GS employee RITA and how it works

Before 2017, a federal employee's permanent change of station (PCS) benefits were allowances, just like in the military. The government provided the flights and paid to ship one's household goods (HHG) to their new duty station, and those benefits weren't taxed.

The Tax Cuts and Jobs Act, however, changed that. The government still pays for those expenses, but they're no longer treated as allowances -- they're considered taxable income. Ironically, the act that meant to cut taxes ended up raising mine. [Source]

As a recently retired veteran, paying taxes on PCS benefits was a strange concept; as a new GS employee, it was a real kick in the teeth. I remember filing my travel voucher soon after arrival and looking forward to getting reimbursed for the per diem and transportation costs, only to find out that I *owed* over $550. It took some forensics work to figure out how they came to that number, but here's how that worked:

$79.5 per diem money for official travel + $120 reimbursement for the bus tickets to Camp Zama I'd paid for - ($2357.48 for the plane tickets + $79.5 per diem + 120 bus tickets) * (22% federal income tax withholding + 6.2% Social Security + 1.45% Medicare) = -$558.65 the money I owed the government.

The only thing the voucher did was reduce the amount I owed the government to accept a government job overseas.

The taxes I owed for the HHG shipment worked similarly. The government paid $5930.36 to ship my stuff from Hawaii to Japan, and 29.65% of that works out to another $1758.37 I have to pay to the government.

The government allows you several options for repayment. You can contest the debt, pay it all in a lump sum, or pay it by a series of salary offsets. If you choose the lump sum, you can pay by either direct debt, salary deduction, or sending in a check.

If you choose to do the series of salary offsets, you have some ability to set the amount, but if it's less than 15% of what the government considers your "disposable income," you'll have to argue your case.

The default seems to be 15% of your disposable income ($1490.73 for a GS-12 Step 2) taken from each paycheck. For me that would work out to about $223.61 (0.15*1490.73=$223.61) every two weeks. If you fail to respond at all, the government will deduct that amount every pay period until the debt is completely amortized.

At some point, I think someone realized the ridiculousness of this whole situation and created the "Relocation Income Tax Allowance" (RITA) to mitigate things. But of course, this process is also overly complicated.

Once you file your income taxes, you complete the RITA paperwork online. There's no math involved at this stage, and by this point you already have the paperwork you need, but they don't tell you what your RITA payment will be. Rather, you'll just have to wait until the advice of payment comes in the mail. Here's how it worked out for me:

$8487.34 total PCs benefits received - (12% my tax bracket / 88% one minus my tax bracket * (1 - (22% federal income tax withholding + 6.2% Social Security + 1.45% Medicare)) = $814.20 what was deposited in my account.

At this point, you could say that accepting my GS position has -- so far -- cost me $1500 ($559 + $1758 - $814), but the game isn't over yet. When I file my 2021 taxes in 2022, I'll still have to deal with that $255 in withholdings taken from my RITA payment. Because of that, computing some sort of final number can only be done in retrospect, and I'll have to deal with this again when I return to the U.S.

I can't say that the formulas I reverse-engineered applies equally to everyone -- state taxes add another element of complexity to the calculations -- but my hope is that post will help someone who's new to federal service better define the costs and benefits associated with their overseas federal service.