Relocation Income Tax (RIT) Information



Relocation Income Tax (RIT) Information

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Information taken from Title II, Chapter 2, Section 1, Travel System (TRVL)

Withholding Tax Allowances (WTA) and Relocation Income Tax (RIT)

Claims

Each time a voucher is processed and Federal income tax is withheld, a Withholding Tax Allowance (WTA) will be calculated and paid to the traveler to offset the 33 percent Federal income tax withholding. The WTA protects the employee from having to use a substantial part of his/her moving expense reimbursement to pay Federal withholding taxes.

The WTA payment will automatically be included in relocation voucher payments. The amount of the WTA is considered taxable income to the employee and will be included on the employee’s W-2 for the year in which the WTA payments are made.

Payment of a WTA will require the employee to submit a corresponding RIT claim for a final accounting of allowances. The RIT claim will be filed after receipt of the W-2 on which the WTA payments are included. This means that the RIT claim will be filed in the calendar year following the year in which the WTA payments were received. These RIT claims should be filed by August 31 of the applicable year.

Since the WTA is only an estimated payment of the employee’s tax liability, the RIT claim may result in an additional payment to the employee. If a RIT payment is made, the Travel System will compute and withhold the appropriate amount of Federal, state, and FICA/HIT taxes. However, there could be instances of an overpayment which would require a collection action. If an overpayment results, the traveler will be issued a Bill for Collection. (This type of bill may be paid on the travel voucher using Block 41 on Form AD-616 and Block 46 on Form AD-616R.)

Income Tax and Reimbursable Travel Expenses

In accordance with Federal and state tax laws, all relocation expenses will be subjected to tax criteria within the Travel System to determine income tax liability. In compliance with the tax laws, the Travel System will determine which expenses are subject to withholding (taxable) and which are not subject to withholding (nontaxable). The Travel System will compute and withhold Federal, state, and FICA/HIT taxes from those travel vouchers that include taxable expenses.

The Travel System will maintain a record of all relocation expenses and send a record of the expenses to the Payroll/Personnel System for inclusion in the employee’s Form W-2, Wage and Tax Statement. Several reports will be provided to the employee and the agency in conjunction with moving expenses.

The following types of travel transactions will be subjected to the tax criteria:

• Type Claim HH = Househunting

• Type Claim TS = Transfer of Station

• Type Claim RI = Relocation Income Tax (RIT)

• Type Claim SR = Supplemental RIT

• Type Claim OT = Outside CONUS Transfer of Station

Type Claims FT, Foreign Transfer, RC, Relocation Contract, and RT, Return Travel are not subjected to tax criteria. These vouchers are never taxed; therefore, moving expenses paid on these types of vouchers will not be included on an employee’s Form W-2.

Taxable and Nontaxable Expenses

Before taxes can be withheld/collected, the Travel System must determine which expenses are taxable and which expenses are nontaxable. The distance of the employee’s move will be the determining factor as described below:

• If the employee’s new duty station is not at least 50 miles farther from his/her former home than the old duty station, all of the moving expenses incurred in conjunction with the move will be considered taxable expenses and taxes will be withheld in accordance with the FTR. All expenses will be reported on the W-2 as taxable income.

• If the employee’s new duty station is at least 50 miles farther from his/her former home than the old duty station, some expenses will automatically be taxed and some will never be taxed. The expenses that are taxed will be reported on the W-2 as taxable income along with the amount of taxes withheld. Those expenses not taxed will be reported on the W-2 as nontaxable income. The expenses that fall within each of these categories (in compliance with the tax laws) are listed below:

• Expenses that are automatically taxed are:

o Miscellaneous allowances

o Temporary quarters expenses

o Temporary storage over 30 days

o All non-temporary storage

o Real estate expenses

o Cost of meals during relocation travel

o Househunting trip expenses (i.e., all expenses claimed on Type HH vouchers)

o Type Claims RI and SR

o Expenses that are never taxed are:

o Shipment of household goods

o Temporary storage for 30 days or less

o Shipment of mobile homes

o Shipment/storage of POV

o Other expenses that are claimed on a Type TS voucher (i.e., mileage, parking, tolls, plane, bus, train, lodging, and incidental expenses (excluding per diem meals)

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