[Federal Register Volume 64, Number 117 (Friday, June 18, 1999)]
[Rules and Regulations]
[Pages 32812-32816]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-15540]
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GENERAL SERVICES ADMINISTRATION
41 CFR Part 301-11
[FTR Interim Rule 7]
RIN 3090-AG99
Federal Travel Regulation; Income Tax Reimbursement Allowance
(ITRA)
AGENCY: Office of Governmentwide Policy, GSA.
ACTION: Interim rule.
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SUMMARY: The General Services Administration (GSA) is amending the
Federal Travel Regulation (FTR) to add authority to implement sections
of the Travel and Transportation Reform Act of 1998, which authorize
Federal agencies to reimburse Federal, State and local income taxes
incurred as a result of long term official travel. It also allows for
the reimbursement of penalty and
[[Page 32813]]
interest payments due to incorrect withholdings by the employee's
agency for tax years 1993 and 1994.
DATES: Effective Date: This interim rule is effective January 1, 1993
and applies to all employees on a long term temporary duty assignment
who incurred income taxes on money received for travel expenses.
Comment Date: Comments must be received by August 17, 1999.
ADDRESSES: Written comments should be sent to Ms. Sharon Kiser,
Regulatory Secretariat (MVR), Office of Governmentwide Policy, General
Services Administration, 1800 F Street, NW, Washington, DC 20405. E-
mail comments may be sent to RIN.3090-AG99@gsa.gov.
FOR FURTHER INFORMATION CONTACT: Jim Harte, Travel Team Leader, Travel
and Transportation Management Policy Division (MTT), telephone 202-501-
0483.
SUPPLEMENTARY INFORMATION:
A. Background
In 1992, the Congress eliminated the travel expense deduction for
travel assignments lasting more than one year, which caused travel
expense reimbursements to become taxable income. On October 19, 1998,
the President signed into law the Travel and Transportation Reform Act
of 1998 (the Act) (Pub. L. 105-264). This interim rule implements the
provisions of the Act authorizing the reimbursement of taxes incurred
due to a temporary duty travel assignment.
B. Executive Order 12866
GSA has determined that this interim rule is not a significant
regulatory action for the purposes of Executive Order 12866 of
September 30, 1993.
C. Regulatory Flexibility Act
This interim rule is not required to be published in the Federal
Register for notice and comment; therefore, the Regulatory Flexibility
Act does not apply.
D. Paperwork Reduction Act
The Paperwork Reduction Act does not apply because the interim rule
does not impose recordkeeping or information collection requirements,
or the collection of information from offerors, contractors, or members
of the public which require the approval of the Office of Management
and Budget under 44 U.S.C. 501 et seq.
E. Small Business Regulatory Enforcement Fairness Act
This interim rule is also exempt from congressional review
prescribed under 5 U.S.C. 801 since it relates solely to agency
management and personnel.
List of Subjects in 41 CFR part 301-11
Government employees, Travel and transportation expenses.
For the reasons set forth in the preamble, 41 CFR part 301-11 is
amended to read as follows:
PART 301-11--PER DIEM EXPENSES
1. The authority citation for part 301-11 is revised to read as
follows:
Authority: 5 U.S.C. 5707.
2. Part 301-11 is amended by adding Subparts E and F to read as
follows:
Subpart E--Income Tax Reimbursement Allowance (ITRA), Tax Years 1993
and 1994
General
Sec.
301-11.501 What is the Income Tax Reimbursement Allowance (ITRA)?
301-11.502 Who is eligible to receive the ITRA?
301-11.503 Are Federal Insurance Contribution Act (FICA) and
Medicare deductions included in any reimbursement under this part?
Employee Responsibilities
301-11.521 Must I file a claim to be reimbursed for the additional
income taxes incurred?
301-11.522 If I was assessed an income tax penalty and/or interest
payment due to incorrect income tax withholdings, are those payments
reimbursable?
301-11.523 What documentation must I submit to substantiate my
claim?
301-11.524 What steps must my agency take to determine my ITRA?
301-11.525 Is the ITRA I receive taxable income?
301-11.526 May I receive a lump sum payment of the additional tax
liability on the covered ITRA in lieu of submitting another claim?
301-11.527 If I elect a lump sum payment, how is the ITRA paid?
301-11.528 If I do not elect lump sum payment is there any
additional reimbursement?
Agency Responsibilities
301-11.531 What documentation must the employee submit to
substantiate a claim?
301-11.532 How should we compute the employee's ITRA?
301-11.533 Are tax penalty and interest payments reimbursable?
301-11.534 What tax tables should we use to calculate the amount of
allowable reimbursement?
301-11.535 How should we calculate the ITRA?
301-11.536 Is the ITRA reimbursement considered to be income to the
employee?
301-11.537 Are income taxes to be withheld from the ITRA?
301-11.538 May we offer a lump sum payment to cover the income tax
liability on the covered ITRA?
301-11.539 If the employee does not elect a lump sum payment, how
is the tax on the ITRA calculated?
301-11.540 How do we handle any excess payment?
General
Sec. 301-11.501 What is the Income Tax Reimbursement Allowance (ITRA)?
The ITRA is an allowance designed to reimburse Federal, State and
local income taxes incurred incident to an extended TDY assignment at
one location.
Sec. 301-11.502 Who is eligible to receive the ITRA?
An employee (and spouse, if filing jointly) who was in a TDY status
for an extended period at one location, and who incurred Federal,
State, or local income taxes on amounts received as reimbursement for
official travel expenses.
Sec. 301-11.503 Are Federal Insurance Contribution Act (FICA) and
Medicare deductions included in any reimbursement under this part?
No. Reimbursement is limited to income taxes.
Employee Responsibilities
Sec. 301-11.521 Must I file a claim to be reimbursed for the
additional income taxes incurred?
Yes. A claim must be submitted in accordance with your agency's
policy.
Sec. 301-11.522 If I was assessed an income tax penalty and/or
interest payment due to incorrect income tax withholdings, are those
payments reimbursable?
Yes, for the total amount of the income tax penalty and/or interest
assessed by the IRS for tax years 1993 and 1994 only.
Sec. 301-11.523 What documentation must I submit to substantiate my
claim?
Your agency will determine what documentation is sufficient. (See
Sec. 301-11.531.)
Sec. 301-11.524 What steps must my agency take to determine my ITRA?
Your agency should:
(a) Determine Federal, State and local marginal tax rates by using
the procedures and the marginal tax tables established for the
relocation income tax allowance in Sec. 302-11.7, Sec. 302-11.8, and
Appendices A, B, C and D to part 302-11 of this title; or
(b) Determine reimbursement as calculated in the illustration shown
in Sec. 301-11.535.
[[Page 32814]]
Sec. 301-11.525 Is the ITRA I receive taxable income?
Yes. The amount received must be reported as taxable income in the
year in which received, but you are eligible to receive an allowance to
cover the taxes assessed on the ITRA under Sec. 301-11.528.
Sec. 301-11.526 May I receive a lump sum payment of the additional tax
liability on the covered ITRA in lieu of submitting another claim?
Yes, if agreed to in writing by your agency and with the
understanding that you will be responsible for any income taxes due
without further reimbursement.
Sec. 301-11.527 If I elect a lump sum payment, how is the ITRA paid?
(a) Reimbursement is as illustrated:
Lump Sum ITRA Tax Paid to Employee
------------------------------------------------------------------------
------------------------------------------------------------------------
ITRA reimbursement for tax year 1993.......................... $14,435
Federal Tax liability on ITRA Reimbursement (@ 28%)........... 4,042
VA State tax liability (@ 5.75%).............................. 830
Local tax liability........................................... 0
---------
Total reimbursement......................................... 19,307
------------------------------------------------------------------------
(b) Reimbursement of the ITRA and the tax on the ITRA is a final
lump sum payment with no further reimbursement. You will be responsible
for any income taxes due on $19,307.
Sec. 301-11.528 If I do not elect lump sum payment is there any
additional reimbursement?
Yes. You are reimbursed for the tax on the tax reimbursement
received. Your agency will calculate the tax on the tax reimbursement
using the formulas developed for the Year 2 reimbursements of the
relocation income tax allowance (see Sec. 302-11.8 of this title).
Agency Responsibilities
Sec. 301-11.531 What documentation must the employee submit to
substantiate a claim?
You must determine what documentation you require to be submitted
with the employee's claim. It can include:
(a) A certified statement as prescribed in Sec. 302-11.10 of this
title or copies of completed Federal, State and local tax return for
the tax year in which the taxes were withheld and paid.
(b) Copies of W-2's and Form 1099's.
(c) Any documentation received from the IRS identifying any
interest or penalty payment (tax years 1993 and 1994 only).
(d) Any other documentation necessary to substantiate the claim.
Sec. 301-11.532 How should we compute the employee's ITRA?
You should follow the procedures prescribed for the relocation
income tax allowance, see Sec. 302-11.7, Sec. 302-11.8 and Appendices
A, B, C, and D to part 302-11 of this title or as illustrated in
Sec. 301-11.535.
Sec. 301-11.533 Are tax penalty and interest payments reimbursable?
Yes, the total amount of any penalty and interest assessed by the
IRS (for tax years 1993 and 1994 only) due to the failure of the
Government to withhold the appropriate income taxes are reimbursable.
Sec. 301-11.534 What tax tables should we use to calculate the amount
of allowable reimbursement?
The tax tables for the year the tax was incurred are to be used.
Sec. 301-11.535 How should we calculate the ITRA?
(a) Use the documents prescribed in Sec. 301-11.531 to calculate
the ITRA as follows:
(1) Determine Federal, State and local marginal tax rates by using
the procedures and the marginal tax tables established for the
relocation income tax allowance in Sec. 302-11.7, Sec. 302-11.8 and
Appendices A, B, C and D to part 302-11 of this title; and
(2) Add any penalty or interest for tax years 1993 or 1994 only to
determine the full ITRA payment; or
(b) As calculated in the following illustration.
Example of calculating an employee's tax return using the
marginal tax rate schedules in Appendix B to part 302-11 of this
title:
For Tax Years 1993 or 1994 (Married Filing Joint Return)
------------------------------------------------------------------------
Original Recalculated
------------------------------------------------------------------------
1. Adjusted Gross Income (w/ travel $75,246 $75,246
reimbursement).........................
2. Subtract travel reimbursement........ .............. (15,482)
3. Subtract personal exemptions and (12,689) (12,689)
itemized or standard deductions........
4. Adjusted taxable Income.............. 62,557 47,075
5. Tax liability on adjusted taxable
income:
a. Federal.......................... 17,516 $7,061*
(28%) (15%)
b. State, VA (5.75% tax bracket).... 3,597 2,707
c. Local: Not applicable............ 0 0
-------------------------------
d. Total............................ 21,113 9,768
6. Difference of total of column 1 minus
total of column 2:
Additional Taxes Incurred due to
travel reimbursement--$11,345
7. Add to the tax difference:
a. Penalty Payment imposed by IRS
tax year 1993--1,500
b. Interest Payment imposed by IRS
tax year 1993--1,500
Total 6 and 7a and b = ITRA--$14,345**
------------------------------------------------------------------------
* Adjusted taxable income places employee in lower tax bracket.
** The ITRA reimbursement is taxable income for the year in which paid
at the appropriate Federal, State and local income tax rates.
Sec. 301-11.536 Is the ITRA reimbursement considered to be income to
the employee?
Yes. The ITRA reimbursement is considered taxable income in the
year paid and is subject to tax withholding as any other income.
Sec. 301-11.537 Are income taxes to be withheld from the ITRA?
Yes, as determined by your internal tax withholding procedures
established for your agency pursuant to IRS procedures.
Sec. 301-11.538 May we offer a lump sum payment to cover the income
tax liability on the covered ITRA?
Yes, if the employee mutually agrees in writing to the lump sum
payment and understands that he/she is responsible
[[Page 32815]]
for any income taxes without further reimbursement. (See the
illustration in Sec. 301-11.527.)
Sec. 301-11.539 If the employee does not elect a lump sum payment, how
is the tax on the ITRA calculated?
The tax on the ITRA reimbursement should be calculated using the
Year 2 formulas developed for the relocation income tax allowance. (See
Sec. 302-11.8.)
Sec. 301-11.540 How do we handle any excess payment?
You must collect any excess payments, which includes issuing
corrected W-2's or 1099's.
Subpart F--Income Tax Reimbursement Allowance (ITRA), Tax Years 1995
and Thereafter
General
Sec.
301-11.601 What is the Income Tax Reimbursement Allowance (ITRA)?
301-11.602 Who is eligible to receive the ITRA?
301-11.603 Are Federal Insurance Contribution Act (FICA) and
Medicare deductions included in any reimbursement under this part?
Employee Responsibilities
301-11.621 Must I file a claim to be reimbursed for the additional
income taxes incurred?
301-11.622 If I was assessed an income tax penalty and/or interest
payment due to incorrect income tax withholdings, are those payments
reimbursable?
301-11.623 What documentation must I submit to substantiate my
claim?
301-11.624 What steps must my agency take to determine my ITRA?
301-11.625 Is the ITRA I receive taxable income?
301-11.626 May I receive a lump sum payment of the additional tax
liability on the covered ITRA in lieu of submitting another claim?
301-11.627 If I elect a lump sum payment, how is the ITRA paid?
301-11.628 If I do not elect lump sum payment is there any
additional reimbursement?
Agency Responsibilities
301-11.631 What documentation must the employee submit to
substantiate a claim?
301-11.632 How should we compute the employee's ITRA?
301-11.633 Are tax penalty and interest payments reimbursable?
301-11.634 What tax tables should we use to calculate the amount of
allowable reimbursement?
301-11.635 How should we calculate the ITRA?
301-11.636 Is the ITRA reimbursement considered to be income to the
employee?
301-11.637 Are income taxes to be withheld from the ITRA?
301-11.638 May we offer a lump sum payment to cover the income tax
liability on the covered ITRA?
301-11.639 If the employee does not elect a lump sum payment, how
is the tax on the ITRA reimbursement calculated?
301-11.640 How do we handle any excess payment?
Subpart F--Income Tax Reimbursement Allowance (ITRA), Tax Years
1995 and Thereafter
General
Sec. 301-11.601 What is the Income Tax Reimbursement Allowance (ITRA)?
The ITRA is an allowance designed to reimburse Federal, State and
local income taxes incurred incident to an extended TDY assignment at
one location.
Sec. 301-11.602 Who is eligible to receive the ITRA?
An employee (and spouse, if filing jointly) who was in a TDY status
for an extended period at one location and who incurred Federal, State,
or local income taxes on amounts received as reimbursement for official
travel expenses.
Sec. 301-11.603 Are Federal Insurance Contribution Act (FICA) and
Medicare deductions included in any reimbursement under this part?
No. Reimbursement is limited to income taxes.
Employee Responsibilities
Sec. 301-11.621 Must I file a claim to be reimbursed for the
additional income taxes incurred?
Yes, a claim must be submitted in accordance with your agency's
policy.
Sec. 301-11.622 If I was assessed an income tax penalty and/or
interest payment due to incorrect income tax withholdings, are those
payments reimbursable?
No. The reimbursement of tax penalty and/or interest payment
assessed by the IRS is limited by law to tax years 1993 and 1994 only.
Sec. 301-11.623 What documentation must I submit to substantiate my
claim?
Your agency will determine what documentation is sufficient. (See
Sec. 301-11.631.)
Sec. 301-11.624 What steps must my agency take to determine my ITRA?
Your agency should:
(a) Determine Federal, State and local marginal tax rates by using
the procedures and the marginal tax tables established for the
relocation income tax allowance in Sec. 302-11.7, Sec. 302-11.8 and
Appendices A, B, C and D to part 302-11 of this title; or
(b) Determine reimbursement as calculated in the illustration shown
in Sec. 301-11.535.
Sec. 301-11.625 Is the ITRA I receive taxable income?
Yes. The amount received must be reported as taxable income in the
year in which received, but you are eligible to receive an allowance to
cover the taxes assessed on the ITRA under Sec. 301-11.628.
Sec. 301-11.626 May I receive a lump sum payment of the additional tax
liability on the covered ITRA in lieu of submitting another claim?
Yes, if agreed to in writing by your agency and with the
understanding that you will be responsible for any income taxes due
without further reimbursement.
Sec. 301-11.627 If I elect a lump sum payment, how is the ITRA paid?
(a) Reimbursement is as illustrated:
Lump Sum ITRA Tax Paid to Employee
------------------------------------------------------------------------
------------------------------------------------------------------------
ITRA reimbursement for tax year 1995.......................... $14,435
Federal Tax liability on ITRA Reimbursement (@ 28%)........... 4,042
VA State tax liability (@ 5.75%).............................. 830
Local tax liability........................................... 0
---------
Total reimbursement......................................... 19,307
------------------------------------------------------------------------
(b) Reimbursement of the ITRA and tax on the ITRA is a final lump
sum payment with no further reimbursement. You will be responsible for
any income taxes due on $19,307.
Sec. 301-11.628 If I do not elect lump sum payment is there any
additional reimbursement?
Yes. You are reimbursed for the tax on the tax reimbursement
received. Your agency will calculate the tax on the tax reimbursement
using the formulas developed for the Year 2 reimbursements of the
relocation income tax allowance (see Sec. 302-11.8 of this title).
Agency Responsibilities
Sec. 301-11.631 What documentation must the employee submit to
substantiate a claim?
You must determine what documentation you require to be submitted
with the employee's claim. It may include:
(a) A certified statement as prescribed in Sec. 302-11.10 of this
title or a copy of the employee's completed Federal, State and local
tax return for the tax year in which the taxes were withheld and paid.
[[Page 32816]]
(b) Copies of W-2's and Form 1099's; and
(c) Any other documentation necessary to substantiate your claim.
Sec. 301-11.632 How should we compute the employee's ITRA?
You should follow the procedures prescribed for the relocation
income tax allowance, see Sec. 302-11.7, Sec. 302-11.8 and Appendices
A, B, C, and D to part 302-11 of this title or as illustrated in
Sec. 301-11.535.
Sec. 301-11.633 Are tax penalty and interest payments reimbursable?
No. The reimbursement of penalty and/or interest payments assessed
by the IRS is limited by law to tax years 1993 and 1994 only.
Sec. 301-11.634 What tax tables should we use to calculate the amount
of allowable reimbursement?
The tax tables for the year the tax was incurred are to be used.
Sec. 301-11.635 How should we calculate the ITRA?
Use the documents prescribed in Sec. 301-11.631 to calculate the
ITRA as follows:
(a) Determine Federal, State and local marginal tax rates by using
the procedures and the marginal tax tables established for the
relocation income tax allowance in Sec. 302-11.7, Sec. 302-11.8 and
Appendices A, B, C and D to part 302-11 of this title, or
(b) As calculated in the following illustration.
Example of calculating an employee's tax return using the
marginal tax rate schedules in Appendix B to part 302-11 of this
title:
For Tax Year 1995 and Thereafter
[Married Filing Joint Return]
------------------------------------------------------------------------
Original Recalculated
------------------------------------------------------------------------
1. Adjusted Gross Income (w/ travel $75,246 $75,246
reimbursement):........................
2. Subtract travel reimbursement:....... .............. (15,482)
3. Subtract personal exemptions and (12,689) (12,689)
itemized or standard deductions........
4. Adjusted taxable income.............. 62,557 47,075
5. Tax liability on adjusted taxable
income:
a. Federal (28%).................... 17,516 *7,061
(15%)
b. State, VA (5.75% tax bracket).... 3,597 2,707
c. Local: Not applicable............ 0 0
-------------------------------
d. Total............................ 21,113 9,768
6. Difference of total of column 1 minus
total of column 2: Additional Taxes
Incurred due to travel reimbursement--
$11,345
Total = ITRA--$11,345**
------------------------------------------------------------------------
*Adjusted taxable income places employee in lower tax bracket.
**The ITRA reimbursement is taxable income for the year in which paid at
the appropriate Federal, State and local income tax rates.
Sec. 301-11.636 Is the ITRA reimbursement considered to be income to
the employee?
Yes. The ITRA reimbursement is considered taxable income in the
year paid and is subject to tax withholding as any other income.
Sec. 301-11.637 Are income taxes to be withheld from the ITRA?
Yes, as determined by your internal tax withholding procedures
established for your agency pursuant to IRS procedures.
Sec. 301-11.638 May we offer a lump sum payment to cover the income
tax liability on the covered ITRA?
Yes, if the employee mutually agrees in writing to the lump sum
payment and understands that he/she is responsible for any income taxes
without further reimbursement. See the illustration in Sec. 301-11.627.
Sec. 301-11.639 If the employee does not elect a lump sum payment, how
is the tax on the ITRA reimbursement calculated?
The tax on the tax reimbursement should be calculated using the
Year 2 formulas developed for the relocation income tax allowance. (See
Sec. 302-11.8.)
Sec. 301-11.640 How do we handle any excess payment?
You must collect any excess payments, which includes issuing
corrected W-2's or 1099's.
Dated: June 10, 1999.
David J. Barram,
Administrator of General Services.
[FR Doc. 99-15540 Filed 6-17-99; 8:45 am]
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