41 C.F.R. § 302-17.24
Each time your agency pays a covered, taxable relocation expense, regardless of whether it is a reimbursement, allowance, or direct payment to a vendor, it is considered "supplemental wages" as defined in 26 CFR 31.3402(g)-1(a) (see also IRS Publication 15, Employer's Tax Guide). You owe taxes on the WTA itself because, like most other relocation allowances, it is taxable income. To reimburse you for the taxes on the WTA itself, your agency computes the WTA by using the grossed-up withholding formula below and the appropriate supplemental wage rate, as specified in IRS Publication 15. This rate, along with examples of how to calculate the WTA, is published in an FTR bulletin available at https://gsa.gov/ftrbulletins. The formula for calculating the WTA is:
WTA = R/(1 - R) * Expense
Where R is the withholding rate for supplemental wages.
41 C.F.R. §302-17.24
Note to § 302-17.24: Your agency must deduct withholding for FICA (Medicare and Social Security), as the WTA does not cover such expenses.