GSA corrects tax law’s harmful provisions for relocating federal employees

New guidance from the General Services Administration will make federal employees who had relocated for the job this year but were forced to pay hundreds or thousands of dollars in moving expenses, whole again.

The regulations in GSA’s bulletin, dated May 14, apply to all federal employees who qualified for relocation reimbursements under the prior federal travel regulations and received “some or all reimbursements, direct payments, or indirect payments on or after Jan. 1, 2018.”

The guidance is retroactive from the beginning of this year, meaning that employees who have already relocated in 2018 but were forced to pay the moving expenses will be reimbursed.

“Agencies are authorized to pay [Withholding Tax Allowance] and [Relocation Income Tax Allowance] to cover ‘substantially all’ of the increased tax liability resulting from receipt of the relocation expense reimbursements either paid directly or indirectly,” GSA Associate Administrator for Governmentwide Policy Jessica Salmoiraghi  wrote in the new bulletin.

These are some relocation expense reimbursements that are now taxable:

  • Lodging expenses during travel to a new duty location,
  • Mileage for using your own vehicle to travel to a new location,
  • Air expenses for traveling to a new duty location, and,
  • Shipment of household goods.

Agencies should also update their internal relocation policies to comply with GSA’s new guidance,  and they should also reimburse employees who have already relocated in 2018 for moving mileage, based on the current published rates, GSA said.

“GSA will continue to publish a moving expense mileage reimbursement, although the new tax law has suspended the ‘qualified moving expense deduction’ for moving mileage rate when a [privately-owned vehicle] is used by federal employees to travel to a new duty station,” the bulletin said.

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Moving forward, managers should adhere to the guidance in the bulletin until GSA issues a new federal travel regulation amendment to address changes in the Tax Cuts and Jobs Act.

The tax act, which Congress passed late last year, eliminated the deduction federal employees could previously take to alleviate the costs of relocating and moving their household items. Those moving reimbursements were being taxed as ordinary income, and agencies were compelled to have their employees foot the bill.

Several federal employee groups, including some members of the Federal-Postal Coalition and Sens. Tim Kaine (D-Va.) and Mark Warner (D-Va.), had written to GSA to express their concerns. They asked the agency to work with the Treasury Department to quickly update the regulations that were impacted by the new tax law and were leaving unintended consequences for federal employees.

According to the Senior Executives Association, which first flagged the relocation issue in April, as many as 25,000 federal employees a year relocate for their jobs.

Some employees had gotten bills for $3,500 and $6,000, SEA said in its own April 9 letter to GSA Administrator Emily Murphy. In particular, employees at the the Agriculture, Defense, Homeland Security and Justice departments, as well as the Federal Aviation Administration, are feeling the impacts of the tax act’s unintended consequences.