41 C.F.R. § 302-17.53 – RITA calculation methodology and procedures under the one-year process.

(a) Agencies provide allowances to an employee, reimburse the employee for vouchers that are submitted, and pay certain relocation vendors directly, all during the calendar year as described in subpart B of this part. Some of these reimbursements, allowances, and direct payments to vendors are taxable income to the employee, as described in subpart A of this part. The agency computes a WTA and reports the WTA to the IRS as taxes withheld for the employee for each of these taxable reimbursements, allowances, and direct payments to vendors. The agency may make the WTA optional. However, if the agency is using a one-year RITA process, there is no advantage to an employee in choosing not to receive the WTA, because the agency will adjust the WTA payment to the IRS. See paragraph (f)(1) of this section.
(b) The agency establishes a cutoff date after which it will not issue reimbursements or allowances to an employee or make direct payments to relocation vendors for the rest of the calendar year.
(c) If the tax information provided changes after an employee has submitted the initial version, the employee must submit amended tax information no later than the agency's cutoff date.
(d) During the period between the cutoff date and the end of the calendar year, the agency calculates the RITA.
(e) The RITA is itself taxable income. To account for taxes on the RITA, the agency will gross-up the RITA by using a gross-up formula that multiplies the grossed-up CMTR by the total of all covered taxable relocation benefits, and then subtracts the grossed-up WTA from that total. That is:
Equation 1 to Paragraph (e)
Where: C = CMTR. R = Reimbursements, allowances, and direct payments to vendors covered by WTA. Y = Total grossed-up WTA paid during the current year.
(f) The RITA is likely to be different from the sum of the WTA computed and reported during the year, because the WTA is calculated using a flat rate, established by the IRC, while the RITA is calculated using the CMTR. Therefore:
1. (1) If the calculation in paragraph (e) of this section results in a negative value (that is, if the agency's calculation shows that it withheld and reported too much money as WTA), then the agency will send an adjustment to the IRS using Form 941. In this case, the agency does not make a RITA payment.
2. (2) If the calculation in paragraph (e) of this section results in a positive value (that is, if the agency's calculation shows that it did not withhold enough money for the income taxes), then the agency will pay a RITA to the employee before the end of the calendar year and report it to the IRS as part of the income for that year.
(g) Shortly after the end of the calendar year, the agency will provide one or two W-2 Forms. At the agency's discretion, an employee may receive one W-2 that includes all of the taxable relocation expenses, WTA, and RITA (if any), along with their payroll wages, or an employee may receive one W-2 for their payroll wages and a separate one for their taxable relocation expenses, WTA, and RITA.
(h) Employees must use all W-2(s) that they have received to file their tax returns. On those returns, employees must include all taxable relocation expenses shown on their W-2(s) as income, including the WTA and RITA (if any). Employees must also include all WTA as withholding, in addition to the standard withholding from their payroll wages.
(i) If an employee finished their relocation within one calendar year, and the agency paid all of the relocation reimbursements, allowances, and direct payments to vendors in the same calendar year, before the cutoff date, then the employee's tax returns for that calendar year are the end of their relocation tax process. If, on the other hand, the agency reimburses an employee for relocation expenses, or pays allowances or relocation vendors on the employee's behalf, during a second (and possibly a third) calendar year, then the employee and the agency repeat the process in this paragraph (i) for each of those years.