Civilian Permanent Change of Station Tax Law Changes Town Hall Session
The presentation covers updates on Tax Cuts and Jobs Act affecting PCS entitlements, tax reporting, debts, and reimbursements. It details the process, deadlines, and responsibilities for civilians moving under DFAS. Information on RITA, vendor payments, amended returns, and IRS compliance is provided with a timeline of events. Various bases and customers serviced by DFAS are also highlighted.
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Civilian Permanent Change of Station Tax Law Changes Defense Finance and Accounting Service Town Hall Session Integrity - Service - Innovation
Agenda Civilian PCS Tax Law Changes Customers Serviced by DFAS Timeline of Events PCS Taxable Entitlements Civilian PCS (prior, current and future travelers) Payments to Third Party Vendors RITA WTA Sample claims Resources Integrity - Service - Innovation 8/4/2024 2
Civilian PCS Tax Law Changes What you need to know: The Tax Cuts and Jobs Act (TCJA) of 2017 made most PCS entitlements taxable and reported as taxable income to the IRS DFAS implemented a system change on Oct 30, 2018 to properly collect tax withholding per TCJA for direct reimbursements For reimbursements processed Jan 1 Oct 29, 2018 travelers had debts established 2018 W-2s Travelers should file their 2018 tax returns by the IRS filing deadline and use issued 2018 W-2 Corrected 2018 W-2s for third party payments Will be issued after process to withhold taxes from vendor payments is complete ECD late 2019 traveler will file amended tax return and supplemental Relocation Income Tax Allowance (RITA) Payments to Vendors Additional debts may be owed for taxable moving expenses DFAS paid directly to vendors on the travelers behalf Integrity - Service - Innovation 8/4/2024 3
Civilian PCS DFAS Customer Base TMA Army / MEDCOM Army CBDP DARPA DAU DCAA DCMA DECA DPAA DHRA DISA DLA DMA DODEA DODIG DSCA DSS DTRA MSC MDA MSC Navy NAVY SDDC TMA Navy TRANSCOM Tricare (TMOFO) USMC WHS WHS DLSA Integrity - Service - Innovation 8/4/2024 4
Timeline of Events Congress passed Tax Cuts & Jobs Act (Effective 1 Jan 2018) Note: additional guidance received from IRS and GSA from Feb Nov 2018 Travel W-2s distributed If received WTA, April 30 is deadline to file RITA or will incur a debt DFAS conducts Town Hall sessions myPay SmartDoc emailed to those eligible for RITAs Jan Dec Oct Feb Mar Apr 2019 2017 2018 2019 2019 2019 DFAS issued direct reimbursement debt letters DFAS implemented a software update to apply tax changes to travel orders (Per May IRS Notice 2018-75) Travelers begin to assemble and file RITA claims after filing personal income taxes DFAS issued temp storage debt letters myPay SmartDoc email debt notifications issued to affected employees Integrity - Service - Innovation 8/4/2024 5
Non-Taxable Civilian PCS Entitlements All PCS expense payments are taxable except the following entitlements: Long-term storage of household goods for employees with duty assignments outside the continental U.S. (OCONUS); Privately owned vehicle shipments to, from, and between OCONUS locations; and Residential sales conducted through the agency relocation services company home sale program For a full list of taxable entitlements, go to: http://www.dfas.mil/TaxLawChange Integrity - Service - Innovation 8/4/2024 6
Civilian PCS Taxable Entitlements Taxable Entitlements After the Tax Cuts and Jobs Act (TCJA) Previously taxable: Additional taxable entitlements per TCJA: En route meals En route lodging Per diem, transportation for House-Hunting Trip (HHT) Transportation to new PDS: POV or Airfare (similar transportation expenses) Temporary Storage of HHG beyond 30 days Temporary Storage of HHG first 30 days Temporary Quarters Subsistence Expense (TQSE) HHG shipment Residence Transactions: Sale of Home, Purchase of Home, Lease-breaking POV shipment within CONUS only Extended HHG Storage/Non-Temporary Storage (CONUS) Mobile Home shipment Home Marketing Incentive Payment (HMIP) Property Management Services Miscellaneous Expenses Withholding Tax Allowance (WTA) Relocation Income Tax Allowance (RITA) Note: Tax withholding is required for taxable payments made directly to the employee or to a third party on the employee s behalf. Note: Items such as TQSA, FTA, LQA, COLA and RAT are not moving expenses affected by TCJA. Integrity - Service - Innovation 8/4/2024 7
Civilian PCS Orders Issued Prior to 2018 PCS orders issued prior to Jan 1, 2018 and reimbursements received for that move in 2018 DFAS did not apply the TCJA to PCS reimbursements (pursuant to the IRS Notice 2018-75) Traveler will not owe a debt to DFAS for additional tax withholding on reimbursements paid by DFAS Only moving expenses paid in 2018 that were taxable prior to the TCJA will be reflected as income on the Travel W2 Payments of moving expenses to third party vendors for temp storage over 30 days may result in tax debts to the traveler Integrity - Service - Innovation 8/4/2024 8
Civilian PCS Orders Issued in 2018 Travel direct reimbursement claims processed Jan 1 Oct 29, 2018 Taxes were not withheld from the claims in accordance with TCJA After Oct 30 system change DFAS calculated the tax withholding and remitted the proper amount to the IRS on the traveler s behalf Traveler owes DFAS for the amount of taxes remitted to the IRS Debt letters were issued to ~3500 travelers the first week of February 2018 Travel W-2 reflect the withholdings paid by DFAS to the IRS Travel direct reimbursement claims processed after Oct 29, 2018 Appropriate taxes were withheld from reimbursements per TCJA No debt will be owed to DFAS for additional tax withholdings from reimbursements paid to the traveler by DFAS Payments of moving expenses to third party vendors Temp Storage taxes properly remitted to IRS and traveler owes amount to DFAS (no change to current process) Other than temp storage additional system change required and may result in corrected W-2 and tax debts to the traveler (example, HHG shipment) Integrity - Service - Innovation 9 8/4/2024
Civilian PCS Claims Paid On or After Oct 30, 2018 Income tax withheld from direct reimbursements per TCJA Taxes withheld at these rates: 22% Federal Income Tax Withholding (FITW) 6.2% Social Security 1.45% Medicare Payments of moving expenses to third party vendors Currently working a secondary system change to properly withhold taxes from third party vendor payments May result in a tax debt to the traveler Process for temp storage tax withholding is already in place and will not result in additional debt Integrity - Service - Innovation 8/4/2024 10
2018 Civilian PCS Debts Official debt letters mailed Feb 2019 Separate debt letters issued (Avg debt for both is $250): Civ PCS direct reimbursement claims paid Jan 1 Oct 29, 2018 Temp storage for third party vendor storage payments Relocation Income Tax Allowance (RITA) claim Traveler may file in 2019 to recoup substantially all Federal and State tax burden associated with their relocation Traveler can file RITA prior to paying direct reimbursement debt Debt notification packages will include: Notification of overpayment Payment Options Payment in full within 30 days without fees Voluntary Repayment Agreements Supporting documentation available upon request Integrity - Service - Innovation 8/4/2024 11
Third Party Payments The IRS treats payments made to a third party vendors on behalf of an employee as taxable income Additional system change required and may result in corrected W-2 and tax debts to the traveler Temporary Storage (current process): DFAS remits tax withholding to the IRS on the traveler s behalf this transaction results in a debt the traveler owes to DFAS TCJA amended timeframe to begin at day 1 versus day 31 Temp storage debt letters properly reflect withholdings starting at day 1 Recommend traveler file 2018 tax return by IRS filing deadline Corrected W-2s for additional third party payments issued later in 2019 Traveler will file amended tax return and supplemental RITA claim Note: This process applies ONLY to the customers that DFAS services for Civilian PCS. Integrity - Service - Innovation 8/4/2024 12
Relocation Income Tax Allowance (RITA) Travelers can submit a RITA claim after filing income tax return for the year the PCS reimbursement was received RITA Tools: Instructions: https://www.dfas.mil/civilianemployees/civrelo/relocationincometax.html eTutorial: https://www.youtube.com/playlist?list=PLhx_8nsfXqVj-Pf34sZ8pPVe4MOuxXN5- RITA is designed to reimburse most of the federal and state income tax paid as a result of the PCS move Travelers not eligible for RITA (also not eligible for WTA): New appointee Assigned under the Government Training Act Returning from an overseas assignment for the purpose of separation from Government service Integrity - Service - Innovation 8/4/2024 13
Withholding Tax Allowance (WTA) WTA acts as an advance on the RITA and is deducted from any RITA reimbursement computed in the following year WTA is computed on the Federal income tax withholding only; it does not cover state, local, Social security, and Medicare taxes WTA is computed at 22% WTA is elected by filling out the WTA employee agreement form and submitting with PCS claims If WTA is elected traveler MUST file a RITA claim within the first 120 days of the following calendar year Once WTA is elected, it applies to all future taxable reimbursements Travelers cannot select specific entitlements to apply WTA (i.e. TQSE with WTA and MEA without WTA) RITA computation results in a WTA Debt When the taxable income after deductions results in a Federal tax rate of LESS THAN 22%, a WTA debt will occur in the RITA computation As an example, if the employee is in the 12% Federal tax bracket, then WTA (paid at 22%) was overpaid and the employee would owe a debt Integrity - Service - Innovation 8/4/2024 14
Sample Civilian PCS Travel Claim Examples Integrity - Service - Innovation 8/4/2024 15
Civ PCS Sample Claim #1 Example Purposes Only CONUS to OCONUS Assumptions PCS Reimbursements Employee Per Diem Employee Transportation (IBA airfare) Employee Reimbursables (Taxi) Dependent Per Diem Dependent Transportation Miscellaneous Expense Allowance Total PCS Reimbursements FITW (22%) FICA (6.2%) Medicare (1.45%) Total Taxes on PCS Reimbursements $ $ $ $ $ $ $ $ $ $ $ 166.50 471.37 71.40 124.88 471.37 1,300.00 2,605.52 573.21 161.54 37.78 772.54 Origin Virginia Destination Germany PCS Entitlements GS14 with 1 dependent Married, filing jointly Wage income $114,500 Withholdings Remitted to IRS Travel Claim Reimbursement Amount Reimbursed to Employee $ 1,832.98 Third Party Reimbursements HHG Storage (3rd Party Vendor) HHG Shipment (3rd Party Vendor) Total Third Party Reimbursements FITW (22%) FICA (6.2%) Medicare (1.45%) Total Taxes on Third Party Reimbursements $ $ $ $ $ $ $ 800.00 8,500.00 9,300.00 2,046.00 576.60 134.85 2,757.45 Withholdings Remitted to IRS RITA (Filed Year After Reimbursements Paid) RITA Calculation FITW (22%) FICA (6.2%) Medicare (1.45%) RITA Amount Paid to Traveler $ $ $ $ $ 4,289.00 943.58 265.92 62.19 3,017.31 RITA Claim Reimbursement -- Based on 2018 per diem rates. -- These examples are provided for demonstrative purposes only and may not reflect the traveler s individual tax situation. Integrity - Service - Innovation 8/4/2024 16
Civ PCS Sample Claim #2 Example Purposes Only Assumptions CONUS to CONUS w/WTA PCS Reimbursements Employee Per Diem Employee MALT Dependent Per Diem TQSE Miscellaneous Expense Allowance (Family Rate) Real Estate Sale WTA (28.205128205%) Total PCS Reimbursements FITW (22%) FICA (6.2%) Medicare (1.45%) Total Taxes on PCS Reimbursements Origin Ohio $ $ $ $ $ $ $ $ $ $ $ $ 38.25 108.54 47.81 5,514.00 1,300.00 22,766.00 8,397.96 38,172.56 8,397.96 2,366.70 553.50 11,318.16 Destination - Georgia GS12 with 2 dependents PCS Entitlements Married, filing jointly Wage income $77,058 Taxable income added to W-2 Withholdings Remitted to IRS Travel Claim Reimbursement Amount Reimbursed to Employee $ 26,854.40 RITA (Filed Year After Reimbursements Paid) RITA Calculation FITW (22%) FICA (6.2%) Medicare (1.45%) RITA Amount Paid to Traveler $ $ $ $ $ 2,437.00 536.14 151.09 35.34 1,714.43 RITA Claim Reimbursement -- Based on 2018 per diem rates. -- These examples are provided for demonstrative purposes only and may not reflect the traveler s individual tax situation. 8/4/2024 Integrity - Service - Innovation 17
Civ PCS Sample Claim #3 Example Purposes Only CONUS to CONUS by POV Assumptions PCS Reimbursements Employee Househunting Per Diem Employee Househunting Transportation Employee Househunting Reimbursables (lodging taxes, tolls) Spouse Househunting Per Diem Member/Employee PCS Per Diem Member/Employee MALT Dependent Per Diem Miscellaneous Expense Allowance (Family Rate) TQSE Purchase Home Selling Home Total PCS Reimbursements FITW (22%) FICA (6.2%) Medicare (1.45%) Total Taxes on PCS Reimbursements $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ 745.50 244.98 119.34 559.13 76.50 122.40 114.76 1,300.00 6,487.50 1,310.50 9,850.50 20,931.11 4,604.84 1,297.73 303.50 6,206.07 Origin New York Destination Indianapolis GS11 with 2 dependents PCS Entitlements Married, filing jointly Wage income $61,674 Taxable income added to W-2 Withholdings Remitted to IRS Travel Claim Reimbursement Amount Reimbursed to Employee $ 14,725.04 RITA (Filed Year After Reimbursements Paid) RITA Calculation FITW (22%) FICA (6.2%) Medicare (1.45%) RITA Amount Paid to Traveler $ $ $ $ $ 6,799.00 1,495.78 421.54 98.59 4,783.10 RITA Claim Reimbursement -- Based on 2018 per diem rates. -- These examples are provided for demonstrative purposes only and may not reflect the traveler s individual tax situation. 8/4/2024 Integrity - Service - Innovation 18
Civ PCS Sample Claim #4 Example Purposes Only Assumptions CONUS to CONUS by POV PCS Reimbursements Member/Employee PCS Per Diem Membe/Employee Reimbursables (lodging taxes) Member/Employee MALT Household Goods Shipment (personally procured) Miscellaneous Expenses (Family Rate) TQSE Purchase Home Total PCS Reimbursements FITW (22%) FICA (6.2%) Medicare (1.45%) Total Taxes on PCS Reimbursements Origin Omaha, NE $ $ $ $ $ $ $ $ $ $ $ $ 309.60 21.58 227.70 11,988.20 1,300.00 4,241.68 636.00 18,724.76 4,119.45 1,160.94 271.51 5,551.89 Destination Ft Huachuca, AZ GS9 with 3 dependents PCS Entitlements Married, filing jointly Wage income $52,229 Taxable income added to W-2 Withholdings Remitted to IRS Travel Claim Reimbursement Amount Reimbursed to Employee $ 13,172.87 RITA (Filed Year After Reimbursements Paid) RITA Calculation FITW (22%) FICA (6.2%) Medicare (1.45%) RITA Amount Paid to Traveler $ $ $ $ $ 3,293.00 724.46 204.17 47.75 2,316.63 RITA Claim Reimbursement -- Based on 2018 per diem rates. -- These examples are provided for demonstrative purposes only and may not reflect the traveler s individual tax situation. Integrity - Service - Innovation 8/4/2024 19
Civ PCS Sample Claim #5 Example Purposes Only CONUS to CONUS w/Airfare & WTA Assumptions PCS Reimbursements Employee Per Diem Employee Transportation (IBA airfare) Employee Reimbursables (POV shipment & taxi ) Dependent Per Diem Dependent Transportation (IBA airfare) TQSE Miscellaneous Expense Allowance (Family Rate) Pick Up Vehicle (mileage reimbursement to VPC) WTA (28.205128205%) Total PCS Reimbursements FITW (22%) FICA (6.2%) Medicare (1.45%) Total Taxes on PCS Reimbursements Origin California $ $ $ $ $ $ $ $ $ $ $ $ $ $ - 300.00 2,002.56 Destination Georgia GS9 with 1 dependent - Married, filing jointly PCS Entitlements 300.00 7,229.13 1,300.00 8.84 3,142.20 14,282.73 3,142.20 885.53 207.10 4,234.83 Wage income $58,451 Taxable income added to W-2 Withholdings Remitted to IRS Travel Claim Reimbursement Amount Reimbursed to Employee $ 10,047.90 RITA (Filed Year After Reimbursements Paid) RITA Calculation FITW (22%) FICA (6.2%) Medicare (1.45%) Amount Traveler Owes DFAS for Overpaid WTA $ (159.00) negative RITA situation $ (159.00) -- Based on 2018 per diem rates. -- These examples are provided for demonstrative purposes only and may not reflect the traveler s individual tax situation. Integrity - Service - Innovation 8/4/2024 20
Resources Civ PCS Web Page: http://www.dfas.mil/TaxLawChange Federal Travel Regulation (FTR): https://www.gsa.gov/cdnstatic/FTR_Amendments_Through_2018- 01.pdf Frequently Asked Questions: https://www.dfas.mil/dfas/civilianemployees/civrelo/Civilian-Moving- Expenses-Tax-Deduction/Frequently-Asked-Questions.html DFAS Customer Care Center: Email: DFAS-CIVREL-Questionsonly@mail.mil Civ PCS Phone Options: 888-332-7366 option: 1; 1 Civilian Relocation Questions: https://www.dfas.mil/AskDFAS.html Integrity - Service - Innovation 8/4/2024 21
Backup Slides Integrity - Service - Innovation 8/4/2024 22
PCS Order of Events (2018 notional) 1. 2. 3. PCS orders issued in 2018 Claims submitted and paid in 2018 Travel Pay 2018 W-2s were issued in Jan 2019 and include: Direct PCS reimbursements paid in 2018 Third party temporary storage reimbursements paid to vendors in 2018 Debt letters for recoupment of taxes issued in Feb 2019 Travelers file income tax returns using the 2018 W-2 tax statements received from DFAS Travelers begin submitting RITA claims System change to collect taxes on other (non-temporary storage) third party payments scheduled for later in 2019 DFAS will issue corrected W-2s for other (non-temporary storage) third party payments made in 2018 during the latter part of 2019 Travelers will file amended tax return using 2018 W-2C, if applicable 10. Travelers may file supplemental RITA claims with W-2Cs 11. DFAS will issue 2019 W-2s in January 2020 for third party payments made in 2019 4. 5. 6. 7. 8. 9. Integrity - Service - Innovation 8/4/2024 23
PCS Order of Events (2019 notional) 1. PCS orders issued in 2019 Employee should save any receipts for lodging and any expenses of $75 or more during their move Contact the Transportation Office to setup HHG pick-up for shipment Employee should file a WTA selection form with the Travel Office if they want WTA paid on their entitlements Employee should file a DD1351-2 travel claim for any authorized entitlement that is performed during their PCS move SF1199A Direct Deposit form ensure that your banking info is correct with Travel and Payroll Perform HHT (as applicable) Perform en-route travel, TQSE, sell/buy house (examples) DFAS receives HHG info from TRANSCOM In January 2020, traveler receives travel W-2 Traveler files 2019 income tax return If traveler received WTA, must submit RITA claim within first 120 calendar days. Otherwise, the RITA claim can be submitted after filing income taxes. 2. 3. 4. 5. 6. 7. Integrity - Service - Innovation 8/4/2024 24
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