Tax on employee travel now reimbursable

Tax on employee travel now reimbursable

letters@govexec.com

Federal travelers on long-term assignments away from home can now get reimbursed for the income taxes they pay on travel expenses.

The new reimbursement rule is retroactive to January 1993, the General Services Administration said in a June 18 Federal Register announcement.

The new rule affects employees who are stationed away from home on government business for more than one year. A change in tax law in 1992 reduced the income tax deduction for business-related travel expenses from a maximum of two years to a maximum of a year. But last year, Congress passed the Travel and Transportation Reform Act, which authorized the reimbursement of taxes federal employees incur on travel assignments lasting more than one year.

Federal employees' travel expenses can add up over the course of time. When employees get reimbursed for those expenses, the reimbursements become taxable income. Taxes on travel expense reimbursements are automatically withheld from employees' pay checks. Federal employees can now get reimbursed for those income taxes for all travel since Jan. 1, 1993.

Unfortunately for some employees, the IRS did not notify agencies until December 1993 that agencies needed to withhold tax payments from employees' salaries to cover the added taxes. Some employees on extended travel duty ended up with more than $1,000 in additional taxes and penalties. The government owes those employees $4 million, GSA estimates.

GSA's new rule reimburses the penalties those employees incurred as well.

To receive the reimbursements, employees must file claims, along with relevant tax information, at their agencies.