GSA has told agencies to reimburse federal employees who relocate to a new duty station for the additional taxes required under a change in law that made taxable as ordinary income several forms of relocation payments that previously were not taxed.
Bulletin FTR 18-05 applies retroactively to the start of this year, when a tax law overhaul enacted late in 2017 took effect. That law made taxable certain reimbursements and other payments, including for driving mileage, airfare and lodging expenses for en route travel to the new duty station; shipment of household items; and temporary storage of those items.
GSA acted after receiving letters from federal employee organizations and some members of Congress who said the law was costing those who relocate additional taxes in the hundreds or thousands of dollars.
Under the policy, agencies still are to collect the taxes from employees’ pay but then are to reimburse them for “substantially all” of the increased tax liability. The guidance stresses that the reimbursements—through two other forms of relocation benefits, withholding tax allowances and relocation income tax allowances—are to be paid only for employees transferred in the interest of the government from one official station or agency to another for permanent duty.
The law did not make taxable another relocation benefit, in which a relocation services company buys the residences of transferees and then sells them, GSA said.
It added that full guidance is to come later in an amendment to its travel regulations but that agencies should revise their internal policies now to comply with the bulletin and should reimburse any employees already hit with the additional taxes.