[Title 41 CFR 302]
[Code of Federal Regulations (annual edition) - July 1, 2002 Edition]
[Title 41 - PUBLIC CONTRACTS AND PROPERTY MANAGEMENT]
[Subtitle F - Federal Travel Regulation System]
[Chapter 302 - RELOCATION ALLOWANCES]
[Subchapter F - MISCELLANEOUS ALLOWANCES]
[Part 302 - 17--RELOCATION INCOME TAX (RIT) ALLOWANCE]
[From the U.S. Government Printing Office]
41PUBLIC CONTRACTS AND PROPERTY MANAGEMENT42002-07-012002-07-01false17--RELOCATION INCOME TAX (RIT) ALLOWANCE302PART 302PUBLIC CONTRACTS AND PROPERTY MANAGEMENTFederal Travel Regulation SystemRELOCATION ALLOWANCESMISCELLANEOUS ALLOWANCES
PART 302-17--RELOCATION INCOME TAX (RIT) ALLOWANCE--Table of Contents
Sec.
302-17.1 Authority.
302-17.2 Coverage.
[[Page 205]]
302-17.3 Types of moving expenses or allowances covered and general
limitations.
302-17.4 Exclusions from coverage.
302-17.5 Definitions and discussion of terms.
302-17.6 Procedures in general.
302-17.7 Procedures for determining the WTA in Year 1.
302-17.8 Rules and procedures for determining the RIT allowance in
Year 2.
302-17.9 Responsibilities.
302-17.10 Claims for payment and supporting documentation and
verification.
302-17.11 Violation of service agreement.
302-17.12 Advance of funds.
302-17.13 Source of references.
Appendix A to Part 302-17--Federal Tax Tables for RIT Allowance
Appendix B to Part 302-17--State Tax Tables for RIT Allowance
Appendix C to Part 302-17--Federal Tax Tables for RIT Allowance--Year 2
Appendix D to Part 302-17--Puerto Rico Tax Tables for RIT Allowance
Authority: 5 U.S.C. 5738; 20 U.S.C. 905(a); E.O. 11609, 36 FR 13747,
3 CFR, 1971-1975 Comp., p. 586.
Source: FTR Amdt. 98, 66 FR 58196, Nov. 20, 2001, unless otherwise
noted.
Sec. 302-17.1 Authority.
Payment of a relocation income tax (RIT) allowance is authorized to
reimburse eligible transferred employees for substantially all of the
additional Federal, State, and local income taxes incurred by the
employee, or by the employee and spouse if a joint tax return is filed,
as a result of certain travel and transportation expense and relocation
allowances which are furnished in kind, or for which reimbursement or an
allowance is provided by the Government. Payment of the RIT allowance
also is authorized for income taxes paid to the Commonwealth of Puerto
Rico, the Commonwealth of the Northern Mariana Islands, and the U.S.
possessions in accordance with a decision of the Comptroller General of
the United States (67 Comp. Gen. 135 (1987)). The RIT allowance shall be
calculated and paid as provided in this part.
Sec. 302-17.2 Coverage.
(a) Eligible employees. Payment of a RIT allowance is authorized for
employees transferred on or after November 14, 1983, in the interest of
the Government from one official station to another for permanent duty.
The effective date of an employee's transfer is the date the employee
reports for duty at the new official station as provided in part 300.3
of this title.
(b) Individuals not covered. The provisions of this part are not
applicable to the following individuals or employees:
(1) New appointees;
(2) Employees assigned under the Government Employees Training Act
(see 5 U.S.C. 4109); or
(3) Employees returning from overseas assignments for the purpose of
separation.
Sec. 302-17.3 Types of moving expenses or allowances covered and general limitations.
The RIT allowance is limited by law as to the types of moving
expenses that can be covered. The law authorizes reimbursement of
additional income taxes resulting from certain moving expenses furnished
in kind or for which reimbursement or an allowance is provided to the
transferred employee by the Government. However, such moving expenses
are covered by the RIT allowance only to the extent that they are
actually paid or incurred, and are not allowable as a moving expense
deduction for tax purposes. The types of expenses or allowances listed
in paragraphs (a) through (i) of this section, are covered by the RIT
allowance within the limitations discussed.
(a) En route travel. Travel (including per diem) and transportation
expenses of the transferred employee and immediate family for en route
travel from the old official station to the new official station. (See
part 302-4 of this chapter.)
(b) Household goods shipment. Transportation (including temporary
storage) expenses for movement of household goods from the old official
station to the new official station. (See part 302-7 of this chapter.)
(c) Extended storage expenses. Allowable expenses for extended
storage of household goods belonging to an employee transferred on or
after November 14, 1983, through October 11, 1984, to an isolated
location in the continental United States. (See part 302-8, of this
chapter extended storage expenses are not covered by the RIT allowance
for
[[Page 206]]
transfers on or after October 12, 1984.) (See Sec. 302-17.4(c) of this
chapter.)
(d) Mobile home movement. Expenses for the movement of a mobile home
for use as a residence when movement is authorized instead of shipment
and temporary storage of household goods. (See part 302-10 of this
chapter.)
(e) Househunting trip. Travel (including per diem) and
transportation expenses of the employee and spouse for one round trip to
the new official station to seek permanent residence quarters. (See part
302-5 of this chapter.)
(f) Temporary quarters. Subsistence expenses of the employee and
immediate family during occupancy of temporary quarters. (See part 302-6
of this chapter.)
(g) Real estate expenses. Allowable expenses for the sale of the
residence (or expenses of settlement of an unexpired lease) at the old
official station and for purchase of a home at the new official station
for which reimbursement is received by the employee. (See part 302-11 of
this chapter.)
(h) Miscellaneous expense allowance. A miscellaneous expense
allowance for the purpose of defraying certain expenses associated with
discontinuing a residence at one location and establishing a residence
at the new location in connection with an authorized or approved
permanent change of station. (See part 302-16 of this chapter.)
(i) Relocation services. Payments, or portions thereof, made to a
relocation service company for services provided to a transferred
employee (see part 302-12 of this chapter), subject to the conditions
stated in this paragraph and within the general limitations of this
section applicable to other covered expenses.
(1) For employees transferred on or after November 14, 1983, through
October 11, 1984. The amount of a broker's fee or real estate
commission, or other real estate sales transaction expenses which
normally are reimbursable to the employee under Sec. 302-11.200 of this
chapter, but have been paid by a relocation service company incident to
an assigned sale from the employee, provided that such payments
constitute income to the employee. For the purposes of this regulation,
an assigned sale occurs when an employee obtains a binding agreement for
the sale of his/her residence and assigns the inherent rights and
obligations of that agreement to a relocation company that is providing
services under contract with the employing agency. For example, if the
employee incurs an obligation to pay a specified broker's fee or real
estate commission under the terms of the sales agreement, this
obligation along with the sales agreement is assigned to the relocation
company and may, upon payment of the obligation by the relocation
company, constitute income to the employee. (See Sec. 302-12.7 of this
chapter entitled ``Income tax consequences of using relocation
companies.'')
(2) For employees transferred on or after October 12, 1984. Expenses
paid by a relocation company providing relocation services to the
transferred employee pursuant to a contract with the employing agency to
the extent such payments constitute income to the employee. (See
Sec. 302-12.7 of this chapter.)
Note: See reference shown in parentheses for reimbursement
provisions for each allowance listed in paragraphs (a) through (i) of
this section. See section 217 of the Internal Revenue Code (IRC) and
Internal Revenue Service (IRS) Publication 521 entitled ``Moving
Expenses'' and appropriate State and local tax authority publications
for additional information on the taxability of moving expense
reimbursements and the allowable tax deductions for moving expenses.
Sec. 302-17.4 Exclusions from coverage.
The provisions of this part are not applicable to the following:
(a) Any tax liability that may result from payments by the
Government to relocation companies on behalf of employees transferred on
or after November 14, 1983, through October 11, 1984, other than the
payments for those expenses specified in Sec. 302-17.3(i)(1).
(b) Any tax liability incurred for local income taxes other than
city income tax as a result of moving expense reimbursements for
employees transferred on or after November 14, 1983, through October 11,
1984. (See definition in Sec. 302-17.5(b).)
(c) Any tax liability resulting from reimbursed expenses for any
extended storage of household goods except as specifically provided for
in Sec. 302-17.3(c).
[[Page 207]]
(d) Any tax liability resulting from paid or reimbursed expenses for
shipment of a privately owned automobile.
(e) Any tax liability resulting from an excess of reimbursed amounts
over the actual expense paid or incurred. For instance, if an employee's
reimbursement for the movement of household goods is based on the
commuted rate schedule and his/her actual moving expenses are less than
the reimbursement, the tax liability resulting from the difference is
not covered by the RIT allowance. (See Sec. 302-17.8(c)(2)(i).)
(f) Any tax liability resulting from an employee's decision not to
deduct moving expenses for which a tax deduction is allowable under the
Internal Revenue Code or appropriate State and local tax codes. (See
Secs. 302-17.8(b)(1) and 302-17.8(c)(2).)
(g) Any tax liability resulting from the payment of recruitment,
retention, or relocation bonuses authorized by the Office of Personnel
Management pursuant to 5 U.S.C. 5753 and 5754, or any other provisions
which allow relocation payments that are not reimbursements for travel,
transportation, and other expenses incurred in relocation.
Sec. 302-17.5 Definitions and discussion of terms.
For purposes of this part, the following definitions will apply:
(a) State income tax. A tax, imposed by a State tax authority, that
is deductible for Federal income tax purposes as a State income tax
under section 164(a)(3) of the IRC. ``State'' means any one of the
several States of the United States and the District of Columbia.
(b) Local income tax. A tax, imposed by a recognized city or county
tax authority, that is deductible for Federal income tax purposes as a
local (city or county) income tax under section 164(a)(3) of the IRC;
except, that for employees transferred on or after November 14, 1983,
through October 11, 1984, local income tax shall be construed to mean
only city income tax. For purposes of this regulation:
(1) City means any unit of general local government which is
classified as a municipality by the Bureau of the Census, or which is a
town or township that in the determination of the Secretary of the
Treasury possesses powers and performs functions comparable to those
associated with municipalities, is closely settled, and contains within
its boundaries no incorporated places as defined by the Bureau of the
Census (31 CFR 215.2(b)(1)).
(2) County means any unit of local general government which is
classified as a county by the Bureau of the Census (31 CFR 215.2(e)).
(c) Covered moving expense reimbursements or covered reimbursements.
As used herein, these terms include those moving expenses listed in
Sec. 302-17.3 as being covered by the RIT allowance and which may be
furnished in kind, or for which reimbursement or an allowance is
provided by the Government.
(d) Covered taxable reimbursements. Covered moving expense
reimbursements minus the tax deductions allowable under the IRC and IRS
regulations for moving expenses. (See determination in Sec. 302-
17.8(c).)
(e) Year 1 or reimbursement year. The calendar year in which
reimbursement or payment for moving expenses is made to, or for, the
employee under the provisions of this part. All or part of these
reimbursements (see Sec. 302-17.6) are reported to the IRS as income
(wages, salary, or other compensation) to the employee for that tax year
under the provisions of the IRC and IRS regulations, and are subject to
Federal tax withholding. The withholding tax allowance (WTA) (see
paragraph (f)(1) of this section) is calculated in Year 1, to cover the
employee's Federal tax withholding obligations each time covered moving
expense reimbursements are made that result in a Federal tax withholding
obligation. For purposes of this part, an advance of funds for any of
the covered moving expenses is not considered to be a reimbursement or a
payment until the travel voucher settlement for such expenses takes
place. If an employee's reimbursement for moving expenses is spread over
more than one year, he/she will have more than one Year 1.
(f) Year 2. The calendar year in which a claim for the RIT allowance
is paid.
(1) Generally, Year 2 will be the calendar year immediately
following Year 1 and in which the employee files a tax
[[Page 208]]
return reflecting his/her tax liability for income received in Year 1.
However, there may be instances where the employee's claims submission
and/or payment of the RIT allowance is delayed beyond the calendar year
immediately following Year 1. (Year 1 will always be the calendar year
that reimbursements are received; see paragraph (e) of this section.)
Year 2 will be the calendar year in which the RIT allowance is actually
paid.
(2) The RIT allowance is calculated in Year 2 and paid to cover the
additional tax liability (resulting from moving expense reimbursements
received in Year 1) not covered by the WTA paid in Year 1. If an
employee's covered taxable reimbursements are spread over more than one
year, he/she will have more than one Year 2.
(g) Federal withholding tax rate (FWTR). The tax rate applied to
incremental income to determine the amount to be withheld for Federal
income tax from salary or other compensation such as moving expense
reimbursements. Because moving expense reimbursements constitute
supplemental wages for Federal income tax purposes, the 20 percent flat
rate of withholding is generally applicable to such reimbursements. (See
Sec. 302-17.7(c).) Agencies should refer to the Treasury Financial
Manual, TFM 3-5000, and applicable IRS regulations for complete and up-
to-date information on this subject.
(h) Earned income. For purposes of the RIT allowance, ``earned
income'' shall include only the gross compensation (salary, wages, or
other compensation such as reimbursement for moving expenses and the
related WTA (see paragraph (n) of this section) and any RIT allowance
(see paragraph (m) of this section) paid for moving expense
reimbursement in a prior year) that is reported as income on IRS Form W-
2 for the employee (employee and spouse, if filing jointly), and if
applicable, the net earnings (or loss) for self-employment income shown
on Schedule SE of the IRS Form 1040. Earned income may be from more than
one source. (See Sec. 302-17.8(d).)
(i) Marginal tax rate (MTR). The tax rate (for example, 33 percent)
applicable to a specific increment of income. The Federal, Puerto Rico,
and State marginal tax rates to be used in calculating the RIT allowance
are provided in appendices A through D of this part. (See Sec. 302-
17.8(e)(3) for instructions on local marginal tax rate determinations.)
(j) Combined marginal tax rate (CMTR). A single rate determined by
combining the applicable marginal tax rates for Federal (or Puerto Rico,
when applicable), State, and local income taxes, using formulas provided
in Sec. 302-17.8(e)(5).
(k) Gross-up. Payment for the estimated additional income tax
liability incurred by an employee as a result of reimbursements or
payments by the Government for the covered moving expenses listed in
Sec. 302-17.3.
(l) Gross-up formulas. The formulas used to determine the amount of
the gross-up for the WTA and the RIT allowance. The gross-up formulas
used herein compensate the employee for the initial tax, the tax on tax,
etc. Note that the WTA gross-up formula in Sec. 302-17.7(d) is different
than the RIT gross-up formula prescribed in Sec. 302-17.8(f).
(m) RIT allowance. The amount of payment computed and paid in Year 2
to cover substantially all of the estimated additional tax liability
incurred as a result of the covered moving expense reimbursements
received in Year 1.
(n) Withholding tax allowance (WTA). The withholding tax allowance
(WTA), paid in Year 1, covers the employee's Federal income tax
withholding liability on covered taxable reimbursements received in Year
1. The amount is computed by applying the withholding gross-up formula
prescribed in Sec. 302-17.7(d) (using the Federal withholding tax rate)
each time that a Federal withholding obligation is incurred on covered
moving expense reimbursements received in Year 1. Grossing-up the
Federal withholding amount protects the employee from using part of his/
her moving expense reimbursement to pay Federal withholding taxes. (See
Sec. 302-17.7.)
(o) State gross-up. Payment for the estimated additional State
income tax liability incurred by an employee as a result of
reimbursements or payments
[[Page 209]]
by the Government for the covered moving expenses listed in Sec. 302-
17.3 that are deductible for Federal income tax but not for State income
tax purposes.
(p) State gross-up formula. The formula prescribed in Sec. 302-
17.8(f)(3) to be used in determining the amount to be included in the
RIT allowance to compensate an employee for the additional State income
tax incurred in States that do not allow the deduction of moving
expenses.
Sec. 302-17.6 Procedures in general.
(a) This regulation sets forth procedures for the computation and
payment of the RIT allowance and defines agency and employee
responsibilities. This part does not require changes to those internal
fiscal procedures established by the individual agencies pursuant to IRS
regulations, or the Treasury Financial Manual, provided that the intent
of the statute authorizing the RIT allowance and this part are not
disturbed.
(b) The total amount reimbursed or paid to the employee, or on his/
her behalf, for travel, transportation, and other relocation expenses
and allowances is includable in the employee's gross income pursuant to
the IRC and certain State or local government tax codes. Some moving
expenses for which reimbursements are received may be deducted from
income by the employee as moving expense deductions, subject to certain
limitations prescribed by the IRS or pertinent State or local tax
authorities. Reimbursements for nondeductible moving expenses are
subject to income tax. (See IRS Publication 521 entitled ``Moving
Expenses'' and the appropriate State and local tax codes for detailed
information.)
(c) Usually, if the employee is reimbursed for nondeductible moving
expenses, the amount of these reimbursements is subject to withholding
of Federal income tax in accordance with IRS regulations at the time of
reimbursement. Under existing fiscal procedures, the amount of the
employee's withholding obligation is usually deducted either from
reimbursements for the moving expenses at the time of reimbursement or
from the employee's salary. (See Treasury Financial Manual.)
(d) Payment of a WTA established herein will offset deductions for
the Federal income tax withholding on moving expense reimbursements, and
on the WTA itself, from the employee's moving expense reimbursements or
from salary.
(e) The total amount of the RIT allowance can be computed after the
end of Year 1 as soon as the earned income level, income tax filing
status, total covered taxable reimbursements, and the applicable
marginal tax rates can be determined. Employee claims for the RIT
allowance should be submitted in accordance with this part and the
employing agency's procedures.
(f) Procedures are prescribed in Secs. 302-17.7 and 302-17.8 for
computation and payment of the WTA and the RIT allowance. These
procedures are built on existing fiscal procedures and IRS regulations
regarding reporting of employee income from reimbursements and
withholding of taxes on supplemental wages.
Sec. 302-17.7 Procedures for determining the WTA in Year 1.
(a) General rules. The WTA is designed to cover only the employee's
withholding tax obligation for Federal income taxes on income resulting
from covered moving expense reimbursements. (See definition in Sec. 302-
17.5(c).) Other withholding tax obligations, if any, such as for social
security taxes or for State and/or local income taxes on income
resulting from moving expense reimbursements shall not be included in
the calculation of the WTA payment. The amount of the WTA is equal to
the Federal income tax withholding obligation incurred by the employee
on covered moving expense reimbursements (which are not offset by
deductible moving expenses) and on the WTA itself. Each time covered
moving expense reimbursements are paid to or on behalf of the employee,
the WTA shall be calculated, accounted for, and reported as provided in
paragraphs (b) through (g) of this section.
(b) Determination of amount of reimbursement subject to withholding.
Under IRS regulations, income resulting from reimbursements for
nondeductible moving expenses is subject to withholding of Federal
income taxes. (See
[[Page 210]]
IRS Publication 521, ``Moving Expenses.'') There are some moving
expenses which may be reimbursed but are not covered taxable
reimbursements (see definition in Sec. 302-17.5(d)) for purposes of the
WTA and RIT allowance calculations, such as extended storage of
household goods. (See exclusions in Sec. 302-17.4.) Therefore, the
actual amount of the covered taxable reimbursements may be different
than the amount of nondeductible moving expenses subject to Federal
income tax withholding. The difference in these amounts should not be
substantial; therefore, the amount of nondeductible moving expenses
subject to Federal income tax withholding, as determined by the agency
pursuant to IRS regulations, may be used in calculating the WTA. (Note
that the RIT calculation procedure in Sec. 302-17.8 requires
determination of covered taxable reimbursements.)
(c) Determination of Federal withholding tax rate (FWTR). Moving
expense reimbursements constitute supplemental wages for Federal income
tax purposes. Therefore, an agency must withhold at the withholding rate
applicable to supplemental wages. Currently, the supplemental wages
withholding rate is 28 percent. The supplemental wages withholding rate
should be used in calculating the WTA unless under an agency's
withholding procedures a different withholding rate is used pursuant to
IRS tax regulations. In such cases, the applicable withholding rate
shall be substituted for the supplemental wages withholding rate in the
calculation shown in paragraph (d) of this section.
(d) Calculation of the WTA. The WTA is calculated by substituting
the amounts determined in paragraphs (b) and (c) of this section into
the following WTA gross-up formula:
Formula:
[GRAPHIC] [TIFF OMITTED] TR20NO01.000
Where:
Y = WTA
X = FWTR (generally, 28 percent)
N = nondeductible moving expenses/covered taxable reimbursements
Example:
If:
X = 28 percent
N = $20,000
Then:
[GRAPHIC] [TIFF OMITTED] TR20NO01.001
Y = .3889 ($20,000)
Y = $7778.00
(e) WTA payment and employee agreement for repayment. (1) The WTA
may be calculated several times within Year 1 if reimbursements for
moving expenses are made on more than one travel voucher. Each time an
employee is reimbursed for moving expenses which are subject to Federal
tax withholding in accordance with the IRS regulations, the WTA will be
calculated and paid unless the employee fails to comply with the
requirements in paragraph (e)(2) of this section.
(2) The employee shall be required to agree in writing to repay any
excess amount paid to him/her in Year 1 (see Secs. 302-17.8(f)(5) and
302-17.9(b)(3)), and submit the required certified tax information and
claim for his/her RIT allowance within a reasonable length of time (as
determined by the agency) after the close of Year 1. Failure of the
employee to comply with this requirement will preclude the agency's
payment of the WTA. The entire WTA will be considered an excess payment
if the RIT allowance claim is not submitted in a timely manner to settle
the RIT allowance account.
(f) Determination of employee's withholding tax on WTA. Since the
amount of the WTA is considered income to the employee, it is subject to
the same tax withholding requirements as all other moving expense
reimbursements. (See Treasury Financial Manual, Section 4080, Moving
Expense Reimbursements, for withholding requirements.)
(g) End of year reporting. At the end of the year, agencies
generally are required to issue IRS Form(s) W-2 for each employee
showing total gross compensation (including moving expense
reimbursements) and the applicable amount of Federal taxes withheld. For
tax reporting purposes, the WTA is to be treated as a moving expense
reimbursement. The total amount of the employee's WTA's paid
[[Page 211]]
during the year as well as the amount of moving expense reimbursements
should be included as income on the employee's Form W-2. The Federal tax
withholding amount applicable to the moving expense reimbursements and
the WTA should also be included on the employee's Form W-2. The amount
of the WTA's also will be furnished to the employee along with the
amount of moving expense reimbursements on IRS Form 4782 or another
itemized listing provided for the employee's use in preparing his/her
tax return (see IRS regulations for further guidance) and in claiming
the RIT allowance as provided in Sec. 302-17.8.
Sec. 302-17.8 Rules and procedures for determining the RIT allowance in Year 2.
(a) Summary/overview of procedures. The RIT allowance will be
calculated and claimed in Year 2. This can be accomplished as soon as
the employee can determine earned income (as defined herein), income tax
filing status, covered taxable reimbursements for Year 1, and the
applicable marginal tax rates. The RIT allowance is then calculated
using the gross-up formula under procedures prescribed herein. Since the
RIT allowance is considered income, appropriate withholding taxes on the
RIT allowance are deducted and the balance constitutes the net payment
to the employee. Rules, procedures, and the prescribed tax tables for
these calculations are provided in paragraphs (b) through (g) of this
section, and in appendices A, B, and C of this part.
(b) General rules and assumptions. (1) The procedures prescribed
herein for calculations and payment of the RIT allowance are based on
certain assumptions jointly developed by GSA and IRS, and tax tables
developed by IRS. This approach avoids a potentially controversial and
administratively burdensome procedure requiring the employee to furnish
extensive documentation, such as certified copies of actual tax returns
and reconstructed returns, in support of a claim for a RIT allowance
payment. Specifically, the following assumptions have been made:
(i) The employee will claim allowable moving expense deductions for
the same tax year in which the corresponding moving expense
reimbursements are included in income;
(ii) Changes to the IRC, applicable to the 1987 and subsequent tax
years, require that allowable moving expense deductions must be taken as
an itemized deduction from gross income rather than as an adjustment to
gross income as in previous tax years. It is assumed that employees will
receive the benefit of allowable moving expense deductions to offset
income either by itemizing their moving expense deductions or through
the increased standard deductions.
(iii) Prior to the Tax Reform Act of 1986, it was assumed that the
employee's (and spouse's, if a joint return is filed) earned income,
filing status, and CMTR determined for Year 1 (and used in determining
the RIT allowance in Year 2) would remain the same or would not be
substantially different in the second and subsequent tax years. However,
the Tax Reform Act of 1986 substantially changed the Federal tax
structure making it necessary to compute a separate CMTR for Year 1 and
for Year 2. (See paragraph (e) of this section.) The formula for
calculating the RIT allowance to be paid in 1988 and subsequent years is
shown in paragraph (f) of this section. It is assumed that within the
accuracy of the calculation, the State and local tax rates for Year 1
and Year 2 will remain the same or will not be substantially different.
Therefore, the State and local tax rates for Year 1 shall be used in
calculating the CMTR for Year 2.
(2) The prescribed procedures, which yield an estimate of an
employee's additional tax liability due to moving expense
reimbursements, are to be used uniformly. They are not to be adjusted to
accommodate an employee's unique circumstance which may differ from the
assumed circumstances stated in paragraph (b)(1) of this section.
(3) An adjustment of the RIT allowance paid in Year 2 for the
covered taxable reimbursements received in Year 1 is required if the tax
information certified to on the RIT allowance claim is different than
that shown on the actual Federal tax return filed with IRS for Year 1 or
changed for any reason after filing of the tax return, so as to affect
[[Page 212]]
the CMTR's used in the RIT allowance calculation. (See Sec. 302-17.10
for claims procedures.)
(c) Determination of covered taxable reimbursements. (1) Generally,
the amount of the covered taxable reimbursements is the difference
between (i) the amount of covered moving expense reimbursements for the
allowances listed in Sec. 302-17.3 that was included in the employee's
income in Year 1, and (ii) the maximum amount of allowable moving
expenses that may be claimed as a moving expense deduction by the
employee on his/her Federal tax return under IRS tax regulations to
offset the income resulting from moving expense reimbursements for Year
1. The covered taxable reimbursements will be determined as if the
employee had itemized and deducted all allowable moving expense
deductions. (See assumption made in paragraph (b)(1)(ii) of this
section.) If the employee is precluded from claiming moving expense
deductions because he/she does not meet IRS requirements for the
distance test, then the amount of covered taxable reimbursements is the
same as the amount of covered moving expense reimbursements. (See
Sec. 302-17.5(d).)
(2) For purposes of calculating the RIT allowance, the following
special rules apply to the determination of moving expense deductions to
offset moving expense reimbursements reported as income:
(i) The total amount of reimbursement (which was reported as income)
for the expenses of en route travel for the employee and family (see
Sec. 302-17.3(a)) and transportation (including up to 30 days temporary
storage) of household goods (see Sec. 302-17.3(b)) to the new official
station shall be used as a moving expense deduction. (See also Sec. 302-
17.4(e) and (f).)
(ii) The total amount of reimbursement for a househunting trip,
temporary quarters (up to 30 days at new station) and real estate
transaction expenses (see Sec. 302-17.3(e), (f), (g), and (i)), up to
the maximum allowable deduction under IRS tax regulations, shall be used
as a moving expense deduction. For example, an employee and spouse
filing a joint return and residing in the same household at the end of
the tax year may deduct up to $3,000 for these expenses. (No more than
$1,500 of the $3,000 may be claimed for a househunting trip and
temporary quarters expenses combined.) If the employee was reimbursed
$1,350 for a househunting trip and temporary quarters expenses and
$9,000 for real estate expenses, the moving expense deductions would be
$1,350 for the househunting trip and temporary quarters expenses and
$1,650 for real estate expenses. If the employee's reimbursement was
$1,850 for the househunting trip and temporary quarters expenses and
$9,000 for real estate expenses, the moving expense deductions would be
$1,500 for the househunting trip and temporary quarters expenses and
$1,500 for real estate expenses. If the employee had no reimbursement
for a househunting trip and temporary quarters, the full $3,000 would be
applied to the $9,000 reimbursement for real estate expenses. (See IRS
Publication 521, ``Moving Expenses,'' for these and other maximums which
vary by situation and filing status.)
(3) Procedures and examples are provided herein as if all moving
expense reimbursements are received in one year with all moving expense
deductions applied in that same year to arrive at the covered taxable
reimbursements. However, when reimbursements span more than one year,
the amount of covered taxable reimbursements must be determined
separately for each reimbursement year (Year 1). The maximum moving
expense deductions apply to the entire move. Under IRS tax regulations,
the employee has some discretion as to when he/she claims these
deductions (e.g., in the year of the move when the expense was paid or
in the year of reimbursement, if these actions do not occur in the same
year). However, for purposes of the RIT allowance procedures, the moving
expense deductions will be applied in the year that the corresponding
reimbursement is made. For example, if an employee incurred and was
reimbursed $1,000 for a househunting trip and temporary quarters in 1989
and an additional $1,000 for temporary quarters in 1990, this employee,
according to his/her particular situation and tax filing status, may
deduct $1,500 of these expenses in moving expense deductions. In
calculating the
[[Page 213]]
RIT allowance for 1989, $1,000 of the $1,500 deduction is used to offset
the $1,000 reimbursement in 1989 resulting in zero covered taxable
reimbursements for the househunting trip and temporary quarters for
1989. The remaining $500 (balance of the $1,500 not used in determining
covered taxable reimbursements for 1989) will be used to offset the
$1,000 temporary quarters reimbursement in 1990 (second Year 1), leaving
$500 of the temporary quarters reimbursement as a covered taxable
reimbursement for 1990.
(4) Although the WTA amount is included in income (see Sec. 302-
17.7), it shall not be included in the amount of covered taxable
reimbursements. Under the procedures and formulas established herein,
the proper amount of the RIT allowance is calculated using the RIT
gross-up formula with the WTA and any prior RIT allowance payments
excluded from covered taxable reimbursements.
(5) Agencies are cautioned that there may be moving expenses
reimbursed to the employee that are not covered by the RIT allowance.
(See exclusions in Sec. 302-17.4; also see discussion in Sec. 302-17.7
regarding covered taxable reimbursements versus nondeductible expenses.)
(d) Determination of income level and filing status. In order to
determine the CMTR's needed to calculate the RIT allowance, the employee
must determine the appropriate amount of earned income (as prescribed
herein) that was or will be reported on his/her Federal tax return for
the tax year in which the covered taxable reimbursements were received
(Year 1). Such amount will also include the spouse's earned income if a
joint filing status is claimed. For purposes of this regulation,
appropriate earned income shall include only the amount of gross
compensation reported on IRS Form(s) W-2, and, if applicable, the net
earnings (or loss) from self-employment income as shown on Schedule SE
of IRS Form 1040. (See Sec. 302-17.5(h).) (Note that moving expense
reimbursements including the WTA amounts and any RIT allowance paid for
a prior Year 1 are to be included in earned income and should be shown
as income on the Form W-2; if they are not, other appropriate
documentation shall be furnished by the agency.) (See Sec. 302-17.7(g).)
The amount of earned income as determined under this paragraph and the
tax filing status (for example, from lines 1 through 5 on the 1987 IRS
Form 1040) shall be contained in a certified statement on, or attached
to, the voucher claiming the RIT allowance. (See Sec. 302-17.10.) If a
joint filing status is claimed and the spouse's earned income is
included, the spouse must sign the certified statement. If the spouse
does not sign the statement, earned income will include only the
employee's earned income and the RIT allowance will be calculated on
that basis. This condition will not apply if an employee is allowed,
under IRS rules, to file a joint return as a surviving spouse.
(e) Determination of the CMTR's. The gross-up formula used to
calculate the RIT allowance in paragraph (f) of this section, requires
the use of two CMTR's--one for Year 1 in which reimbursements were
received and the other for Year 2 in which the RIT allowance is paid.
CMTR's are single tax rates calculated to represent the Federal, State,
and/or local income tax rates applicable to the earned income determined
for Year 1. (See paragraph (d) of this section.) The CMTR's will be
determined as follows:
(1) Federal marginal tax rates. The Federal marginal tax rates for
Year 1 and Year 2 are determined by using the income level and filing
status determined under paragraph (d) of this section and contained in
the certified statement by the employee (or employee and spouse) on the
RIT allowance claim, and applying the prescribed Federal tax tables
contained in appendices A and C of this part. For example, if the income
level for the 1989 tax year (Year 1) was $84,100 for a married employee
filing a Federal joint return, the Federal marginal tax rate would be 33
percent for Year 1 (1989) (see appendix A of this part) and 28 percent
for Year 2 (1990) (see appendix C of this part). These rates would be
used regardless of how much of the $84,100 was attributable to
reimbursement for the employee's relocation expenses. (Note that these
marginal rates are different from the withholding tax rate used for the
WTA.) If the employee incurs only Federal income tax (i.e.,
[[Page 214]]
there are no State or local taxes), the Federal marginal tax rates
determined from appendices A and C of this part are the CMTR's to be
used in the RIT gross-up formula provided in Sec. 302-17.8(f). In such
cases, the provisions of paragraphs (e)(2) and (3) of this section, do
not apply.
(2) State marginal tax rate. (i) If the employee incurs an
additional State income tax (see definition in Sec. 302-17.5(a))
liability as a result of moving expense reimbursements, the appropriate
State tax table in appendix B of this part is to be used to determine
the applicable State marginal tax rate that will be substituted into the
formula for determining the CMTR for both Year 1 and Year 2. The
appropriate State tax table will be the one that corresponds to the tax
year in which the reimbursements are paid to the employee (Year 1). The
income level determined in paragraph (d) of this section for Federal
taxes shall be used to identify the appropriate income bracket in the
State tax table. The applicable State marginal tax rate is obtained from
the selected income bracket column for the State where the employee is
required to pay State income tax on moving expense reimbursements. The
tax rates shown in the table apply to all employees regardless of their
filing status, except where a separate rate is shown for a single filing
status.
(ii) The lowest income bracket shown in the State tax tables in
appendix B of this part is $20,000-$24,999. In cases where the
employee's (employee's and spouse's, if filing jointly) earned income as
determined under paragraph (d) of this section is less than this income
bracket, an appropriate State marginal tax rate shall be established by
the employing agency from the applicable State tax code or regulations
issued pursuant thereto. Such State marginal tax rate shall be
representative of the earned income level in question but in no case
more than the marginal tax rate established in appendix B of this part
for the $20,000-$24,999 income bracket for the particular State in which
an additional tax obligation has been incurred.
(iii) The prescribed State marginal tax rates generally are
expressed as a percent of taxable income. However, if the applicable
State marginal tax rate is stated as a percentage of the Federal income
tax liability, the State tax rate must be converted to a percent of
taxable income to be used in the CMTR formulas in paragraph (e)(5) of
this section. This is accomplished by multiplying the applicable Federal
tax rate for Year 1 by the applicable State tax rate. For example, if
the Federal tax rate is 33 percent for Year 1 and the State tax rate is
25 percent of the Federal income tax liability, the State tax rate
stated as a percent of taxable income would be 8.25 percent. The State
tax rate thus determined for Year 1 will be used in determining the CMTR
for both Year 1 and Year 2.
(iv) An employee may incur a State income tax liability on moving
expense reimbursements in more than one State at the same or different
marginal tax rates (i.e., double taxation). For example, an employee may
incur taxes on moving expense reimbursements in one State because of
residency in that State, and in another State because that particular
State taxes income earned within its jurisdiction irrespective of
whether the employee is a resident. In such cases, a single State
marginal tax rate must be determined for use in the CMTR formulas in
paragraph (e)(5) of this section. The general rules in paragraph
(e)(2)(iv) (A) through (C) of this section apply in determining the
applicable single State marginal tax rate in such cases.
(A) If two or more States impose an income tax on an employee's
moving expense reimbursement, but no two States tax the same portion of
the reimbursement, then the reimbursement is not subject to double
taxation. In this situation, the average of the applicable State
marginal tax rates, as determined under paragraphs (e)(2) (i) through
(iii) of this section, shall be treated as being imposed on the entire
reimbursement, and shall be used in the CMTR formula.
(B) If two or more States impose an income tax on the moving expense
reimbursement, and more than one State taxes the same portion of the
reimbursement, but those States allow an adjustment or credit for income
taxes paid to the other State(s), then the reimbursement is not subject
to double
[[Page 215]]
taxation. In this situation, the highest of the applicable State
marginal tax rates, as determined under paragraphs (e)(2) (i) through
(iii) of this section, shall be used in the CMTR formula.
(C) If two or more States impose an income tax on the moving expense
reimbursement, and more than one State taxes the same portion of the
reimbursement without allowing an adjustment or credit for income taxes
paid to the other, then the reimbursement is subject to double taxation.
In this situation, the sum of the applicable State marginal tax rates,
as determined under paragraphs (e)(2) (i) through (iii) of this section,
shall be used in the CMTR formula.
(3) Local marginal tax rate. Because of the impracticality of
establishing a single marginal tax rate table for local income taxes
that could be applied uniformly on a nationwide basis, appropriate local
marginal tax rates shall be determined as provided in paragraphs
(e)(3)(i) through (iii) of this section.
(i) If the employee incurs an additional local income tax (see
definition Sec. 302-17.5(b)) liability as a result of moving expense
reimbursements, he/she shall certify to such fact when claiming the RIT
allowance (see certification statement in Sec. 302-17.10) by specifying
the name of the locality imposing the income tax and the applicable
marginal tax rate determined from the actual marginal tax rate table or
schedule prescribed by the taxing locality. The marginal tax rate shall
be the one applicable to the taxable income portion of the amount of
earned income determined under paragraph (d) of this section for the
employee (and spouse, if filing jointly). The same tax rate shall be
used in calculating the CMTR for both Year 1 and Year 2. The employing
agency shall establish procedures to determine whether the employee-
certified local marginal tax rate is appropriate for the employee's
income level and filing status and approve its use in the CMTR formulas.
(See also Sec. 302-17.10(b)(2).)
(ii) If the local marginal tax rate is stated as a percentage of
Federal or State income tax liability, such rate must be converted to a
percent of taxable income for use in the CMTR formulas. This is
accomplished by multiplying the applicable Federal or State tax rate for
Year 1 as determined in paragraph (e) (1) or (2) of this section by the
applicable local tax rate. For example, if the State tax rate for Year 1
is 6 percent and the local tax rate is 50 percent of State income tax
liability, the local tax rate stated as a percentage of taxable income
would be 3 percent. The local tax rate thus determined for Year 1 will
be used in determining the CMTR for both Year 1 and Year 2.
(iii) The situations described in paragraph (e)(2)(iv) of this
section with respect to State income taxes may also be encountered with
local income taxes. If such situations do occur, the rules prescribed
for determining the single State marginal tax rate shall also be applied
to determine the single local marginal tax rate for use in the CMTR
formulas.
(4) Marginal tax rates for the Commonwealth of Puerto Rico, the
Commonwealth of the Northern Mariana Islands, and the U.S. possessions--
(i) The Commonwealth of Puerto Rico. A Federal employee who is relocated
to or from a point, or between points, in the Commonwealth of Puerto
Rico may be subject to income tax on the employee's salary (including
moving expense reimbursements) by both the U.S. Government and the
government of Puerto Rico. However, under the current law of Puerto
Rico, such employee receives a credit on his/her Puerto Rico income tax
for the amount of taxes paid to the United States. The rules in
paragraphs (e)(4)(i)(A) through (C) apply in determining the marginal
tax rate applicable for transfers to, from, or between points in Puerto
Rico.
(A) The applicable Puerto Rico marginal tax rate shall be determined
by using the income level determined in paragraph (d) of this section
for Federal taxes and the employee's filing status. The Puerto Rico
marginal tax rate for Year 1 will be used in computing the CMTR for both
Year 1 and Year 2. The Puerto Rico tax tables are contained in appendix
D of this part.
(B) If the applicable Puerto Rico marginal tax rate is higher than
the applicable Federal marginal tax rate, then the total amount of taxes
paid by the employee to both jurisdictions is
[[Page 216]]
equal to the employee's total income tax liability to the Commonwealth
of Puerto Rico before any credit is given for taxes paid to the United
States. The Federal marginal tax rate, therefore, is of no consequence
and will be disregarded. In such cases, the formula in paragraph
(e)(5)(iii) of this section will be used to compute the CMTR. The CMTR
formula shall include only the Puerto Rico marginal tax rate, the State
marginal tax rate as determined under paragraph (e)(2) of this section
(when applicable), and the local marginal tax rate as determined under
paragraph (e)(3) of this section. For purposes of applying the Puerto
Rico CMTR formula in paragraph (e)(5)(iii) of this section, the State
marginal tax rate will be applicable if both Puerto Rico and one or more
of the States impose an income tax on the moving expense reimbursement,
and more than one of these entities taxes the same portion of the
reimbursement without allowing an adjustment or credit for income taxes
paid to the other. In this situation, the S component of the CMTR
formula will be the applicable State marginal tax rate as determined
under paragraph (e)(2) of this section.
(C) If the applicable Puerto Rico marginal tax rate is equal to or
lower than the applicable Federal marginal tax rate, then the total
amount of taxes paid by the employee to both jurisdictions is equal to
the employee's total Federal income tax liability. The Puerto Rico
marginal tax rate, therefore, is of no consequence in such cases and
will be disregarded. The CMTR will be computed using the formula in
paragraphs (e)(5) (i) and (ii) of this section. This formula will
include the Federal marginal tax rate as determined under paragraph
(e)(1) of this section, the State marginal tax rate as determined under
paragraph (e)(2) of this section (when applicable), and the local
marginal tax rate as determined under paragraph (e)(3) of this section.
The State marginal tax rate will be applicable if one or more States
impose tax on the moving expense reimbursement.
(ii) The Commonwealth of the Northern Mariana Islands and the U.S.
possessions. A Federal employee who is relocated to or from a point, or
between points, in the Commonwealth of the Northern Mariana Islands or
the U.S. possessions (Guam, American Samoa, and the U.S. Virgin Islands)
is subject to both Federal income tax and income tax assessed by the
Commonwealth of the Northern Mariana Islands or the U.S. possession, as
applicable. However, the income tax system and rates for the
Commonwealth of the Northern Mariana Islands and for the U.S.
possessions are identical to the U.S. Federal income tax system and
rates. This constitutes a ``mirror tax'' system. A tax credit or
exclusion is provided by one of the taxing jurisdictions (either the
U.S., the Commonwealth of the Northern Mariana Islands, or the U.S.
possession, as appropriate) to prevent double taxation. The marginal tax
rate for the Commonwealth of the Northern Mariana Islands or the U.S.
possession, therefore, is of no consequence since it is identical to the
Federal marginal income tax rate and is completely offset by a
corresponding credit or exclusion. Thus, the Commonwealth's or the
possession's tax rate will not be factored into the CMTR formula. The
CMTR will be computed as provided in paragraphs (e)(5) (i) and (ii)
based solely on the Federal marginal tax rate; when applicable, the
State(s) marginal tax rate; and the local marginal tax rate.
(5) Calculation of the CMTR's. As stated above, the gross-up formula
for calculating the RIT allowance requires the use of two CMTR's.
However, the required CMTR's cannot be calculated by merely adding the
Federal, State, and local marginal tax rates together because of the
deductibility of State and local income taxes from income for Federal
income tax purposes. The State tax tables prescribed in appendix B of
this part are designed to use the same income amount as that determined
for the Federal taxes, which reflects, among other things, State and
local tax deductions. The formulas prescribed below for calculating the
CMTR's are designed to adjust the State and local tax rates to
compensate for their deductibility from income for Federal tax purposes.
(i) Calculation of the CMTR for Year 1. The following formula shall
be used to calculate the CMTR for Year 1.
CMTR Formula: X = F + (1-F)S + (1-F)L
[[Page 217]]
Where:
X = CMTR for Year 1
F = Federal tax rate for Year 1
S = State tax rate for Year 1
L = local tax rate for Year 1
(A) Federal, State, and local taxes incurred. If the employee incurs
Federal, State, and local income taxes on moving expense reimbursements,
the CMTR formula may be solved as follows:
Example:
If:
F = 33 percent of income
S = 6 percent of income
L = 3 percent of income
Then:
X = .33 + (1.00-.33).06 + (1.00-.33).03
X = .3903
(B) Federal and State income taxes only. If the employee incurs tax
liability on moving expense reimbursements for Federal and State income
taxes but none for local income tax, the value of ``L'' is zero and the
CMTR formula may be solved as follows:
Example:
If:
F = 33 percent of income
S = 6 percent of income
L = Zero
Then:
X = .33 + (1.00-.33).06
X = .3702
(C) Federal and local income taxes only. If the employee incurs a
tax liability on moving expense reimbursements for Federal and local
income taxes but none for State income tax, the value of ``S'' is zero
and the CMTR formula may be solved as follows:
Example:
If:
F = 33 percent of income
S = Zero
L = 3 percent of income
Then:
X = .33 + (1.00-.33).03
X = .3501
(ii) Calculation of the CMTR for Year 2. The calculation of the CMTR
for Year 2 is the same as described for Year 1, except that the Federal
tax rate for Year 2 is used in place of the Federal tax rate for Year 1.
State and local tax rates remain the same as for Year 1. The following
formula shall be used to determine the CMTR for Year 2:
CMTR Formula: W = F + (1-F)S + (1-F)L
Where:
W = CMTR for Year 2
F = Federal tax rate for Year 2
S = State tax rate for Year 1
L = local tax rate for Year 1
(iii) Calculation of CMTR's for Puerto Rico. The following formula
shall be used to calculate the CMTR for transfers to, from, or between
points in Puerto Rico. (This formula is different from the formulas
provided in paragraphs (e)(5) (i) and (ii) of this section since the
Federal marginal tax rate is disregarded.)
CMTR Formula: X = P + S + L
Where:
X = CMTR for Year 1 and Year 2
P = Puerto Rico tax rate for Year 1
S = State tax rate for Year 1, when applicable (See Sec. 302-
17.8(e)(4)(i)(B).)
L = Local tax rate for Year 1
(f) Determination of the RIT allowance. The RIT allowance to cover
the tax liability on additional income resulting from the covered
taxable reimbursements received in Year 1 is calculated in Year 2 as
provided below:
(1) The RIT allowance is calculated by substituting the amount of
covered taxable reimbursements for Year 1, the CMTR's for Year 1 and
Year 2, and the total amount of the WTA's paid in Year 1 into the gross-
up formula as follows:
Formula:
[GRAPHIC] [TIFF OMITTED] TR20NO01.002
Where:
Z = RIT allowance payable in Year 2
X = CMTR for Year 1
W = CMTR for Year 2
R = covered taxable reimbursements
Y = total WTA's paid in Year 1
Example:
If:
X = .3903
W = .3448
R = $21,800
Y = $5,450
Then:
[[Page 218]]
[GRAPHIC] [TIFF OMITTED] TN27FE02.000
Z= .5957($21,800)-.9306($5,450)
Z= $12,986.26-$5,071.77
Z= $7,914.49''
(2) There may be instances when a WTA was not paid in Year 1 at the
time moving expense reimbursements were made. In cases where there is no
WTA to be deducted, the value of ``Y'' is zero and the formula stated in
paragraph (f)(1) of this section, for calculating the amount of the RIT
allowance (Z) due the employee in Year 2 may be solved as shown in the
following example:
Example:
If:
X = .3903
W = .3448
R = $21,800
Y = Zero
Then:
[GRAPHIC] [TIFF OMITTED] TR20NO01.004
Z = .5957 ($21,800)
Z = $12,986.26
(3) Certain States do not allow the deduction of all or part of the
covered moving expenses that are deductible for Federal income tax
purposes. The State gross-up to cover the additional State income tax
liability resulting from the covered moving expense reimbursements
received in Year 1 that are deductible for Federal income tax purposes
but not for State income tax purposes is calculated in Year 2 as
follows:
(i) The State gross-up is calculated by substituting the amount of
covered moving expense reimbursements that are deductible for Federal
income tax purposes but not for State income tax purposes, the Federal
tax rate for Year 1, the State tax rate for Year 1, and the combined
marginal tax rate for Year 2 into the State gross-up formula as follows:
Formula:
[GRAPHIC] [TIFF OMITTED] TR20NO01.005
Where:
A = State gross-up
F = Federal tax rate for Year 1
S = State tax rate for Year 1
W = CMTR for Year 2
N = covered moving expense reimbursements that are deductible for
Federal income tax purposes but not for State income tax purposes
Example:
If:
F = .33
S = .06
W = .3448
N = $9,250
Then:
[GRAPHIC] [TIFF OMITTED] TR20NO01.006
A = .0614 ($9,250)
A = $567.95
(ii) Add the State gross-up to the RIT allowance as calculated using
the formula in paragraph (f)(1) of this section. The result is the RIT
allowance adjusted for those States that do not allow moving expense
deductions. Example:
RIT allowance payable in Year.............................. $7,914.49
Plus adjustment factor..................................... +567.95
------------
Total.................................................... $8,482.44
(4) If the amount of the RIT allowance is greater than zero, it is
payable to the employee on the travel voucher as a relocation or moving
expense allowance. The RIT allowance amount is included in the
employee's gross income for Year 2 and, therefore, subject to
appropriate withholding taxes. (See net payment to employee in paragraph
(g) of this section.) The RIT allowance amount will be reported on IRS
Form W-2 for Year 2 (including applicable income tax withholding
amounts) and on IRS Form 4782 for the employee's information.
(5) If the calculation of the RIT allowance results in a negative
amount, the employee is obligated to repay this amount as a debt due the
Government. (See Secs. 302-17.7(e)(2) and 302-17.9(b).)
[[Page 219]]
(6) Any changes to the employee's income level or filing status for
Year 1 that would affect the marginal tax rates (Federal, State, or
local) used in calculating the RIT allowance must be reported to the
agency by the employee as provided in Sec. 302-17.9(b)(2). (See also
Sec. 302-17.10 for certified statement regarding these changes.)
(g) Determination of the net payment due employee in Year 2. Since
the amount of the RIT allowance is income to the employee in Year 2, it
is subject to the same tax withholding requirements as all other moving
expense reimbursements. Agencies should determine the appropriate
amounts for withholding taxes under their internal tax withholding
procedures. The amount of withholding taxes is deducted from the RIT
allowance to arrive at the net payment to the employee.
[FTR Amdt. 98, 66 FR 58196, Nov. 20, 2001; 67 FR 7219, Feb. 15, 2002; 67
FR 9045, Feb. 27, 2002]
Sec. 302-17.9 Responsibilities.
(a) Agency. Finance offices will calculate the amount of the gross-
up for the WTA in Year 1 in accordance with procedures outlined herein
and credit this amount to the employee at the time of reimbursement as
provided in Sec. 302-17.7(e). The WTA will be reflected on the
employee's Form W-2 for Year 1. The RIT allowance may be calculated in
Year 2 either by the employee or by the agency finance office based on
information provided by the employee on the voucher, as directed by the
agency's implementing policies and procedures. In addition, agencies
shall prescribe appropriate and necessary implementing procedures as
provided elsewhere in this part.
(b) Employee. (1) The employee is required to submit a claim for the
RIT allowance and to file the tax information for Year 1 specified in
Sec. 302-17.10 with his/her agency in Year 2, regardless of whether any
additional reimbursement for the RIT allowance is owed the employee.
(See Sec. 302-17.7(e) for employee agreement.)
(2) If any action occurs (i.e., amended tax return, tax audit, etc.)
that would change the information provided in Year 2 by the employee to
his/her agency for use in calculating the RIT allowance due the employee
for Year 1 taxes, this information must be provided by the employee to
his/her agency under procedures prescribed by the agency. (See Sec. 302-
17.10.)
(3) If the calculation of the RIT allowance results in a negative
amount, the employee is obligated to repay this amount as a debt due the
Government. (See Secs. 302-17.7(e)(2) and 302-17.8(f)(5).)
Sec. 302-17.10 Claims for payment and supporting documentation and verification.
(a) Claims forms. Claims for payment of the RIT allowance shall be
submitted by the employee in Year 2 on SF 1012 (Travel Voucher) or other
authorized travel voucher form. When claiming payment for the RIT
allowance, the employee shall furnish and certify to certain tax
information that has been or will be shown on his/her actually prepared
tax returns. The spouse must also sign statement if joint filing status
is claimed and spouse's income is included on statement. This
information shall be contained in a certified statement on, or attached
to, the SF 1012 reading essentially as follows:
Certified Statement
I certify that the following information, which is to be used in
calculating the RIT allowance to which I am entitled, has been (or will
be) shown on the income tax returns filed (or to be filed) by me (or by
my spouse and me) with the applicable Federal, State, and local (specify
which) tax authorities for the 19----tax year.
--Gross compensation as shown on attached IRS Form(s) W-2 and, if
applicable, net earnings (or loss) from self-employment income shown on
attached Schedule SE (Form 1040):
----------------------------------------------------------------------------------------------------------------
Form(s) W-
2 Schedule SE
------------------------------------------------------------------------------------------
Employee........................................................ $ $
Spouse (if filing jointly\1\)................................... $ $
Total (Both columns)............................................ ........... $
----------------------------------------------------------------------------------------------------------------
--Filing status: ------------ (Specify one of the filing status items
that was (or will be) claimed on IRS Form 1040.)
--Marginal tax rates from appendices A, B, and C of 41 CFR part 302-17
and local tax tables derived under procedures prescribed in 41 CFR part
302-17:
Federal for Year 1_____________________________________________________
Federal for Year 2_____________________________________________________
[[Page 220]]
State (specify which):_________________________________________________
Local (specify which):_________________________________________________
The above information is true and accurate to the best of my
knowledge. I (we) agree to notify the appropriate agency official of any
changes to the above (i.e., from amended tax returns, tax audit, etc.)
so that appropriate adjustments to the RIT allowance can be made. The
required supporting documents are attached. Additional documentation
will be furnished if requested.
I (we) further agree that if the 12-month service agreement required
by 41 CFR 302-2.13 is violated, the total amount of the RIT allowance
will become a debt due the United States Government and will be repaid
according to agency procedures.
________________________________________________________________________
Employee's signature
________________________________________________________________________
Date
________________________________________________________________________
Spouse's signature (if filing jointly)\1\
________________________________________________________________________
Date
\1\ If a joint filing status is claimed and spouse's income is
included, the spouse must sign the statement. If the spouse does not
sign the document, earned income will include only the employee's earned
income as provided in 41 CFR 302-17.8(d). This condition will not apply
if an employee is allowed, under IRS rules, to file a joint return as a
surviving spouse.
(b) Supporting documentation/verification. The claim for the RIT
allowance shall be supported by documentation attached to the voucher
and by verification of State and local tax obligations as provided
below:
(1) Copies of the appropriate IRS Forms W-2 and, if applicable, the
completed IRS Schedule SE (Form 1040) shall be attached to the voucher
to substantiate the income amounts shown in the certified statement.
Employee (and spouse, if filing jointly) must agree to provide
additional documentation to verify income amounts, filing status, and
State and local income tax obligations if requested by the agency.
(2) In order to determine or verify whether a particular State or
local tax authority imposes a tax on moving expense reimbursements, it
is incumbent upon the appropriate agency officials to become familiar
with the State and local tax laws that affect their transferring
employees. In cases where the taxability of moving expense
reimbursements is not clear, an agency may pay a RIT allowance which
reflects only those State and local tax obligations that are clearly
imposed under State and local tax law. Once the questionable State or
local tax obligations are resolved, agencies may recompute the RIT
allowance and make appropriate payment adjustments.
(c) Fraudulent claims. A claim against the United States is
forfeited if the claimant defrauds or attempts to defraud the Government
in connection therewith (28 U.S.C. 2514). In addition, there are two
criminal provisions under which severe penalties may be imposed on an
employee who knowingly presents a false, fictitious, or fraudulent claim
against the United States (18 U.S.C. 287 and 1001). The employee's claim
for payment of the RIT allowance shall accurately reflect the facts
involved in every instance so that any violation of these provisions
will be avoided.
Sec. 302-17.11 Violation of service agreement.
In the event the employee violates the terms of the service
agreement required under Sec. 302-2.13, no part of the RIT allowance or
the WTA will be paid, and any amounts paid prior to such violation shall
be a debt due the United States until they are repaid by the employee.
Sec. 302-17.12 Advance of funds.
No advance of funds is authorized in connection with the allowance
provided in this part.
Sec. 302-17.13 Source references.
The following references or publications have been used as source
material for this part.
(a) Internal Revenue Code (IRC), section 164(a)(3) (26 U.S.C.
164(a)(3)) pertaining to the deductibility of State and local income
taxes, and section 217 (26 U.S.C. 217), pertaining to moving expenses.
(b) Internal Revenue Service Publication 521, ``Moving Expenses.''
(c) Internal Revenue Service, Circular E, ``Employer's Tax Guide.''
(d) Department of the Treasury Financial Manual, TFM 3-5000.
(e) 31 CFR 215.2 (5 U.S.C. 5516, 5517, and 5520).
[[Page 221]]
Appendix A to Part 302-17--Federal Tax Tables for RIT Allowance
Federal Marginal Tax Rates by Earned Income Level and Filing Status--Tax Year 2000
[The following table is to be used to determine the Federal marginal tax rate for Year 1 for computation of the RIT allowance as prescribed in Sec. 302-
11.8(e)(1). This table is to be used for employees whose Year 1 occurred during calendar year 2000.]
--------------------------------------------------------------------------------------------------------------------------------------------------------
Single taxpayer Heads of household Married filing jointly/ Married filing
---------------------------------------------------- qualifying widows and separately
widowers -------------------------
Marginal tax rate (percent) But not But not --------------------------
Over over Over over But not Over But not
Over over over
--------------------------------------------------------------------------------------------------------------------------------------------------------
15.............................................. $7,417 $34,638 $13,375 $49,734 $17,421 $63,297 $8,603 $31,342
28.............................................. 34,638 75,764 49,734 113,413 63,297 131,334 31,342 63,448
31.............................................. 75,764 148,990 113,413 180,742 131,334 189,826 63,448 99,219
36.............................................. 148,990 306,111 180,742 326,450 189,826 315,957 99,219 170,524
39.6............................................ 306,111 ........... 326,450 ........... 315,957 ........... 170,524 ...........
--------------------------------------------------------------------------------------------------------------------------------------------------------
[[Page 222]]
Appendix B to Part 302-17--State Tax Tables for RIT
Allowance
State Marginal Tax Rates by Earned Income Level--Tax Year 2000
[The following table is to be used to determine the State marginal tax rates for calculation of the RIT
allowance as prescribed in Sec. 302-11.8(e)(2). This table is to be used for employees who received covered
taxable reimbursements during calendar year 2000.]
----------------------------------------------------------------------------------------------------------------
Marginal tax rates (stated in percents) for the earned income amounts specified in each column 1, 2
-----------------------------------------------------------------------------------------------------------------
$20,000- $25,000- $50,000- $75,000 and
State (or district) $24,999 $49,999 $74,999 over
----------------------------------------------------------------------------------------------------------------
Alabama................................................. 5 5 5 5
Alaska.................................................. 0 0 0 0
Arizona................................................. 2.87 3.2 3.74 5.04
Arkansas................................................ 4.5 7 7 7
If single status \3\.................................... 6 7 7 7
California.............................................. 2 4 8 9.3
If single status \3\.................................... 4 8 8 9.3
Colorado................................................ 4.75 4.75 4.75 4.75
Connecticut............................................. 4.5 4.5 4.5 4.5
Delaware................................................ 5.2 5.95 6.4 6.4
District of Columbia.................................... 8 9.5 9.5 9.5
Florida................................................. 0 0 0 0
Georgia................................................. 6 6 6 6
Hawaii.................................................. 7.2 8.2 8.75 8.75
If single status \3\.................................... 8.2 8.75 8.75 8.75
Idaho................................................... 7.8 8.2 8.2 8.2
Illinois................................................ 3 3 3 3
Indiana................................................. 3.4 3.4 3.4 3.4
Iowa.................................................... 6.48 7.92 8.98 8.98
If single status \3\.................................... 6.8 7.92 8.98 8.98
Kansas.................................................. 3.5 6.25 6.25 6.45
If single status \3\.................................... 6.25 6.45 6.45 6.45
Kentucky................................................ 6 6 6 6
Louisiana............................................... 2 4 4 6
If single status \3\.................................... 4 4 6 6
Maine................................................... 4.5 7 8.5 8.5
If single status \3\.................................... 7 8.5 8.5 8.5
Maryland................................................ 4.85 4.85 4.85 4.85
Massachusetts........................................... 5.95 5.95 5.95 5.95
Michigan................................................ 4.4 4.4 4.4 4.4
Minnesota............................................... 5.5 7.25 7.25 8
If single status \3\.................................... 7.25 7.25 8 8
Mississippi............................................. 5 5 5 5
Missouri................................................ 6 6 6 6
Montana................................................. 9 10 11 11
Nebraska................................................ 3.65 5.24 6.99 6.99
If single status \3\.................................... 5.24 6.99 6.99 6.99
Nevada.................................................. 0 0 0 0
New Hampshire........................................... 0 0 0 0
New Jersey.............................................. 1.4 1.75 2.45 6.37
If single status \3\.................................... 1.4 3.5 5.525 6.37
New Mexico.............................................. 3.2 6 7.1 8.2
If single status \3\.................................... 6 7.1 7.9 8.2
New York................................................ 4 5.25 6.85 6.85
If single status \3\.................................... 5.25 6.85 6.85 6.85
North Carolina.......................................... 6 7 7 7.75
North Dakota............................................ 6.67 9.33 12 12
If single status \3\.................................... 8 10.67 12 12
Ohio.................................................... 3.580 4.295 5.012 7.228
Oklahoma................................................ 5 6.75 6.75 6.75
If single status \3\.................................... 6.75 6.75 6.75 6.75
Oregon.................................................. 9 9 9 9
Pennsylvania............................................ 2.8 2.8 2.8 2.8
Rhode Island \4\........................................ 26.5 26.5 26.5 26.5
South Carolina.......................................... 7 7 7 7
South Dakota............................................ 0 0 0 0
Tennessee............................................... 0 0 0 0
Texas................................................... 0 0 0 0
Utah.................................................... 7 7 7 7
Vermont \5\............................................. 25 25 25 25
Virginia................................................ 5 5.75 5.75 5.75
Washington.............................................. 0 0 0 0
West Virginia........................................... 4 4.5 6 6.5
Wisconsin............................................... 6.37 6.77 6.77 6.77
[[Page 223]]
Wyoming................................................. 0 0 0 0
----------------------------------------------------------------------------------------------------------------
\1\ Earned income amounts that fall between the income brackets shown in this table (e.g., $24,999.45,
$49,999.75) should be rounded to the nearest dollar to determine the marginal tax rate to be used in
calculating the RIT allowance.
\2\ If the earned income amount is less than the lowest income bracket shown in this table, the employing agency
shall establish an appropriate marginal tax rate as provided in Sec. 302-11.8(e)(2)(ii).
\3\ This rate applies only to those individuals certifying that they will file under a single status within the
States where they will pay income taxes. All other taxpayers, regardless of filing status, will use the other
rate shown.
\4\ The income tax rate for Rhode Island is 26.5 percent of Federal income tax liability for all employees.
Rates shown as a percent of Federal income tax liability must be converted to a percent of income as provided
in Sec. 302-11.8(e)(2)(iii).
\5\ The income tax rate for Vermont is 25 percent of Federal income tax liability for all employees. Rates shown
as a percent of Federal income tax liability must be converted to a percent of income as provided in Sec. 302-
11.8(e)(2)(iii).
[[Page 224]]
Appendix C to Part 302-17--Federal Tables for RIT Allowance--Year 2
Federal Marginal Tax Rates by Earned Income Level and Filing Status--Tax Year 2001
[The following table is to be used to determine the Federal marginal tax rate for Year 2 for computation of the RIT allowance as prescribed in Sec. 302-
11.8(e)(1). This table is to be used for employees whose Year 1 occurred during calendar years 1991, 1992, 1993, 1994, 1995, 1996, 1997, 1998, 1999 or
2000.]
--------------------------------------------------------------------------------------------------------------------------------------------------------
Single taxpayer Heads of households Married Filing jointly/ Married filing
---------------------------------------------------- qualifying widows & separately
widowers -------------------------
Marginal tax rate (percent) But not But not --------------------------
Over over Over over But not Over But not
Over over over
--------------------------------------------------------------------------------------------------------------------------------------------------------
15.............................................. $7,582 $35,363 $13,905 $51,016 $18,061 $65,011 $8,742 $32,028
28.............................................. 35,363 77,472 51,016 116,612 65,011 133,818 32,028 65,470
31.............................................. 77,472 154,524 116,612 180,660 133,818 193,566 65,470 99,363
36.............................................. 154,524 317,548 180,660 324,522 193,566 323,455 99,363 169,100
39.6............................................ 317,548 ........... 324,522 ........... 323,455 ........... 169,100 ...........
--------------------------------------------------------------------------------------------------------------------------------------------------------
[FTR Amdt. 98, 66 FR 58196, Nov. 20, 2001; 67 FR 7219, Feb. 15, 2002]
[[Page 225]]
Appendix D to Part 302-17--Puerto Rico Tax Tables for RIT
Allowance
Puerto Rico Marginal Tax Rates by Earned Income Level--Tax Year 1998
[The following table is to be used to determine the Puerto Rico marginal tax rate for computation of the RIT
allowance as prescribed in Sec. 302-11.8(e)(4)(i).]
----------------------------------------------------------------------------------------------------------------
Single filing status Any other filing status
---------------------------------------------------
Marginal tax rate (percent) But not But not
Over over Over over
----------------------------------------------------------------------------------------------------------------
12.......................................................... ........... ........... ........... $25,000
18.......................................................... ........... $25,000 ........... ...........
31.......................................................... $25,000 50,000 $25,000 50,000
33.......................................................... 50,000 ........... 50,000 ...........
----------------------------------------------------------------------------------------------------------------
[[Page 227]]