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TCJA changes federal workers' reimbursement for job relocation

There is an apparently unforeseen consequence of the Tax Cuts and Jobs Act that affects federal employees who have been reassigned. Under previous law, when federal employees relocated for their jobs they could deduct certain travel and moving expenses. Those deductions seem to have been removed by the new tax law. A coalition of federal employee associations hopes they can be reinstated when the Treasury Department and GSA update policies and regulations to comply with the new law.

Around 25,000 federal workers relocate each year for their jobs, according to the coalition, which includes the Federal Law Enforcement Officers Association, the Senior Executives Association, the Federal Managers Association, the FAA Managers Association and other organizations.

When they do, their travel and moving expenses have in the past been deductible and included in the Withholding Tax Allowance and Relocation Income Tax Allowance computation. Now, the deductions aren't being included in the calculation, the collation says. At the same time, employees' home sales' excludable tax status remains unchanged.

As a result, employees who have been relocated this year have faced hefty tax bills -- sometimes as much as $3,500 to $6,000, according to Federal News Radio.

Without legal guidance directing agencies otherwise, they have no choice but to allow the relocating employee to pay that bill. As a result, many federal employees are turning down reassignments or even leaving federal service altogether.

"Clearly, this unintended policy outcome of tax reform holds the potential to be personally ruinous to affected federal employees," the coalition wrote in a letter to the GSA administrator. "Moreover, this policy is specifically impacting those federal employees who already faced the daunting prospect of uprooting and relocating their lives in the name of public service."

The coalition also noted that the policy change has a disproportionate impact upon employees involved in homeland or national security, such as those at DHS, the Justice Department, the DOD, the USDA and the FAA.

"We ask that you move quickly to take the steps necessary -- including consultation with Treasury Secretary Steve Mnuchin -- to resolve this matter," the coalitions implored.

It is unclear, however, whether the omission of the deductions can be resolved via regulatory guidance, or if a legislative fix would have to take place. It's also unclear if workers who have already been relocated and taxed could be made whole through a regulatory change.

If you have been relocated and faced this tax, or if you are slated for relocation and don't know what to do, a federal employment law attorney can help you understand your options and choose your best alternative based on your specific circumstances.

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