Tax Reform Change Threatens ‘Potentially Ruinous’ Damage to Some Feds’ Finances

The recent passage by Congress of a sweeping tax reform effort is having “potentially ruinous” unintended consequences for some federal employees who have had to relocate for work.

The change potentially impacts both active and retired federal employees and occurred as a result of changes to the way the tax deduction for household goods is calculated.

As summarized by Nicole Ogrysko at Federal News Radio, “previously, employees who relocated for the job could deduct certain moving and travel expenses from their taxes. Those previously deductible expenses were not included in the Withholding Tax Allowance and Relocation Income Tax Allowance computations.”

In practice, “this unintended policy outcome of tax reform holds the potential to be personally ruinous to affected federal employees,” notes a coalition letter sent last week by nine organizations representing federal employees, with the letter noting that the “gross-up” tax bills faced by some federal employees “are so large as to essentially negate the total value of one or multiple employee paychecks.”

“Moreover, the policy is specifically impacting those federal employees who already faced the daunting prospect of uprooting and relocating their entire lives in the name of public service. A disproportionate impact of these changes is being faced by employees involved in national and homeland security at the Departments of Homeland Security (DHS), Justice (DOJ), and Defense (DOD), as well as Agriculture (USDA), the Federal Aviation Administration (FAA), and others,” the letter continues.

The letter also notes that resolution of the problem requires that “GSA, via the Office of Governmentwide Policy (OGP)” consult with the Department of Treasury and Internal Revenue Service.

Ogrysko writes, “The recent tax code changes are also impacting new hires, employees returning home from a stint overseas or senior executives eligible for ‘last move home,’ an obscure benefit for career SES who move upon retirement from federal service. A fix for employees in these situations, SEA said, would require a statutory change.”

The coalition letter responsible for making the story public was sent to GSA Administrator Emily Murphy and was cosigned by the Senior Executives Association (SEA), the Federal Law Enforcement Officers Association (FLEOA), the Professional Managers Association (PMA), the Federal Managers Association (FMA), the FAA Managers Association (FAAMA), the National Association of Federal Veterinarians (NAFV), the National Federation of Federal Employees (NFFE), the National Council of Social Security Management Associations (NCSSMA).

 

Posted in From the Hill

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