
withholding to the IRS for each of these
that is taxable. This is Year 1 of the twoyear process.
(b) If your agency makes the WTA
optional to you and you have chosen
not to receive the WTA, then your
agency computes withholding tax for
each taxable reimbursement, allowance,
and direct payment, and reports that
withholding to the IRS. See Example 3
in this section
(c) Shortly after the end of the
calendar year, your agency provides one
or more W–2 forms to you. At its
discretion, your agency may include all
of your taxable relocation expenses and
WTA (if any) in one W–2, along with
your regular payroll wages, or it may
provide you one W–2 for your regular
payroll wages and a separate W–2 for
your taxable relocation expenses and
WTA (if any).
(d) At approximately the same time as
your agency provides your W–2(s), it
also may provide you an itemized list of
all relocation benefits and the WTA (if
any) for each benefit. You should use
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Fmt 4702
Sfmt 4702
this statement to verify that your agency
has included all covered taxable items
in its calculations and to check your
agency’s calculations.
(e) You must submit all W–2s that you
have received with your Year 1 tax
returns. On those returns, you must
include all taxable relocation expenses
during the previous year as income.
Furthermore, you must include the
WTA (if any) as tax payments that your
agency made for you during the
previous year, in addition to the regular
withholding of payroll taxes from your
salary.
§ 302–17.63 What information should I
provide to my agency to make the RITA
calculation possible under the two-year
process?
You should provide the information
required in the following ‘‘Statement of
Income and Tax Filing Status.’’ This
information should be taken from the
income tax returns you filed for Year 1.
Statement of Income and Tax Filing
Status—Two-Year Process
The following information, which my
agency will use in calculating the RITA
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Federal Register / Vol. 76, No. 108 / Monday, June 6, 2011 / Proposed Rules
§ 302–17.64 When should I file my
‘‘Statement of Income and Tax Filing Status’’
and RITA claim under the two-year
process?
mstockstill on DSK4VPTVN1PROD with PROPOSALS
For the two-year process, you should
file the ‘‘Statement of Income and Tax
Filing Status’’ in Year 2, along with your
RITA claim, after you file your income
tax return. If your agency pays any
taxable expenses covered by the WTA
(if any) in more than one year, then you
will have to file a new ‘‘Statement of
Income and Tax Filing Status’’ each
year. Your agency establishes the
deadline each year for filing of your
Statement.
§ 302–17.66 How do I claim my RITA under
the two-year process?
(a) To claim your RITA under the twoyear process, you must submit a
voucher and attach the ‘‘Statement of
Income and Tax Filing Status,’’ as
discussed in §§ 302–17.63—302–17.65.
(b) Your voucher must claim a
specific amount. However, your agency
will calculate your actual RITA after
you submit your RITA voucher and your
‘‘Statement of Income and Tax Filing
Status;’’ the amount you claim on your
voucher does not enter into that
calculation. You should perform the
RITA calculation for yourself, as a check
on your agency’s calculation, but you
are not required to put the ‘‘right
answer’’ on the voucher you submit to
claim your RITA.
§ 302–17.67 How does my agency
calculate my RITA under the two-year
process?
(a) Your agency calculates your RITA
after receipt of your RITA voucher.
(b) Your RITA is itself taxable income
to you. To account for taxes on the
RITA, your agency will gross-up your
RITA by applying the CMTR to the final
amount rather than the reimbursed
amount.
(c) Thus, your agency calculates your
RITA by multiplying the Combined
Marginal Tax Rate (CMTR) (using the
state and local tax tables most current at
the time of the RITA calculation) by the
total of all covered taxable relocation
benefits during the applicable Year 1,
and then subtracting your WTA(s), if
any, from the same Year 1 from that
total. That is:
Where C = CMTR
R = Reimbursements, allowances, and direct
payments to vendors covered by WTA
during Year 1
Z = Total grossed-up WTAs paid during
Year 1.
Note to 302–17.67(c): If your agency
chooses to offer you the choice, the WTA is
optional to you. If the employee has declined
the WTA, enter zero for element Z in the
above calculation.
§ 302–17.65 What happens if I do not file
the ‘‘Statement of Income and Tax Filing
Status’’ in a timely manner?
§ 302–17.68 What does my agency do
once it has calculated my RITA under the
two-year process?
The WTA is an advance on your
income tax expenses, thus if you don’t
file the ‘‘Statement of Income and Tax
Filing Status’’ in a timely manner, your
agency will require you to repay the
entire amount of the withholding and
WTA (if any) that the agency has paid
on your behalf.
(a) Your RITA is likely to be different
from the sum of the WTA(s) paid during
Year 1, if any, because the WTA is
calculated using a flat rate, established
by the IRC, while the RITA is calculated
using the CMTR. Therefore:
(1) If the RITA calculation in § 302–
17.67 results in a negative value (that is,
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Frm 00024
Fmt 4702
Sfmt 4702
if your agency’s calculation shows that
it withheld and reported too much
money as income taxes), then your
agency will report this result to you and
will send you a bill for the difference,
to repay the excess amount that it sent
to the IRS on your behalf as withheld
income taxes. The IRS will credit you
for the full amount of withheld taxes,
including the excess amount, when you
file your income tax return for Year 1;
therefore, you must repay the excess
amount to your agency within 90 days,
or within a time period set by your
agency. If you are required to repay an
amount in Year 2 that was included as
wages on your W–2 in Year 1, you may
be entitled to a miscellaneous itemized
deduction on your Federal income tax
return in Year 2. For more information,
see IRS Publication 535, ‘‘Business
Expenses.’’ If your agency chooses to
offer you the choice, then you may want
to decline the WTA to avoid this socalled ‘‘negative RITA’’ situation.
(2) If the RITA calculation in § 302–
17.67 results in a positive value (that is,
if your agency’s calculation shows that
it did not withhold enough money as
income taxes), then your agency will
pay your RITA to you before the end of
Year 2 and will report it to the IRS as
part of your income for that year. Also,
after your agency has paid your RITA to
you, it will provide a W–2 that shows
your RITA as taxable income to you.
(b) At your agency’s discretion, you
may receive one W–2 that includes all
of your taxable relocation expenses,
WTA (if any), and RITA (if any), along
with your regular payroll wages, or you
may receive one W–2 for your regular
payroll wages and a separate one for
your taxable relocation expenses, WTA,
and RITA.
§ 302–17.69 How do I pay taxes on my
RITA under the two-year process?
When income taxes are due for Year
2, you must report your RITA, if any, as
taxable income on your Federal, state,
and local tax returns.
(a) If your relocation process results in
only one Year 2, or if the previous year
was your last Year 1, your RITA is the
only amount that you report as income
resulting from your relocation for that
Year 2.
(b) If, on the other hand, your
relocation process results in more than
one Year 2 (if, for example, you incurred
relocation expenses during more than
one calendar year), then, except for your
last Year 2, you will need to report
reimbursements, allowances, direct
payments to vendors, and WTA(s), if
any, for succeeding Year 1’s at the same
time that you report each Year 2’s RITA.
E:\FR\FM\06JNP1.SGM
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EP06JN11.399
to which I am entitled, was shown on
the Federal, state and local income tax
returns that I (or my spouse and I) filed
for the 20_______ tax year.
Filing status:
bSingle
b Head of Household
b Married Filing Jointly
b Qualifying Widow(er)
b Married Filing Separately
Taxable income as shown on my (our)
IRS Form 1040: $ _____________
State you are moving out
of:_________________
Marginal Tax Rate: _______%
State you are moving into:
_________________
Marginal Tax Rate: _______%
Locality you are moving out of:
_______________
Marginal Tax Rate: ________%
Locality you are moving into:
_______________
Marginal Tax Rate: ________%
The above information is true and
accurate to the best of my (our)
knowledge. I (we) agree to notify the
appropriate agency official of any
significant changes to the above so that
appropriate adjustments to the RITA can
be made.
llllllllllllllllll
l
Employee’s signature
llllllllllllllllll
l
Date
llllllllllllllllll
l
Spouse’s signature (if filing jointly)
llllllllllllllllll
l
Date
32353
32354
Federal Register / Vol. 76, No. 108 / Monday, June 6, 2011 / Proposed Rules
(c) See the table in § 302–17.60 for a
graphic explanation of Year 1 and Year
2.
Subpart H—Agency Responsibilities
§ 302–17.100 May we use a relocation
services provider to comply with the
requirements of this part?
Yes. You may use the services of
relocation companies to manage all
aspects of relocation, including the
RITA computation. Agencies that
relocate few employees or do not have
the resources to manage the complexity
of relocation may find that the use of
relocation companies is a practical
alternative. As another alternative,
agencies with infrequent requirements
for relocation or with inadequate
internal resources may establish an
interagency agreement with one or more
other agencies to pool resources to
provide this service.
§ 302–17.101 What are our responsibilities
with regard to taxes on relocation
expenses?
mstockstill on DSK4VPTVN1PROD with PROPOSALS
To ensure that all provisions of this
part are fulfilled, you must:
(a) Prepare a relocation travel
authorization that includes an estimate
of the WTA and RITA, to obligate the
funds that will be needed.
(b) Determine, in light of the specific
circumstances of each employee
relocation, which reimbursements,
allowances, and direct payments to
vendors are taxable, and which are
nontaxable.
(c) Decide whether or not you will
allow individual employees and/or
categories of employees to choose not to
receive the WTA.
(d) Calculate the WTA, and credit the
amount of the WTA to the employee at
the time of reimbursement.
(e) Prepare the employee’s W–2
Form(s) and ensure that it (they)
reflect(s) the WTA.
(f) Provide each employee an itemized
list of relocation expenses after the end
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16:05 Jun 03, 2011
Jkt 223001
of each calendar year in which you
provided an allowance, reimbursement,
or direct payment to a vendor.
(g) Establish processes for identifying
the relevant Federal, state, and local
marginal tax rates and for keeping that
information current.
(h) Establish processes for identifying
states that treat a reimbursement or
direct payment to a vendor as taxable
even though it is nontaxable under the
Federal IRC, and for keeping that
information current.
(i) Calculate the employee’s CMTR(s).
(j) Decide whether you will use the
one-year or two-year RITA process and
whether you will use different processes
(that is, one-year or two-year) for
different groups of employees within
your agency.
(k) Make sure the RITA calculation is
done correctly and in a timely manner,
whether your policies call for the
calculation to be done by you or by a
third party.
(l) Make sure that payment of the
RITA occurs in a timely manner (this is
especially critical for the one-year
process).
(m) Develop criteria for accepting and
rejecting requests for recalculation of
RITA.
(n) Establish a process for
recalculating the RITA when the
employee’s request for recalculation is
accepted.
(o) Consult with IRS for clarification
of any confusion stemming from taxes
on relocation expenses.
§ 302–17.102 What happens if an
employee fails to file and/or amend a
‘‘Statement of Income and Tax Filing Status’’
prior to the required date?
(a) If a relocating employee does not
file and/or amend a ‘‘Statement of
Income and Tax Filing Status’’ prior to
the required date, and you are using a
one-year RITA process, you are to
switch to a two-year RITA process and
send a written warning to the employee
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Frm 00025
Fmt 4702
Sfmt 9990
reminding them of the requirement and
informing them that if they do not
submit the ‘‘Statement of Income and
Tax Filing Status,’’ you may declare the
entire amount of the WTA forfeited.
(b) If the relocating employee does not
file and/or amend a Statement of
Income and Tax Filing Status prior to
the required date, and you are using a
two-year RITA process, you are to send
the employee a written warning
informing them they have 60 days to file
or amend their ‘‘Statement of Income
and Tax Filing Status,’’ or you will
declare the WTA that you have already
paid on his/her behalf forfeited and due
as a debt to the Government.
(c) If the relocating employee chose
not to receive the WTA and fails to file
a Statement of Income and Tax Filing
Status prior to your required date, you
are to send the employee a written
warning that they have 60 days to file.
If the employee still fails to file, you
may close your case file and refuse any
later claims for RITA related to this
specific relocation.
§ 302–17.103 What are the advantages of
choosing a one-year or a two-year RITA
process?
(a) The one-year process is simpler. It
reimburses the employee more quickly,
and it eases the administrative burden
required to calculate the RITA. Most
importantly, the one-year process
eliminates the possibility of charging
employees for excess payments to the
IRS, the so-called ‘‘negative RITA.’’
(b) The two-year process provides a
somewhat more accurate calculation of
the additional taxes the employee incurs
because it is based on the employee’s
actual Year One taxable income and
filing status rather than the taxable
income and filing status from the year
before.
[FR Doc. 2011–13356 Filed 6–3–11; 8:45 am]
BILLING CODE 6820–14–P
E:\FR\FM\06JNP1.SGM
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Agencies
[Federal Register Volume 76, Number 108 (Monday, June 6, 2011)]
[Proposed Rules]
[Pages 32340-32354]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2011-13356]
=======================================================================
-----------------------------------------------------------------------
GENERAL SERVICES ADMINISTRATION
41 CFR Parts 301-11, 302-2, 302-3, and 302-17
[FTR Case 2009-307; Docket 2009-0013; Sequence 1]
RIN 3090-AI95
Federal Travel Regulation; Temporary Duty (TDY) Travel Allowances
(Taxes); Relocation Allowances (Taxes)
AGENCY: Office of Governmentwide Policy (OGP), General Services
Administration (GSA).
ACTION: Proposed rule.
-----------------------------------------------------------------------
SUMMARY: GSA is proposing to amend the Federal Travel Regulation (FTR)
by incorporating recommendations of the Governmentwide Relocation
Advisory Board (GRAB) concerning calculation of reimbursements for
taxes on relocation expenses. In addition, this proposed rule alters
the process for calculating reimbursements for taxes on extended
temporary duty (TDY) benefits to correct errors and to align that
process with the proposed changes to the relocation income tax process.
DATES: Interested parties should submit comments in writing on or
before August 5, 2011 to be considered in the formulation of a final
rule.
ADDRESSES: Submit comments identified by FTR case 2009-307 by any of
the following methods:
Regulations.gov: https://www.regulations.gov.
Submit comments via the Federal eRulemaking portal by inputting
``FTR Case 2009-307'' under the heading ``Comment or Submission.''
Select the link ``Send a Comment or Submission'' that corresponds with
FTR Case 2009-307. Follow the instructions provided to complete the
``Public Comment and Submission Form.'' Please include your name,
company name (if any), and ``FTR Case 2009-307'' on your attached
document.
Fax: 202-501-4067.
Mail: General Services Administration, Regulatory
Secretariat (MVCB), 1275 First Street, NE., Room 783E, ATTN: Hada
Flowers, Washington, DC 20417.
Instructions: Please submit comments only and cite FTR case 2009-
307 in all correspondence related to this case. All comments received
will be posted without change to https://www.regulations.gov, including
any personal information provided.
FOR FURTHER INFORMATION CONTACT: The General Services Administration,
Regulatory Secretariat (MVCB), 1275 First Street, NE., Washington, DC
20417, (202) 501-4755, for information pertaining to status or
publication schedules. For clarification of content, contact Mr. Ed
Davis, Office of Governmentwide Policy (MT), General Services
Administration, at (202) 208-7638 or e-mail at ed.davis@gsa.gov. Please
cite FTR case 2009-307.
SUPPLEMENTARY INFORMATION:
A. Request for Input on the Final Effective Date
GSA recognizes that implementing the final rule that will result
from this proposed rule will be challenging and time-consuming, both
for Federal agencies and software providers. To help set a final
effective date that allows adequate time to implement the final rule,
GSA requests comments from affected parties on how much time they will
need to change their systems and processes to implement the eventual
final rule.
B. Background
The GSA Office of Governmentwide Policy seeks to incorporate best
practices from Federal agencies and the private sector into the
policies that GSA issues. To this end, GSA created the GRAB, consisting
of Government and private industry relocation experts, to examine
Government relocation policy. The GRAB was chartered under the Federal
Advisory Committee Act on July 9, 2004, and it submitted its ``Findings
and Recommendations'' on September 15, 2005. The GRAB ``Findings and
Recommendations'' and corresponding documents may be accessed at GSA's
Web site at https://www.gsa.gov/grab. The GRAB made a number of
recommendations with regard to taxes, and GSA has developed this
proposed rule in response to those recommendations.
GSA has worked with the Executive Relocation Steering Committee
(ERSC), an interagency group chartered by GSA, to analyze the GRAB
recommendations regarding taxes. The first product of the analysis by
the ERSC was a set of four principles:
``Substantially all''--Federal agencies are required by 5
U.S.C. 5724b to reimburse ``substantially all'' of the additional
income taxes incurred by employees as a result of relocation and to
reimburse ``all'' of the taxes imposed on any reimbursement for taxes.
Fair and equitable--In personnel matters, the Government
seeks to treat all employees fairly and equitably. A key piece of this
is transparency. Everyone must be able to see and understand how the
benefits are being computed. Another key piece is seeking
[[Page 32341]]
to treat all civilian transferees equally, regardless of grade level.
Relative simplicity--The tax process is necessarily
complex because relocation has so many parts. However, it is important
to keep this process as simple as possible, so that agencies can and
will perform all of the calculations accurately, so that employees can
verify the calculations, and so that employees will be more likely to
believe that they are being treated fairly and equitably.
Minimizing cost--It is, of course, very important to
balance the three objectives above against the overall cost of
reimbursing employees for the taxes that they incur. It is important,
therefore, to seek to limit reimbursement to ``substantially all'' of
each transferee's tax liability, to the extent that this can be done
without making the process overly complex.
C. Major Changes in This Proposed Rule
This proposed rule completely replaces FTR part 302-17. It also
removes FTR part 301-11, subpart E, and it replaces FTR part 301-11,
Subpart F, which regulates taxes involved in extended TDY benefits.
The major changes in this proposed rule are:
Taxes on extended TDY benefits--The existing FTR part 301-11,
subpart E, addresses only tax years 1993 and 1994 and is therefore
obsolete. FTR part 301-11, subpart F, includes several substantial
errors and does not agree with either the existing FTR part 302-17 or
this proposed rule. This proposed rule deletes part 301-11, subpart E,
and it replaces part 301-11, subpart F in its entirety. This proposed
rule also eliminates the lump sum process for reimbursing taxes on
extended TDY benefits. This process is seldom used and, therefore,
creates more confusion than benefit.
Question and answer format--This proposed rule puts part 302-17
into question and answer format to conform to the remainder of the FTR.
GSA notes that the GRAB recommended that GSA move in the other
direction, taking all of the FTR back to its old format. GSA has
considered and rejected this GRAB recommendation. GSA continues to
believe that the question and answer format is easier to read and
understand for the large majority of users.
Eliminating use of two tables for Federal tax rates--GSA examined
the tax tables for the past seven years and determined that the
difference in tax rates from year to year is not large enough to
justify formulas complex enough to account for year-to-year changes in
Federal tax rates.
Standardizing usage of the terms ``withholding tax allowance''
(WTA) and ``relocation income tax allowance'' (RITA)--The existing part
302-17 is not entirely clear in its use of these two terms. The
proposed rule seeks to clarify these terms and, to this end, it changes
the title of part 302-17 to ``Taxes on Relocation Expenses.''
Fraudulent claims--The existing part 302-17 includes a paragraph,
at Sec. 302-17.10(c), about fraudulent claims made against the United
States, especially in the context of the ``Statement of Income and Tax
Filing Status.'' The statutes on fraudulent claims remain in effect and
unchanged. However, these statutes apply to the entire relocation
process, not just reimbursement for taxes on relocation expenses, and
GSA therefore has added a new section to FTR part 302-2 to address
fraudulent claims made at any point during the relocation reimbursement
process. This new section directly mirrors section 301-52.12 covering
fraudulent claims with regards to TDY benefits.
New definitions--The proposed rule includes definitions for 13
terms in a glossary that is specific to part 302-17. Many of these
terms are defined in the text of the existing part 302-17; the proposed
rule gathers these 13 definitions into one place for easy reference in
the new section 302-17.1.
Limitations and Federal income tax treatments--The proposed rule
provides a table in section 302-17.8 that summarizes allowances,
limitations, and tax treatment for each relocation reimbursement,
allowance or direct payment to a vendor provided by the FTR.
Correcting the taxability of household goods transportation
expenses--The existing section 302-17.3(b) states that the expenses for
transportation of household goods (HHG) are taxable. This was true when
the existing FTR 302-17 was published. However, in 1993 the IRC section
on fringe benefits was amended to exclude from income certain moving
expenses that are reimbursed and otherwise would be deductible. At the
same time the IRC was amended to make fewer moving expenses deductible.
One result was that the HHG shipment remained as a deductible expense.
Correcting the withholding rate for supplemental wages--The
withholding rate of 28 percent for supplemental wages used in the
current FTR 301-11, subpart F and 302-17.7 is incorrect. The correct
rate is 25 percent, and this is the rate used in this proposed rule, at
Sec. 302-17.24. This rate is scheduled to revert to 28 percent on
January 1, 2011, absent legislative action. If and when this rate
changes, GSA will correct the new part 302-17 to reflect the change.
Allowing a one-year RITA process--The GRAB's ``Findings and
Recommendations'' clearly says that a one-year RITA process is the
standard in the private sector because it is quicker and simpler. The
GRAB strongly recommended that the Federal government adopt a one-year
process. In addition to its complexity, the existing two-year process
for calculating taxes on relocation expenses creates a burden for many
lower-grade transferees, because they are more likely to be required,
in the second year, to repay an over-reimbursement in the first year.
On the other hand, discussions with Federal agencies have made it clear
that moving to a one-year process will be challenging at best, and many
are reluctant to move in that direction. In addition, as some have
noted, the two-year process does result in a somewhat more accurate
reflection of the actual tax impact on the employee. Therefore, this
proposed rule offers the one-year RITA process to agencies as an
option, alongside the existing two-year process. It also includes, at
new section 302-17.103, a short discussion of the benefits and
drawbacks of the one-year and two-year processes. See also new sections
302-17.32, 302-17.33, and subparts F and G.
Making the WTA optional--A number of Federal agencies have made the
WTA optional to the employee. Nothing in tax law or existing
regulations prohibits this practice, and in some cases declining the
WTA may be advantageous to the employee. This proposed rule explicitly
gives the agencies permission to make the WTA optional and provides
guidance and explanation for both the agency and the employee.
Moving from earned income to taxable income--As the ERSC reviewed
the GRAB's recommendations, it recognized that using taxable income
(instead of using earned income like the existing part 302-17), would
provide a simpler process and would bring the taxes reimbursement
calculation closer to the target of ``substantially all.'' Moving to
taxable income resolves several of the issues that the GRAB raised,
including issues with capital gains and self-employment income. See new
sections 302-17.40, 302-17.50, and 302-17.63 for information on how
taxable income is used.
Eliminating the Government-unique tax tables--Moving to taxable
income will also make it unnecessary for GSA to publish special tax
tables each year. Transferees and agencies will be able to use the
tables published by the Internal Revenue Service (IRS) and state and
local tax authorities.
[[Page 32342]]
Failure to file the ``Statement of Income and Tax Filing Status''
in a timely manner--The existing Sec. 302-17.7(e)(2) makes the entire
WTA an excess payment if the employee fails to file the statement or
the RITA claim in a timely manner. Because the WTA is an advance
payment on the employee's reimbursable income tax expenses, agencies
are entitled to recover it if an employee fails to properly document
their income taxes. Therefore, this proposed rule continues these
requirements on the employee and the agency, except in the case of an
employee who declines the WTA. In this case, if the employee fails to
file the ``Statement of Income and Tax Filing Status'' and/or the RITA
claim in a timely manner, this proposed rule allows the agency to close
the file without paying the RITA. See new sections 302-17.53, 302-
17.65, and 302-17.102.
Recalculation of RITA--The existing part 302-17 makes no provision
for the employee to request recalculation. Most private sector
companies do allow employees to request recalculation, at least in some
circumstances, though the percentage of private sector employees who do
request recalculation is small. The proposed rule makes it possible for
Federal employees to request recalculation, provided they filed and/or
amend their ``Statement of Income and Tax Filing Status'' in a timely
manner. See the new section 302-17.33.
Agency responsibilities--The existing part 302-17 mentions some
agency responsibilities in the context of other provisions. The
proposed rule, in conformity with the rest of the FTR, lists the agency
responsibilities together in the new subpart H.
Information about state and local tax laws--GSA informally
circulated a draft version of this proposed rule to various Federal
agencies asking for input. Several agencies objected to what they
thought were new or additional burdens stemming from requirements to
know and utilize state and local tax laws. However, current section
302-17.10(b)(2) already places this requirement on agencies, stating
``* * * is incumbent upon the appropriate agency officials to become
familiar with the state and local tax laws that affect their
transferring employees.'' In short, this proposed rule is not imposing
any new requirements on agencies regarding knowledge of state and local
tax law. At the same time, this rule carries forward from the current
302-17 the requirement that the employee find and provide the
applicable state and local marginal tax rates.
D. Changes to the Current FTR
This proposed rule--
Deletes part 301-11, subpart E.
Replaces part 301-11, subpart F in its entirety.
Adds new Sec. 302-2.7.
Replaces one sentence in Sec. 302-3.502(b).
Replaces part 302-17 in its entirety.
E. Executive Order 12866 and Executive Order 13563
Executive Orders 12866 and 13563 direct agencies to assess all
costs and benefits of available regulatory alternatives and, if
regulation is necessary, to select regulatory approaches that maximize
net benefits (including potential economic, environmental, public
health and safety effects, distributive impacts, and equity). Executive
Order 13563 emphasizes the importance of quantifying both costs and
benefits, of reducing costs, of harmonizing rules, and of promoting
flexibility. This is not a significant regulatory action and,
therefore, was not subject to review under Section 6(b) of Executive
Order 12866, Regulatory Planning and Review, dated September 30, 1993.
This rule is not a major rule under 5 U.S.C. 804.
F. Regulatory Flexibility Act
This proposed rule is not required to be published in the Federal
Register for notice and comment as per the exemption specified in 5
U.S.C. 553(a)(2); therefore, the Regulatory Flexibility Act, 5 U.S.C.
601, et seq., does not apply. However, this proposed rule is being
published to provide transparency in the promulgation of Federal
policies.
G. Paperwork Reduction Act
The Paperwork Reduction Act does not apply because the proposed
changes to the Federal Travel Regulation do not impose recordkeeping or
information collection requirements, or the collection of information
from offerors, contractors, or members of the public that require the
approval of the Office of Management and Budget under 44 U.S.C. 3501,
et seq.
H. Small Business Regulatory Enforcement Fairness Act
This final rule is also exempt from congressional review prescribed
under 5 U.S.C. 801 since it relates solely to agency management and
personnel.
List of Subjects in 41 CFR Parts 301-11, 302-2, 302-3, and 302-17
Government employees, Travel and transportation expenses, Income
taxes.
Dated: March 14, 2011.
Kathleen Turco,
Associate Administrator.
For the reasons set forth in the preamble, under 5 U.S.C. 5701-
5739, GSA proposes to amend 41 CFR parts 301-11, 302-2, 302-3, and 302-
17 as set forth below:
PART 301-11--PER DIEM EXPENSES
1. The authority for part 301-11 continues to read as follows:
Authority: 5 U.S.C. 5707.
Subpart E--[Removed and Reserved]
2. Remove and reserve subpart E.
3. Revise subpart F to read as follows:
Subpart F--Taxes on Extended TDY Benefits
Sec.
301-11.601 What is a taxable extended TDY assignment?
301-11.602 What factors should my agency consider in determining
whether to authorize extended TDY?
301-11.603 What are the tax consequences of extended TDY?
301-11.604 What are the procedures for calculation and reimbursement
of my WTA and ETTRA for taxable extended TDY?
301-11.605 When should I file my ``Statement of Income and Tax
Filing Status'' for my taxable extended TDY assignment?
Subpart F--Taxes on Extended TDY Benefits
Sec. 301-11.601 What is a taxable extended TDY assignment?
A taxable extended TDY assignment is a TDY assignment that
continues for so long that, under the IRC the employee is no longer
considered ``temporarily away from home.'' The IRC, at 26 U.S.C.
162(a), states: ``* * * the taxpayer shall not be treated as being
temporarily away from home during any period of employment if such
period exceeds 1 year.'' You are no longer ``temporarily away from
home'' as of the date that you and/or your agency recognize that your
assignment will exceed one year. That is, as soon as you recognize that
your assignment will exceed one year, you must notify your agency of
that fact, and they must change your status immediately. Similarly, as
soon as your agency recognizes that your assignment will exceed one
year, your agency must notify you of that fact and change your status.
The effective date of this status change is the date on which it was
recognized that you are no longer ``temporarily away from home'' as
defined in the IRC.
[[Page 32343]]
(a) If you believe that your temporary duty assignment may exceed
one year, you should carefully study IRS Publication 463, ``Travel,
Entertainment, Gift, and Car Expenses,'' to determine whether you are
or will be considered ``temporarily away from home'' under this
provision. If you are not or will not be considered ``temporarily away
from home'' under this provision, then you are on taxable extended TDY.
(b) The IRC makes an exception for certain Federal personnel
involved in investigation or prosecution of a Federal crime.
Specifically, 26 U.S.C. 162(a), continues: ``The [above quotation from
26 U.S.C. 162(a)] shall not apply to any Federal employee during any
period for which such employee is certified by the Attorney General (or
the designee thereof) as traveling on behalf of the United States in
temporary duty status to investigate or prosecute, or provide support
services for the investigation or prosecution of, a Federal crime.''
Sec. 301-11.602 What factors should my agency consider in determining
whether to authorize extended TDY?
Your agency should consider the factors discussed in Sec. 302-
3.502 of this Subtitle in determining whether to authorize extended
TDY.
Sec. 301-11.603 What are the tax consequences of extended TDY?
(a) If you are on a taxable extended TDY assignment, then all
allowances and reimbursements for travel expenses, plus all travel
expenses that the Government pays directly on your behalf in connection
with your TDY assignment, are taxable income to you. This includes all
allowances, reimbursements, and direct payments to vendors from the day
that you or your agency recognized that your extended TDY assignment is
expected to exceed one year, as explained in Sec. 301-11.601.
(b) Your agency will reimburse you for substantially all of the
income taxes that you incur as a result of your taxable extended TDY
assignment. This reimbursement consists of two parts:
(1) The Withholding Tax Allowance (WTA). See part 302-17, subpart B
of this Subtitle for information on the WTA; and
(2) The ``Extended TDY Tax Reimbursement Allowance'' (ETTRA) (in
previous editions of the FTR this was known as the ``Income Tax
Reimbursement Allowance'').
(c) The WTA and ETTRA for taxable extended TDY assignments cover
only the TDY benefits described in FTR Chapter 301, Subchapter B. On an
extended TDY assignment, you are not eligible for the other benefits
that you would have received if your agency had permanently relocated
you.
Sec. 301-11.604 What are the procedures for calculation and
reimbursement of my WTA and ETTRA for taxable extended TDY?
(a) If your agency knows from the beginning of your TDY assignment
that your assignment qualifies as taxable extended TDY, then your
agency will withhold an amount as a WTA and pay that as withholding tax
to the IRS until your extended TDY assignment ends. The WTA itself is
taxable income to you, so your agency increases, or ``grosses-up,'' the
amount of the WTA, using a formula to reimburse you for the additional
taxes on the WTA.
(b) If your agency realizes during a TDY assignment that you will
incur taxes (because, for example, the TDY assignment has lasted, or is
going to last, longer than originally intended), then your agency will
compute the WTA for all taxable benefits received since the date it was
recognized that you are no longer ``temporarily away from home'' (See
Sec. 302-11.601 for more information on the meaning of ``temporarily
away from home''). Your agency will pay that amount to the IRS, and
then will begin paying WTA to the IRS until your extended TDY
assignment ends.
(c) For your ETTRA, your agency will use the same one-year or two-
year process that it has chosen to use for the relocation income tax
allowance (RITA).
(d) See part 302-17 of this subtitle for additional information on
the WTA and RITA processes.
Note to Sec. 301-11.604: If your agency chooses to offer you
the choice, the WTA is optional to you. See Sec. Sec. 302-17.61
through 302-17.69.
Sec. 301-11.605 When should I file my ``Statement of Income and Tax
Filing Status'' for my taxable extended TDY assignment?
You should file your ``Statement of Income and Tax Filing Status''
for your taxable extended TDY assignment at the beginning of your
extended TDY assignment or, as soon as you or your agency realizes that
your TDY assignment will incur taxes. You should provide the same
information as the sample ``Statements of Income and Tax Filing
Status'' shown in part 302-17, subpart F (one-year process) or subpart
G (two-year process) of this Subtitle.
PART 302-2--EMPLOYEE ELIGIBILITY REQUIREMENTS
4. The authority for part 302-2 continues to read as follows:
Authority: 5 U.S.C. 5738; 20 U.S.C. 905(a).
Sec. Sec. 302-2.7--302-2.22 [redesignated as Sec. Sec. 302-2.8--
302-2.23]
5. Redesignate Sec. Sec. 302-2.7--302-2.22 as Sec. Sec. 302-2.8--
302-2.23, respectively, and add new Sec. 302-2.7 to read as follows:
Sec. 302-2.7 What happens if I attempt to defraud the Government?
If you attempt to defraud the Government:
(a) You forfeit reimbursement pursuant to 28 U.S.C. 2514; and
(b) You may be subject under 18 U.S.C. 287 and 1001 to one, or
both, of the following:
(1) A fine of not more than $10,000, and/or
(2) Imprisonment for not more than 5 years.
PART 302-3--RELOCATION ALLOWANCES BY SPECIFIC TYPE
6. The authority for part 302-3 continues to read as follows:
Authority: 5 U.S.C. 5738; 20 U.S.C. 905(a).
7. Amend Sec. 302-3.502 by revising the second sentence in
paragraph (b) to read as follows:
Sec. 302-3.502 What factors should we consider in determining whether
to authorize a TCS for a long-term assignment?
* * * * *
(b) * * * The Withholding Tax Allowance and the Extended TDY Tax
Reimbursement Allowance allow for the reimbursement of Federal, state,
and local income taxes incurred as a result of taxable extended
temporary duty assignments (see Sec. Sec. 301-11.601--301-11.605 of
this Subtitle). * * *
* * * * *
8. Revise part 302-17 to read as follows:
PART 302-17--TAXES ON RELOCATION EXPENSES
Sec.
302-17.0 How are the terms ``I'' and ``you'' used in this part?
Subpart A--General
302-17.1 What special terms apply to this part?
302-17.2 Why does relocation affect personal income taxes?
302-17.3 What is the Government's objective in reimbursing the
additional income taxes incurred as a result of a relocation?
302-17.4 Why is the reimbursement for substantially all, and not
exactly all, of the additional income taxes incurred as a result of
a relocation?
302-17.5 Who is eligible for the withholding tax allowance and the
relocation income tax allowance?
302-17.6 Who is not eligible for the WTA and the RITA?
[[Page 32344]]
302-17.7 Is there any circumstance under which the WTA and the RITA
are not paid even though I would otherwise be eligible?
302-17.8 What limitations and Federal income tax treatments apply to
various relocation reimbursements?
302-17.9 Who is responsible for knowing which relocation expenses
are taxable and which expenses are nontaxable?
302-17.10 Which expenses should I report on my state tax returns if
I am required to file returns in two different states?
302-17.11 When is an expense considered completed in a specific tax
year?
302-17.12 Where can I find additional information and guidance on
WTA and RITA?
302-17.13 How are taxes on extended TDY benefits and taxes on
relocation allowances related?
Subpart B--The Withholding Tax Allowance (WTA)
302-17.20 What is the purpose of the WTA?
302-17.21 What relocation expenses does the WTA cover?
302-17.22 What relocation expenses does the WTA not cover?
302-17.23 What are the procedures for my WTA?
302-17.24 How does my agency compute my WTA?
Subpart C--The Relocation Income Tax Allowance (RITA)
302-17.30 What is the purpose of the RITA?
302-17.31 What are the procedures for calculation and payment of my
RITA?
302-17.32 Who chooses the one-year or two-year process?
302-17.33 May I ask my agency to recalculate my RITA?
Subpart D--The Combined Marginal Tax Rate (CMTR)
302-17.40 How does my agency calculate my CMTR?
302-17.41 Is there any difference in the procedures for calculating
the CMTR, depending on whether my agency chooses the one-year or
two-year RITA process?
302-17.42 Which state marginal tax rate(s) does my agency use to
calculate the CMTR if I incur tax liability in more than one state,
and how does this affect my RITA and my state tax return(s)?
302-17.43 What local marginal tax rate(s) does my agency use?
302-17.44 What if I incur income tax liability to the Commonwealth
of Puerto Rico?
302-17.45 What if I incur income tax liability to the Commonwealth
of the Northern Mariana Islands or any other territory or possession
of the United States?
Subpart E--Special Procedure if a State Treats an Expense as Taxable
Even Though It Is Nontaxable Under the Federal IRC
302-17.46 What does my agency do if a state treats an expense as
taxable even though it is nontaxable under the Federal IRC?
Subpart F--The One-Year RITA Process
302-17.50 What information should I provide to my agency to make the
RITA calculation possible under the one-year process?
302-17.51 When should I file my ``Statement of Income and Tax Filing
Status'' under the one-year process?
302-17.52 When should I file an amended ``Statement of Income and
Tax Filing Status'' under the one-year process?
302-17.53 What happens if I do not file and amend the ``Statement of
Income and Tax Filing Status'' in a timely manner?
302-17.54 How does my agency calculate my RITA under the one-year
process?
302-17.55 What does my agency do once it has calculated my RITA
under the one-year process?
302-17.56 What do I do, under the one-year process, once my agency
has provided my W-2(s)?
Subpart G--The Two-Year RITA Process
302-17.60 How are the terms ``Year 1'' and ``Year 2'' used in the
two-year RITA process?
302-17.61 Is the WTA optional under the two-year process?
302-17.62 What information do I put on my tax returns for Year 1
under the two-year process?
302-17.63 What information should I provide to my agency to make the
RITA calculation possible under the two-year process?
302-17.64 When should I file my ``Statement of Income and Tax Filing
Status'' under the two-year process?
302-17.65 What happens if I do not file the ``Statement of Income
and Tax Filing Status'' in a timely manner?
302-17.66 How do I claim my RITA under the two-year process?
302-17.67 How does my agency calculate my RITA under the two-year
process?
302-17.68 What does my agency do once it has calculated my RITA
under the two-year process?
302-17.69 How do I pay taxes on my RITA under the two-year process?
Subpart H--Agency Responsibilities
302-17.100 May we use a relocation company to comply with the
requirements of this part?
302-17.101 What are our responsibilities with regard to taxes on
relocation expenses?
302-17.102 What happens if an employee fails to file and/or amend a
``Statement of Income and Tax Filing Status'' prior to the required
date?
302-17.103 What are the advantages of choosing a one-year or a two-
year RITA process?
Authority: 5 U.S.C. 5724b; 5 U.S.C. 5738; E.O. 11609, as
amended.
Sec. 302-17.0 How are the terms ``I'' and ``you'' used in this part?
The pronouns ``I'' and ``you'' and their variants throughout this
part refer to the employee.
Subpart A--General
Sec. 302-17.1 What special terms apply to this part?
The following definitions apply to this part:
Allowance:
(1) Money paid to the employee to cover future expenses, such as
the miscellaneous expense allowance (see part 302-16 of this chapter
for information about the miscellaneous expense allowance);
(2) Money paid to the employee to cover past expenses, such as the
relocation income tax allowance (RITA) under the two-year tax process
described in part 302-17, subpart G; or
(3) A limit established by statute or regulation, such as the
18,000 pound net weight allowance for household goods shipments (see
part 302-7 of this chapter for information about the 18,000 pound net
weight allowance).
City means any unit of general local government as defined in 31
CFR 215.2(b).
Combined marginal tax rate (CMTR) means a single rate determined by
combining the applicable marginal tax rates for Federal, state, and
local income taxes, using the formula provided in Sec. 302-17.40. If
you incur liability for income tax in the Commonwealth of Puerto Rico,
see Sec. 302-17.44.
County means any unit of local general government as defined in 31
CFR 215.2(e).
Gross-up used as a noun, has two related meanings in this part. It
is either:
(1) The process that your agency uses to estimate the additional
income tax liability that you incur as a result of relocation benefits
and taxes on those benefits; or
(2) The result of the gross-up process.
Note to the definition of gross-up: The gross-up allows for the
fact that every reimbursement of taxes is itself taxable. Therefore,
the gross-up calculates the amount an agency must reimburse an employee
to cover substantially all of the income taxes incurred as the result
of a relocation.
Internal Revenue Code (IRC) means Title 26 of the United States
Code, which governs Federal income taxes.
Local income tax means a tax imposed by a recognized city or county
tax authority that is deductible for Federal income tax purposes as a
local income tax under the IRC, at 26 U.S.C. 164(a)(3). (See the
definitions for the terms city and county in this section.)
Marginal tax rate (MTR) means the tax rate that applies to the last
increment of taxable income after taxable relocation benefits have been
added to the employee's income. For example, a
[[Page 32345]]
married employee who files jointly has a taxable income of $120,000.
According to the IRS 2010 Tax Rate Schedules, taxable income between
$68,000 and $137,700 is taxed at the 25 percent tax rate; therefore,
the $120,000 taxable income of the employee and spouse is in this
range, so they have a 25 percent marginal tax rate. If the employee
receives $30,000 of taxable relocation benefits, the taxable income for
the employee and spouse is now $150,000, which is in the next highest
tax bracket. In this example, the employee and spouse now have a
Federal marginal tax rate of 28 percent once the taxable relocation
benefits have been added to their income.
Reimbursement means money paid to you to cover expenses that you
have already paid for out of your own funds.
Relocation benefits means all reimbursements and allowances that
you receive, plus all direct payments that your agency makes on your
behalf, in connection with your relocation.
Relocation income tax allowance (RITA) means the payment to the
employee to cover the difference between the withholding tax allowance
(WTA), if any, and the actual tax liability incurred by the employee as
a result of their taxable relocation benefits; RITA is paid whenever
the actual tax liability exceeds the WTA.
State means any one of the several states of the United States, the
District of Columbia, the Commonwealth of Puerto Rico, the Commonwealth
of the Northern Mariana Islands, or any other territory and possession
of the United States.
State income tax means a tax imposed by a state tax authority that
is deductible for Federal income tax purposes under the IRC,
specifically 26 U.S.C. 164(a)(3).
Withholding tax allowance (WTA) means the amount paid to the
Federal IRS by the agency as withholding of income taxes for any
taxable relocation allowance, reimbursement, or direct payment to a
vendor.
Sec. 302-17.2 Why does relocation affect personal income taxes?
When you are relocated from one permanent duty station to another,
you are reimbursed by your employing agency for certain expenses. The
IRC requires that you report many of these relocation benefits,
including some that your agency pays on your behalf, as taxable income.
When you receive taxable benefits, you must pay income tax on the
amount or value of those benefits. However, 5 U.S.C. 5724b also
requires that your agency reimburse you for substantially all of the
additional Federal, state, and local income taxes you incur as a result
of any taxable relocation benefits. A reimbursement for taxes is also a
taxable benefit on which you must pay additional taxes.
Sec. 302-17.3 What is the Government's objective in reimbursing the
additional income taxes incurred as a result of a relocation?
The Government's objective is to reimburse transferred employees
for substantially all (not exactly all--see Sec. 302-17.4) of the
additional Federal, state, and local income taxes incurred as a result
of a relocation, including the taxes on the taxable relocation benefits
and the taxes on the reimbursement for taxes.
Sec. 302-17.4 Why is the reimbursement for substantially all, and not
exactly all, of the additional income taxes incurred as a result of a
relocation?
Because of the complexity of the calculations, which involve not
only Federal income tax but also the income tax rates of many states
and localities, it is not reasonable for the Government to compute the
exact impact of relocation on an affected employee's taxes. Making a
good faith effort to reimburse substantially all additional income
taxes is sufficient. The statute where this appears, at 5 U.S.C. 5724b
does not define substantially all. This part provides the description
through its provisions.
Sec. 302-17.5 Who is eligible for the withholding tax allowance and
the relocation income tax allowance?
(a) The withholding tax allowance (WTA) and the relocation income
tax allowance (RITA) are the two allowances through which the
Government reimburses you for substantially all of the income taxes
that you incur as a result of your relocation. You are eligible for the
WTA and the RITA if your agency is transferring you from one permanent
duty station to another, in the interest of the Government, and your
agency's reimbursements to you for relocation expenses result in you
being liable for additional taxes.
(b) If your agency chooses to offer you the choice, the WTA is
optional to you. See 302-17.61 through 302-17.69.
Sec. 302-17.6 Who is not eligible for the WTA and the RITA?
You are not eligible for the WTA or the RITA if you are:
(a) A new appointee;
(b) Assigned under the Government Employees Training Act; or
(c) Returning from an overseas assignment for the purpose of
separation from Government service.
Sec. 302-17.7 Is there any circumstance under which the WTA and the
RITA are not paid even though I would otherwise be eligible?
If you violate the 12-month service agreement under which you are
relocated, your agency will not pay the WTA or the RITA to you, and you
must repay any relocation benefits paid prior to the violation.
Sec. 302-17.8 What limitations and Federal income tax treatments
apply to various relocation reimbursements?
(a) If you were moving yourself for a new job, with no help from
your employer, then you probably would be able to deduct some of your
relocation expenses. However, if you are eligible for WTA and RITA
under this part, your Federal agency reimburses you or pays directly
for many relocation expenses that otherwise would be deductible. Since
you could have deducted these expenses if you had paid them yourself,
the benefits you receive from your agency for these ``deductible''
relocation expenses are nontaxable. Therefore, you do not report them
as income and you cannot take them as deductions.
(b) However, many other relocation benefits are taxable income to
you, the employee, because you could not have deducted them. You also
may not deduct the additional taxes you incur, as a result of taxable
benefits (except that you may deduct state and local income taxes on
your Federal tax return). Your agency will reimburse you for most of
these taxable expenses and for substantially all of the additional
taxes that you incur as a result of the taxable benefits.
(c) The table to Sec. 302-17.8 summarizes the FTR allowances,
limitations, and tax treatment of each reimbursement, allowance, or
direct payment to a vendor. See IRS Publication 521, Moving Expenses,
and the cited FTR paragraphs for details.
[[Page 32346]]
Table to Sec. 302-17.8--FTR Allowances and Federal Income Tax Treatments
----------------------------------------------------------------------------------------------------------------
Summary of FTR
Entitlement allowance FTR part or section Tax treatments
----------------------------------------------------------------------------------------------------------------
Meals while en route to the new duty The standard CONUS per Sec. 302-4.200....... Taxable.
station. diem for meals and
incidental expenses.
Lodging while en route to the new The standard CONUS per Sec. 302-4.200....... Nontaxable provided the
duty station. diem for lodging cost is reasonable
expenses for the according to the IRC.
employee only.
Transportation using your POV to your Actual cost or the rate Part 302-4............. Nontaxable.
new duty station. established by the IRS
for using a POV for
relocation.
Transportation to your new duty Actual cost............ Part 302-4............. Nontaxable.
station using a common carrier (an
airline, for example).
Per diem and transportation for Actual Expense Method: Part 302-5............. Taxable.
househunting trip. 10 days of per diem
plus transportation
expenses--must be
itemized;
or
Lump Sum Method: Part 302-5............. Taxable.
locality rate times 5
(one person) or times
6.25 (employee and
spouse) for up to 10
days--no itemization
required.
Temporary quarters subsistence Actual Expense Method: Sec. 302-6.100....... Taxable.
expenses (TQSE). Maximum of 120 days;
full per diem for only
the first 30 days--
itemization required;
or
Lump Sum Method: Sec. 302-6.200....... Taxable.
multiply number of
days allowed by .75
times the locality
rate (30 days
maximum)--no
itemization required.
Note: Additional TQSE
allowances for family
members are less than
the benefit for the
employee occupying TQ
alone.
Shipment of household goods (HHG).... Transportation of up to Sec. 302-7.2......... Transportation of goods
18,000 pounds. from your former
residence to your new
residence is
nontaxable.
Temporary storage of household goods Temporary storage of up Sec. 302-7.8......... Nontaxable.
in transit, as long as the expenses to 30 days (However,
are incurred within any 30 calendar see the section
day period after the day your items immediately below).
are removed from your old residence
and before they are delivered to the
new residence.
Temporary storage of household goods Temporary storage of 60 Sec. 302-7.8......... Taxable.
beyond 30 days. plus 90 days, NTE 150
days.
Extended storage of Household Goods CONUS--TCS (per agency Part 302-8, Subpart B.. Taxable.
(HHG). policy) or isolated
duty station only.
OCONUS--Agency policy.. Part 302-8, Subparts C Nontaxable.
and D.
Transportation of privately-owned CONUS--Agency Part 302-9, Subpart D.. Nontaxable.
vehicle (POV). discretion.
OCONUS--Agency Part 302-9, Subparts B Nontaxable.
discretion. & C.
Shipment of mobile home in lieu of Limited to maximum Sec. 302-10.3........ Nontaxable.
HHG. allowance for HHG.
Residence transactions:
Sale of home............ Closing costs up to 10% Sec. 302-11.300(a)... Taxable.
of actual sales price.
Purchase of home........ Closing costs up to 5% Sec. 302-11.300(b)... Taxable.
of actual purchase
price.
Lease-breaking.......... Itemization required... Sec. Sec. 302-11.430 Taxable.
& 431.
Payments to Relocation Service According to agency Part 302-12............ Taxability determined
Contractors. policy and contracts. on a case-by-case
basis.
Home Marketing Incentive Payment..... See internal agency Part 302-14............ Taxable, but not
policies and eligible for WTA or
regulations. RITA.
Property Management Services......... See internal agency Part 302-15............ Taxable.
policies and
regulations.
Miscellaneous expenses............... $500 or $1,000; or..... Sec. 302-16.102...... Taxable.
Maximum of 1 or 2 weeks Sec. 302-16.103...... Taxable.
basic pay.
Withholding tax allowance............ 25 percent of Part 302-17, Subpart B. Taxable.
reimbursements,
allowances, and direct
payments to vendors.
[[Page 32347]]
Relocation income tax allowance...... Based on income and tax Part 302-17, Subpart C. Taxable.
filing status..
----------------------------------------------------------------------------------------------------------------
Sec. 302-17.9 Who is responsible for knowing which relocation
expenses are taxable and which expenses are nontaxable?
Both you and your agency must know which reimbursements and direct
payments to vendors are taxable and which are nontaxable in your
specific circumstances. When you submit a voucher for reimbursement,
your agency must determine whether the reimbursement is taxable income
at the Federal, state, and/or local level. Then, when you file your
income tax returns, you must report the taxable allowances,
reimbursements, and direct payments to vendors as income. Your agency
is ultimately responsible for calculating and reporting withholding
accurately, and you are ultimately responsible for filing your taxes
correctly.
Sec. 302-17.10 Which expenses should I report on my state tax returns
if I am required to file returns in two different states?
In most cases, your state tax return for the state you are leaving
should reflect your reimbursement or allowance, if any, for
househunting expenses and your reimbursement or direct payments to
vendors for real estate expenses at the home you are leaving. All other
taxable expenses should be shown as income on the tax return you file
in the state into which you have moved. However, you and your agency
must carefully study the rules in both states and include everything
that each state considers to be income on each of your state tax
returns.
Sec. 302-17.11 When is an expense considered completed in a specific
tax year?
A reimbursement, allowance, or direct payment to a vendor is
considered completed in a specific tax year only if the money was
actually disbursed to the employee or vendor during the tax year in
question.
Sec. 302-17.12 Where can I find additional information and guidance
on WTA and RITA?
To find additional information and guidance on WTA and RITA, see:
(a) IRS Publication 521, Moving Expenses; and
(b) FTR Bulletins; GSA publishes additional information on RITA,
including the illustrations and examples of various RITA computations,
in FTR Bulletins which are updated as necessary. The current GSA FTR
Bulletins may be found at https://www.gsa.gov/bulletins.
Sec. 302-17.13 How are taxes on extended TDY benefits and taxes on
relocation allowances related?
(a) Taxes on extended TDY benefits are computed using exactly the
same processes described in this part for the WTA and RITA except that:
(1) The tax process for extended TDY benefits uses the term
``withholding tax allowance '' (WTA) in exactly the same fashion as the
process for taxes on relocation allowances; however, in place of the
term ``relocation income tax allowance,'' the tax process for extended
TDY benefits uses the term ``extended TDY tax reimbursement allowance''
(ETTRA); and
(2) All benefits are taxable under extended TDY, so the sections of
this part that discuss which benefits are taxable and which are not
have no relevance to ETTRA.
(b) See part 301-11, subpart F of this title for additional
information about taxes on extended TDY benefits.
Subpart B--The Withholding Tax Allowance (WTA)
Sec. 302-17.20 What is the purpose of the WTA?
(a) The purpose of the WTA is to protect you from having to use
part of your relocation expense reimbursements to pay Federal income
tax withholding; it does not cover state taxes, local taxes, Medicare
taxes, or Social Security taxes (see Sec. 302-17.22(c) and (d)).
(b) If your agency chooses to offer you the choice, the WTA is
optional to you. See 302-17.61 through 302-17.69.
Sec. 302-17.21 What relocation expenses does the WTA cover?
The WTA covers certain allowances, reimbursements, and/or direct
payments to vendors, to the extent that each of them is taxable income.
It does not cover any allowance, reimbursement, or direct payment to a
vendor that is nontaxable; that is, your agency will not give you a WTA
for anything that is not considered taxable income to you (see the
table in Sec. 302-17.8 for a summary of tax treatment). In particular,
the WTA covers:
(a) En route meals and incidental expenses--Reimbursements for
meals and incidental expenses while en route are taxable and,
therefore, are covered by the WTA.
(b) Househunting trip--Travel (including per diem and
transportation) expenses for you (and your spouse) for one round trip
to the new official station to seek permanent residence quarters.
Househunting is covered regardless of whether it is reimbursed under
the actual expense or lump sum method. (See part 302-5 of this
chapter.)
(c) Temporary quarters--Subsistence expenses for you and your
immediate family during occupancy of temporary quarters. Temporary
quarters are covered regardless of whether it is reimbursed under the
actual expense or lump sum method. (See part 302-6 of this chapter.)
(d) Extended storage expenses--Extended storage for a temporary
change of station in CONUS or assignment to an isolated duty station in
CONUS, but only if these expenses are allowed by part 302-8 of this
chapter and your agency's policy.
(e) Real estate expenses--Expenses for the sale of the residence at
your old official station and purchase of a home at your new official
station. This can also include expenses for settling an unexpired lease
(``breaking'' a lease) at your old official station. (See part 302-11
of this chapter. If you do not hold full title to the home you are
selling or buying, see Sec. 302-12.7 of this chapter.)
(f) Expenses paid by a relocation company to the extent such
payments constitute taxable income to the employee. The extent to which
such payments constitute taxable income varies according to the
individual circumstances of your relocation, and by the state and
locality in which you reside. (See IRS Publication 521, Moving
Expenses, and appropriate state and local tax authorities for
additional information.)
(g) Property Management Services--Payment for the services of a
property manager for renting rather than selling a residence at your
old official station. (See part 302-15 of this chapter.)
(h) Miscellaneous expense allowance--Miscellaneous expenses for
defraying certain relocation expenses not covered by other relocation
benefits. (See part 302-16 of this chapter.)
[[Page 32348]]
Sec. 302-17.22 What relocation expenses does the WTA not cover?
The WTA does not cover the following relocation expenses:
(a) Any reimbursement, allowance, or direct payment to a vendor
that should not be reported as taxable income when you file your
Federal tax return; this includes but is not limited to en route
lodging and transportation, HHG transportation, and transportation of
POVs.
(b) Reimbursed expenses for extended storage of household goods
during an OCONUS assignment, if reimbursement is permitted under your
agency's policy.
(c) State and local withholding tax obligations. To the extent that
your state or local tax authority requires periodic (such as quarterly)
tax payments, you are responsible to pay these from your own funds.
Your agency reimburses you for substantially all of these payments
through the RITA process, but your agency does not provide a WTA for
them. If required to by state or local law, your agency may withhold
these from your reimbursement.
(d) Additional taxes due under the Federal Insurance Contributions
Act including Social Security tax, if applicable, and Medicare tax.
Current law does not allow Federal agencies to reimburse transferees
for these employment taxes on relocation benefits. However, your agency
will deduct for these taxes from your reimbursements for taxable items.
(e) Any reimbursement amount that exceeds the actual expense paid
or incurred. For example, if your reimbursement for the movement of
household goods is based on the commuted rate schedule but your actual
relocation expenses are less than that, your tax liability for the
difference is not covered by the WTA or RITA.
(f) Home marketing incentive payment. In accordance with FTR part
302-14, your agency may not provide you either a WTA or RITA for this
incentive.
(g) Any recruitment, relocation, or retention incentive payment
that you receive. Any withholding of taxes for such payments is outside
the scope of this regulation. Rather, it is covered by regulations
issued by the Office of Personnel Management, Treasury's Financial
Management Service, and the IRS.
(h) Any allowances, reimbursements, and/or direct payments to
vendors not related to your relocation; for example, a reimbursement
for office supplies would not be covered by the WTA, even if it
occurred during your relocation.
Sec. 302-17.23 What are the procedures for my WTA?
(a) Your agency prepares a relocation travel authorization, which
includes an estimate of the WTA and RITA, to obligate funds for your
relocation.
(b) Your agency pays certain allowances to you. Your agency also
pays vendors directly for other relocation expenses.
(c) Your agency instructs you as to whether to submit one voucher
after you have completed your relocation or to submit vouchers at
various points as your relocation progresses plus another when your
relocation is completed.
(d) You submit your voucher(s) for reimbursement of certain
relocation expenses.
(e) Your agency determines the extent to which each allowance, each
item on your voucher(s), and each direct payment to a vendor is
nontaxable or is taxable income to you under the IRC.
(f) For the taxable items, your agency calculates your WTA and any
reimbursement(s) due to you in accordance with Sec. 302-17.24. Your
agency sets aside the amount of your WTA and pays the IRS as a
withholding tax in accordance with IRS requirements.
Sec. 302-17.24 How does my agency compute my WTA?
(a) Your agency computes your WTA by applying the grossed-up
withholding formula below each time your agency incurs a covered,
taxable relocation expense, regardless of whether it is a
reimbursement, allowance, or direct payment to a vendor.
(b) The law currently provides for a withholding rate of 25 percent
for ``supplemental wages'' that are identified separately from regular
wages (This rate has not always been 25 percent and may change in the
future; GSA will revise the FTR to reflect any changes as quickly as
possible, but users of this part should see IRS Publication 15,
Employer's Tax Guide, for the most current rate). Taxable payments for
relocation expenses are ``supplemental wages,'' as defined in IRS
Publication 15. However, you owe taxes on the WTA itself because, like
most other relocation allowances, it is taxable income. To reimburse
you for the taxes on the WTA itself, your agency computes the WTA by
multiplying the reimbursement, allowance, or direct payment to a vendor
by 0.3333 instead of 0.25. That is:
WTA = R/(1-R) x Expense
Where R is the withholding rate for supplemental wages, or
WTA = 0.25/(1 -0.25) x Expense, or 0.3333 x Expense
Example 1--Calculating the Withholding Tax Allowance (WTA)
------------------------------------------------------------------------
------------------------------------------------------------------------
Househunting Trip Actual Expense Claim.................. 3,000
WTA = .3333 x $3,000 = $999.90
Temporary Quarters Lump Sum Allowance................... 5,000
WTA = .3333 x $5,000 = $1,666.50
Total WTA $999.90 + $1,666.50 = $2,666.40
------------------------------------------------------------------------
Note: Your agency must deduct withholding for Medicare and FICA
(Social Security) from your reimbursement for expenses such as
househunting, as the WTA does not cover such expenses.
Subpart C--The Relocation Income Tax Allowance (RITA)
Sec. 302-17.30 What is the purpose of the RITA?
(a) The purpose of the RITA is to reimburse you for any taxes that
you owe that were not adequately reimbursed by the WTA. As discussed in
Sec. 302-17.24, the WTA calculation is based on the 25 percent income
tax withholding rate applicable to supplemental wages. This may be
higher or lower than your actual tax rate. The RITA, on the other hand,
is based on your marginal tax rate, determined by your actual taxable
income and filing status, which allows your agency to reimburse you for
substantially all of your Federal income taxes. The RITA also
reimburses you for any additional state and local taxes that you incur
as a result of your relocation, because they are not reimbursed in the
WTA process.
(b) The WTA may be optional to you. See 302-17.61 for a discussion
of criteria for choosing whether or not to accept the WTA. See 302-
17.62 through 302-17.69 for procedures if you choose not to accept the
WTA.
Sec. 302-17.31 What are the procedures for calculation and payment of
my RITA?
The procedures for the calculation and payment of your RITA depend
on whether your agency has chosen to use a one-year or two-year RITA
process. See subpart F for the one-year process and subpart G for the
two-year process.
Sec. 302-17.32 Who chooses the one-year or two-year process?
Your agency or a major component of your agency determines whether
it will adopt a one-year or two-year RITA process. Your agency may use
the one-year RITA process for one or more specific categories of
employees and the
[[Page 32349]]
two-year process for one or more other categories.
Sec. 302-17.33 May I ask my agency to recalculate my RITA?
(a) Yes, you may ask your agency to recalculate your RITA provided
you filed your ``Statement of Income and Tax Filing Status,'' and
amended it, if necessary, in a timely manner. If, once you have
completed all Federal, state, and local tax returns, you believe that
your RITA should have been significantly different from the RITA that
your agency calculated, you may ask your agency to recalculate your
RITA. This is true for either the one-year or two-year process. With
any request for recalculation, you must submit a statement explaining
why you believe your RITA was incorrect.
(b) Please note that your agency may require that you also submit
an amended ``Statement of Income and Tax Filing Status'' (if, for
example, you inadvertently did not report some of your income in your
original Statement), your actual tax returns, or both, as attachments
to your request for recalculation.
Note to Sec. 302-17.33: Please see Sec. 302-17.55, if your
agency uses a one-year RITA process, or Sec. 302-17.69, if your
agency uses a two-year RITA process, for more information about
positive and negative RITA calculations.
Subpart D--The Combined Marginal Tax Rate (CMTR)
Sec. 302-17.40 How does my agency calculate my CMTR?
(a) The CMTR is a key element that greatly enhances the accuracy of
the calculation of your RITA. Your agency uses the information on your
``Statement of Income and Tax Filing Status,'' as amended, to determine
your CMTR, as follows (see subparts F and G of this part for
information about the ``Statement of Income and Tax Filing Status'').
(b) The CMTR is, in essence, a combination of your Federal, state,
and local tax rates. However, the CMTR cannot be calculated by merely
adding the Federal, state, and local marginal tax rates together
because of the deductibility of state and local income taxes from
income on your Federal income tax return. The formula prescribed below
for calculating the CMTR, therefore, is designed to adjust the state
and local tax rates to compensate for their deductibility from income
for Federal tax purposes.
(c) The formula for calculating the CMTR is:
CMTR = F + (1-F)S + (1-F)L
Where:
F = Your Federal marginal tax rate
S = Your state marginal tax rate, if any
L = Your local marginal tax rate, if any
(d) Your agency finds the Federal marginal tax rate by comparing
your taxable income, as shown in your ``Statement of Income and Filing
Status,'' to the Federal tax tables in the current year's Form 1040-ES
instructions (See Sec. Sec. 302-17.50 through 302-17.53 and Sec. Sec.
302-17.63 through 302-17.65 for additional information on the
``Statement of Income and Tax Filing Status.'')
(e) Your agency finds the state and local marginal tax rates that
apply to you (if any) by comparing your taxable income to the most
current state and/or local tax tables provided by the states and
localities. Every Federal payroll office and every provider of tax
calculation software has these tables readily available, and the tables
are also available on the Web sites of the various state and local
taxing authorities.
Sec. 302-17.41 Is there any difference in the procedures for
calculating the CMTR, depending on whether my agency chooses the one-
year or two-year RITA process?
No. The procedures for calculating the CMTR are the same for the
one-year and two-year RITA processes.
Example 2--Calculating the Combined Marginal Tax Rate
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