|CHAPTER��16�-�RELOCATION�INCOME�TAX�(RIT)�ALLOWANCE
        C16006��PROCEDURES�IN�GENERAL
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| | C16006� PROCEDURES IN GENERAL | 
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| | A.� GENERAL.� | 
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| | This regulation sets forth procedures for the computation and payment of the RIT allowance and defines DOD component and employee responsibilities.� This regulation doesn't require changes to those internal fiscal procedures established by individual DOD components pursuant to IRS regulations, or the Treasury Fiscal Requirements Manual, provided that the intents of the statute authorizing the RIT allowance and this regulation aren't disturbed. | 
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| | B.� INCLUSIONS IN GROSS INCOME.� | 
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| | The total amount reimbursed or paid to the employee, or on an employees behalf, for travel, transportation and other relocation expenses and allowances is includable in the employee's gross income pursuant to the Internal Revenue Code (IRC) and certain State or local� government tax codes.� Some moving expenses for which reimbursements are received may be deduced from income by the employee as moving expense deductions, subject to certain limitations prescribed by the IRS or pertinent State or local tax authorities.� Reimbursement 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. | 
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| | C.� TAX WITHHOLDING.� | 
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| | 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 usually is deducted either from reimbursement for the moving expenses at the time of reimbursements or from the employee's salary.� See Treasury Fiscal Requirements Manual for Federal Agencies. | 
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| | D.� WTA OFFSETS DEDUCTIONS.� | 
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| | Payment of a withholding tax allowance (WTA) established herein shall offset deductions for the Federal income tax withholding, on moving expense reimbursements and on WTA itself, from the employee's moving expense reimbursements or from salary. | 
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| | E.� WHEN RIT ALLOWANCE COMPUTED.� | 
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| | 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 regulation and the DOD components' procedures. | 
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| | F.� COMPUTING AND PAYMENT PROCEDURES.� | 
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| | Procedures are prescribed in pars.C16007andC16008for 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. | 
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| | C16007� PROCEDURES FOR DETERMINING THE WTA IN YEAR 1 | 
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| | A.� GENERAL RULES.� | 
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| | 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 par.C16005-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 aren't 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 subpars. B through F. | 
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| | B.� DETERMINATION OF AMOUNT OF REIMBURSEMENT SUBJECT TO WITHHOLDING.� | 
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| | Under IRS regulations, income resulting from reimbursements for nondeductible moving expenses is subject to withholding of Federal income taxes (see IRS Publication 521, "Moving Expenses").� There are some moving expenses which may be reimbursed but aren't covered taxable reimbursements (see definition in par.C16005-D) for the purposes of the WTA and RIT allowance calculations, such as nontemporary storage of HHG (see exclusions in par.C16004).� 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.� Because the difference in these amounts shouldn't be substantial, the amount of nondeductible moving expenses subject to Federal income tax withholding, as determined by the DOD component concerned pursuant to IRS regulations, may be used in calculating the WTA.� (Note:� The RIT calculation procedure in par.C16008requires determination of covered taxable reimbursements). | 
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| | C.� DETERMINATION OF FEDERAL WITHHOLDING TAX RATE (FWTR).� | 
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| | Moving expense reimbursements constitute supplemental wages for Federal income tax purposes.� Therefore, a DOD component 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 a DOD component'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 subpar. D. | 
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| | D.� CALCULATION OF WITHHOLDING TAX ALLOWANCE (WTA).� | 
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| | The WTA is calculated by substituting the amounts determined in subpars. B and C, above into the WTA "gross-up" formula shown below: | 
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| | Formula:Y =� � X��� (N) | 
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| | ������� 1-X | 
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| | whereY = WTA | 
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| | X = FWTR (generally 28 percent) | 
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| | N = nondeductible moving expenses/covered taxable reimbursements) | 
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| | Example:If� X = 28 percent | 
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| | ���� N = $20,000 | 
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| | Then���� Y =�� � .28�������($20,000) | 
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| | 1.00 - .28 | 
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| | ���� Y = .3889 ($20,000) | 
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| | ���� Y = $7,778.0 | 
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| | E.� WTA PAYMENT AND EMPLOYEE AGREEMENT FOR REPAYMENT | 
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| | 1.� Frequency of WTA Calculation.� | 
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| | 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 withholding in accordance with IRS regulations, the WTA is calculated and paid unless the employee fails to comply with the requirements in subpar. 2. | 
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| | 2.� Employee Agreement for Payment.� | 
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| | The employee shall be required to agree in writing to:� (1) repay any excess amount paid in Year 1 (see pars.C16008-F5andC16009-B3), and (2) submit the required certified tax information and claim for RIT allowance within 120 days, unless an extension is granted by the commanding officer or designee of the DOD component concerned, after the close of Year 1.� Failure of the employee to comply with this requirement precludes the DOD components payment of the WTA.� The entire WTA is considered an excess payment if the RIT allowance claim isn't submitted in a timely manner to settle the RIT allowance account. | 
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| | F.� DETERMINATION OF EMPLOYEE'S WITHHOLDING TAX ON WTA.� | 
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| | 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 Fiscal Requirements Manual for Federal Agencies, Section 4080, Moving Expense Reimbursements, for withholding requirements.) | 
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| | G.� END OF YEAR REPORTING.� | 
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| | At the end of the year, DOD components generally are required to issue IRS Forms 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 during the year as well as the amount of moving expense reimbursements should be included as income on the employee 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 WTAs also are 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 the tax return (see IRS regulations for further guidance) and in claiming the RIT allowance as provided in par.C16008. | 
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| | C16008� RULES AND PROCEDURES FOR DETERMINING THE RIT ALLOWANCE IN YEAR 2 | 
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| | A.� SUMMARY/OVERVIEW OF PROCEDURES.� | 
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| | The RIT allowance will be calculated and claimed in Year 2 (see definition in par.C16005-F).� 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 (see definition in par. C16005-E) and the applicable marginal tax rates.� The RIT allowance is then calculated using the "gross-up" formula under procedures described 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, examples, and prescribed tax tables for these calculations are provided in subpars. B through G and at the end of this Chapter. | 
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| | B.� GENERAL RULES AND ASSUMPTIONS | 
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| | 1.� Procedures.� | 
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| | 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: | 
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| | a.� the employee will claim allowable moving expense deductions for the same tax year in which the corresponding moving expense reimbursements are included in income; | 
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| | b.� 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 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; and | 
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| | c.� 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 subpar. E).� The formula for calculating any RIT allowances to be paid in 1988 and subsequent years is shown in subpar. F.� 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. | 
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| | 2.� Estimate of Tax Liability.� | 
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| | 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 subpar. 1. | 
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| | 3.� Adjustment.� | 
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