The Foreign Service Journal, January-February 2023

THE FOREIGN SERVICE JOURNAL | JANUARY-FEBRUARY 2023 65 announcement 2021-7). Additionally, the CARES Act perma- nently expanded the definition of qualifying medical expenses to include feminine hygiene products and over-the-counter medications purchased after Dec. 31, 2019. This expanded definition allows taxpayers to withdraw funds from HSAs or FSAs (such as the HCFSA) to pay for these expenses. The IRS also announced that the cost of COVID-19 home testing is an eligible medical expense and may be paid or reimbursed from HSAs or FSAs. AFSA recommends Publication 969, the Form 8889 instructions, and the FSA Feds website. Deductions for Moving for a New Job & Retiring from Overseas Are No Longer Available The personal costs incurred to move to a new job (IRC Sec. 217(j)) and for moving back to the United States after retir- ing from overseas are not deductible following amendments included in the 2017 Tax Cuts and Jobs Act (TCJA). Only active-duty members of the armed forces should use Form 3903 to calculate and deduct their moving expenses from their military moves. Visit the IRS web page “Moving Expenses to and from the United States,” read Publication 521, and contact a professional to discuss future planning opportuni- ties on these issues for 2026—the tax year many provisions of the TCJA sunset. Official Relocation Under the Foreign Service Act Is Not Taxed (PCS, R&R, Medevac) All travel authorized under Section 901 of the Foreign Service Act—which includes permanent change of station (PCS), representational travel, R&R, emergency visitation travel, and medevac—is exempt from taxation per IRC Sec. 912. Charles- ton General Financial Services secured advice from the IRS to this effect, which is consistent with IRS guidance issued in April 2018. None of these reimbursements appear on a W-2 for State Department employees. Non–State Department employees and anyone who doubts they are traveling under the Foreign Service Act should contact a professional to determine what relocation expenses may be taxable. Personally Incurred Expenses for Home Leave and R&R Personal expenses paid by a direct-hire employee while on R&R are not tax deductible. Prior to the 2017 TCJA, lodging, food, and transportation expenses paid by the employee on official home leave were deductible on Schedule A as unreimbursed employee business expenses. The TCJA eliminated the tax deduction for most unreimbursed employee business expenses, so these expenses cannot be deducted until 2026 (filed April 2027). The Schedule A line 16 “other itemized deductions” section is not appropriate for deducting these expenses. Representational & Official Residence Expenses Certain Foreign Service employees receive a nontaxable allowance for representation expenses. If the actual expenses exceed the allowance, the excess expenses are not deductible under current tax law. Further, other Foreign Service employ- ees incurring expenses related to their job may not deduct such expenses. Alimony for Divorces, Settlements, and Modifications Alimony paid pursuant to agreements and orders entered into before Jan. 1, 2019, is deductible by the payer and taxed as income to the payee. Alimony payments paid pursuant to divorce or separation instruments entered into or modified after Dec. 31, 2018, are not deductible by the payer or taxed as income to the payee. Any modifications after Dec. 31, 2018, to agreements finalized before Jan. 1, 2019, must explicitly state that the repeal of the alimony and maintenance rules will apply to the modification, otherwise the pre-2019 rules apply. Taxpayers should read Form 1040 Schedule 1, the Form 1040 Instructions, and Tax Topic 452. Note TCJA generally repealed IRC Section 71 and 26 CFR 1.71-1 for agreements entered into after Dec. 31, 2018. Required Minimum Distributions (RMD) from Inherited IRAs and Retirement Accounts For inherited traditional IRAs and retirement plan accounts (Account) where the Account owner dies after Dec. 31, 2019, the 2019 SECURE Act changed some rules for RMDs and distinguished between an eligible designated beneficiary (EDB) and other beneficiaries (non-EDBs). EDBs include the surviving spouse, a disabled individual, a chronically ill individual, a minor child until age 21, or an individual not more than 10 years younger than the Account owner. Generally, an EDB may take distributions over the EDB’s life expectancy. However, non-EDBs must withdraw the entire Account by the 10th calendar year following the year of the Account owner’s post-2019 death. Proposed regulations issued in February 2022 attempted to clarify that non-EDBs who inherit the Account before the deceased owner’s required beginning date (RBD) of distributions must withdraw the entire Account before the end of the 10th calendar year following the owner’s death. If the Account owner died on or after their RBD, the proposed regulations further state that non-EBDs must take annual RMDs (based on the non-EDBs lifespan) for years 1-9 and receive the remaining balance in the 10th calendar year. Prior to these proposed regulations, non-EDBs who inherited Accounts in 2020 reasonably expected they could wait until the end of the 10-year period to withdraw the entire Account. Due to the confusion caused by the non-EDB withdrawal rules