Workforce

Feds face unexpected taxes on moving expenses

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For federal employees who move for work, the new tax law could leave them on the hook for taxes on their moving expenses.

Employer-covered moving expenses were tax deductible under the former tax code, but the new law eliminated this deduction, opening feds up to paying income taxes on these reimbursements.

Sens. Mark Warner (D-Va.) and Tim Kaine (D-Va.) want rules in place "immediately" to make sure feds aren't subject to new taxes.

"This situation is causing a particular burden for federal employees who, after being assigned to a new duty station, have discovered that hundreds or even thousands of dollars have been withheld from their paychecks, often with little advance notice, in order to cover the cost of taxes associated with moving reimbursements from the federal government," they wrote to head of the General Services Administration Emily Murphy and to Treasury Secretary Steven Mnuchin.

The government has policies in place to exempt federal employees from getting taxed on relocation expenses -- the relocation income tax allowance and the withholding tax allowance -- but these policies "have not yet been adjusted to take into account changes from the tax bill," the senators pointed out.

"We urge you to move quickly and use the maximum discretion to avoid having more federal employees stuck with the bill for their moves," they wrote.

The senators also asked GSA to provide their staffs with the number of employees affected by relocation expenses, broken out by agency and how they're affected.

Over the summer and fall of 2017, a number of Department of Interior senior executives were reassigned across the country without much notice, leading many to question whether the moves were intended as punishments.

Without rule changes, does the new tax law mean those employees could be stuck paying taxes on a move they never even wanted?

"Under current law and regulations, apparently so," said Senior Executives Association President Bill Valdez, who applauded the senators for their letter.

SEA's Legislative Director Jason Briefel added that without a rules change, there are tax implications for most federal employees, with exceptions for some foreign service and intelligence community positions.

Earlier in April, SEA wrote GSA asking it to change the rules so the approximately 25,000 employees who move annually are not affected.

The Federal Law Enforcement Officers Association, the FAA Managers Association, Federal Managers Association, the National Active and Retired Federal Employees Association, the National Association of Federal Veterinarians, the National Federation of Federal Employees, the National Council of Social Security Management Associations and the Professional Managers Association joined SEA as signatories on the letter.

About the Author

Chase Gunter is a staff writer covering civilian agencies, workforce issues, health IT, open data and innovation.

Prior to joining FCW, Gunter reported for the C-Ville Weekly in Charlottesville, Va., and served as a college sports beat writer for the South Boston (Va.) News and Record. He started at FCW as an editorial fellow before joining the team full-time as a reporter.

Gunter is a graduate of the University of Virginia, where his emphases were English, history and media studies.

Click here for previous articles by Gunter, or connect with him on Twitter: @WChaseGunter

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