U.S. Senators Mark Warner (D. VA) and Tim Kaine (D. VA) sent
a letter to the Administrator of GSA on April 24, 2018, urging her to
accelerate changes to federal gross-up rules that are currently causing federal
agencies to withhold federal taxes on newly-taxable moving expenses rather than
The Tax Cuts and Jobs Act suspended the deduction/exclusion
for moving expenses from 2018 through 2025. Accordingly, reimbursements/payments of moving expenses by federal
agencies are now taxable to employees.
Under federal travel regulations, agencies must tax protect
for taxable relocation costs. And under the
federal system, there is a Withholding Tax Allowance issued contemporaneously
with the expenditures, and then a Relocation Income Tax Allowance computation
at the completion of the move to adjust the WTA allowances. However, the regulations have been held by
the GSA’s Office of Government-wide Policy to require amendment to allow
reimbursement for taxes on formerly nontaxable moving expenses. Amendment requires consultation between GSA
and the U.S. Treasury Department.
That consultation is ongoing, but has not yet resulted in
any decision to begin allowing WTA for these costs. A number of employee organizations have also
urged that GSA and Treasury act promptly to resolve the problem.
In the meantime, however, relocating federal employees are
facing very large withholding obligations on moving expenses, and the
organizations say many are refusing to move until the problem is resolved.