Board of Contract Appeals

                 General Services Administration

                      Washington, D.C. 20405







                                                          



                          June 29, 2005

                                                          





                         GSBCA 16628-RELO





                In the Matter of RANDALL O. PEAUGH





     Randall O. Peaugh, Calendonia, MS, Claimant.



     Shirley Lee Autry, Deputy Director, Finance Center, United States Army Corps of

Engineers, Millington, TN, appearing for Department of the Army.

                                 

PARKER, Board Judge.



     Randall O. Peaugh, an employee of  the United States Army Corps of Engineers who

was transferred in 2002 from Spottsville, Kentucky, to Columbus, Mississippi, has asked the

Board to review the agency's determination that he owes $329.98 in connection with a

relocation income tax allowance.  Mr. Peaugh has provided us with no specific grounds for

challenging the assessment, but states that he does not understand the basis for the charge.



                            Discussion



     Statute and regulation require agencies to pay various relocation benefits and

allowances to employees who are transferred in the interest of the Government from one

permanent duty station to another.  See 5 U.S.C. ch. 57, subch. II (2000); 41 CFR ch. 302

(2002).  These payments are, for the most part, considered taxable income to the recipients. 

We have previously discussed in some detail the provisions of law, 5 U.S.C.   5724b and

41 CFR pt. 302-17, which require agencies to pay these employees additional money to

effectively compensate them for the taxes they incur consequent to their receipt of these

benefits and allowances.  Robert J. Dusek, GSBCA 14325-RELO, 98-1 BCA   29,440

(1997).



     The regulation establishes a two-step process for accomplishing this goal.  In the year

in which the agency pays the employee relocation benefits and allowances (year 1), it also

pays a withholding tax allowance (WTA), which is intended to cover the increase in the

employee's federal income tax withholding liability that results from receipt of the benefits

and allowances.  41 CFR 302-17.5(e), (n), -17.7(a).  The WTA is calculated at a flat rate

based on a marginal tax rate of 28%, regardless of the employee's tax bracket. 

Id. 302-17.7(c).  In the following year (year 2), the agency calculates a relocation income tax

allowance, which makes further adjustments in payment, to reimburse the employee for any

added tax liability that was not reimbursed by payment of the WTA, or to cause the employee

to repay any excessive amount of WTA, based on the employee's actual tax situation for the

year in which the relocation benefits and allowances were received.  Id. 302-17.5(f)(2), (m),

-17.8; Paula M. Stead, GSBCA 16506-RELO, 05-1 BCA   32,874.



     The record shows that Mr. Peaugh received a WTA payment in the amount of $928.29

in 2003 (year 1).  In 2004 (year 2), the agency used tax information provided by Mr. Peaugh

to calculate a relocation income tax allowance based upon Mr. Peaugh's actual tax situation. 

That calculation showed that the actual amount due Mr. Peaugh was $329.98 less than the

amount he received in the WTA.  The agency then billed Mr. Peaugh for the overpayment. 

Because Mr. Peaugh has not provided, nor have we found, any evidence that the relocation

income tax allowance was calculated incorrectly, the claim is denied.









                                   _______________________

                                   ROBERT W. PARKER

                                   Board Judge