HomeCivilianEmployeesCivilian Permanent Change of Station (PCS)Civilian PCS Entitlement GuideWithholding Tax Allowance

Withholding Tax Allowance

 

The purpose of the Withholding Tax Allowance (WTA) is to protect you from having to use part of your relocation expense reimbursements to pay Federal income tax withholding; it does not cover state, local, Social Security/FICA, or Medicare taxes.

The WTA is treated as an advance against the Relocation Income Tax Allowance (RITA) and is deducted from any RITA computed in the following year. If you elect WTA, it will be reimbursed on each claim that has taxable allowances from the time of election. WTA is not applied retroactively.  Remember, WTA itself is taxable.  

If WTA is elected, you must file a RITA claim within 120 days of the following calendar year. Failure to file a timely RITA claim will result in a debt and collection of the entire amount of WTA paid on your behalf.

WTA is calculated using the current prescribed withholding tax rate of 22 percent, plus a grossed-up formula in order to reimburse the taxes incurred on the WTA payment itself.

If you anticipate that your marginal Federal tax rate will be 22 percent or greater for the calendar year in which you receive your relocation reimbursements, then you may want to elect to receive WTA. If you elect WTA, it will be computed using a rate of 28.205 percent.

If you anticipate your marginal Federal tax rate will be less than 22 percent, then you should decline WTA to avoid overpayment and a Negative RITA debt (DUE US) when your RITA is computed.

Example:

Allowance computed without WTA:

$1,000.00 
-  $220.00 FWTR (22%)
-    $14.50 Medicare (1.45%)
-    $62.00 FICA (6.20%)
   $703.50 amount due to traveler

Allowance computed with WTA at 28.20%

    $1,000.00
   +  $282.00 WTA (28.20%)
    $1,282.00
      -$282.04 FWT (22%)
       - $18.59 Medicare (1.45%)
       - $79.48 FICA (6.20%)
       $901.89 amount due traveler


WTA Election

The WTA Employee Agreement form is completed and submitted with the PCS entitlement claims.  Once WTA is elected, it applies to all future reimbursements under the same travel order.

Questions? Link here to Federal Travel Regulations, Part 302-17

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Page Updated June 16, 2020