Two senators want the General Services Administration to quickly find a solution to a series of complex changes in the new tax act, which are having an unintended consequences for federal employees who move for the job.
The Tax Cuts and Jobs 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. Now, those moving reimbursements are being taxed as ordinary income, and agencies are compelled to have their employees foot the bill.
Virginia Senators Tim Kaine and Mark Warner are joining a handful of federal employee organizations to demand a solution.
Without clear guidance from GSA, agencies are withholding hundreds or thousands of dollars from some employees’ paychecks to cover the costs of these taxes on moving reimbursements, the senators wrote in an April 24 letter to GSA Administrator Emily Murphy.
Policies already exist that could make impacted federal employees whole, including the relocation income tax allowance and withholding tax allowance. But GSA needs to work with the Treasury Department to adjust these policies to comply with the provisional changes in the Tax Cuts and Jobs Act.
“While these agencies deliberate, federal employees are being left on the hook for extra tax bills, and some have had their duty station change delayed and even canceled,” Kaine and Warner wrote. “We urge you to move quickly and use the maximum discretion to avoid having more federal employees stuck with the bill for their moves.”
GSA and the Treasury Department are updating a huge variety of regulations and policies to comply with provisional changes in the new tax act, but Kaine and Warner want the two agencies to make the relocation issue a top priority.
The senators also requested the number of employees who are impacted by the issue, broken out by agency and the scope of the problem.
According to the Senior Executives Association, which first flagged the relocation issue earlier this month, as many as 25,000 federal employees a year relocate for their jobs.
Some employees have gotten bills for $3,500 and $6,000, SEA said in its own April 9 letter to 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.
“All federal workers are doing a great service to the nation, keeping the public safe and helping the government operate,” the senators wrote. “The federal workers financially affected by this problem are uprooting their lives in order to go where the public needs them most. It is unfortunate that the response to their willingness to relocate for the public good is to then send them a bill.”