Publication 521 |
2001 Tax Year |
How To Report
The following discussions explain how to report your moving
expenses and any reimbursements or allowances you received for your
move.
Use Form 3903 to report your moving expenses. Use a
separate Form 3903 for each qualified move.
You do not have to complete Form 3903 if all of the following
apply.
- You moved in an earlier year.
- You are claiming only storage fees while you are away from
the United States.
- Any amount your employer paid for the storage fees is
included as wages in box 1 of your Form W-2.
Instead, enter the storage fees (after the reduction for the
part that is allocable to excluded income) on line 26, Form 1040, and
write "Storage" next to the amount.
Where to deduct.
Deduct your moving expenses on line 26 of Form 1040. The amount of
moving expenses you can deduct is shown on line 5 of Form 3903.
You cannot deduct moving expenses on Form 1040EZ or Form 1040A.
Reimbursements
This section explains what to do when you receive a reimbursement
(including advances and allowances) for any of your moving expenses
discussed in this publication.
If you received a reimbursement for your allowable moving expenses,
how you report this amount and your expenses depends on whether the
reimbursement was paid to you under an accountable plan or a
nonaccountable plan. These plans are discussed later. For a quick
overview of how to report the reimbursement, see Table 2.
Table 2. Reporting Employee Moving Expenses and Reimbursements
Your employer should tell you what method of reimbursement is used
and what records they require.
Employers.
If you are an employer and you reimburse employee moving expenses,
how you treat this reimbursement on your employee's Form W-2
depends in part on whether you have an accountable plan.
Reimbursements treated as paid under an accountable plan are reported
in box 13 with code P. For more information, see
Publication 535,
Business Expenses.
Reimbursements treated as paid under nonaccountable plans, as
explained later, are reported as pay. See Publication 15,
Circular E, Employer's Tax Guide, for information on
employee pay.
Accountable plans.
To be an accountable plan, your employer's reimbursement
arrangement must require you to meet all three of the following rules.
- Your expenses must be of the type for which a deduction
would be allowed had you paid them yourself. The reasonable expenses
of moving your possessions from your former home to your new home, and
traveling from your former home to your new home are two
examples.
- You must adequately account to your employer for these
expenses within a reasonable period of time.
- You must return any excess reimbursement or allowance within
a reasonable period of time.
An excess reimbursement
includes any amount you are
paid or allowed that is more than the moving expenses that you
adequately accounted for to your employer. See Returning excess
reimbursements, later, for information on how to handle these
excess amounts.
Adequate accounting.
You adequately account by giving your employer documentary evidence
of your moving expenses, along with a statement of expense, an account
book, a diary, or a similar record in which you entered each expense
at or near the time you had it. Documentary evidence includes
receipts, canceled checks, and bills.
Returning excess reimbursements.
You must be required to return any excess reimbursement for your
moving expenses to the person paying the reimbursement. Excess
reimbursement includes any amount for which you did not adequately
account within a reasonable period of time. For example, if you
received an advance and you did not spend all the money on deductible
moving expenses, or you do not have proof of all your expenses, you
have an excess reimbursement.
Reasonable period of time.
What constitutes a "reasonable period of time" depends on the
facts and circumstances of your situation. However, regardless of the
facts and circumstances of your situation, actions that take place
within the time specified in the following list will be treated as
taking place within a reasonable period of time.
- You receive an advance within 30 days of the time you have
an expense.
- You adequately account for your expenses within 60 days
after they were paid or incurred.
- You return any excess reimbursement within 120 days after
the expense was paid or incurred.
- You are given a periodic statement (at least quarterly) that
asks you to either return or adequately account for outstanding
advances and you comply within 120 days of the statement.
Employee meets accountable plan rules.
If for all reimbursements you meet the three rules for an
accountable plan, your employer should not include any reimbursements
of allowable expenses in your income in box 1 of your Form W-2.
Instead, your employer should include the reimbursements in box 13 of
your Form W-2.
Example.
You lived in Boston and accepted a job in Atlanta. Under an
accountable plan, your employer reimbursed you for your actual
traveling expenses from Boston to Atlanta and the cost of moving your
furniture to Atlanta.
Your employer will include the reimbursement in box 13 of your Form
W-2. If your allowable expenses are more than your
reimbursement, show all of your expenses on lines 1 and 2 of Form
3903. Include the reimbursement on line 4 of Form 3903.
Employee does not meet accountable plan rules.
You may be reimbursed by your employer, but for part of your
expenses you may not meet all three rules.
If your deductible expenses are reimbursed under an otherwise
accountable plan but you do not return, within a reasonable period,
any reimbursement of expenses for which you did not adequately
account, then only the amount for which you did adequately account is
considered as paid under an accountable plan. The remaining expenses
are treated as having been reimbursed under a nonaccountable plan
(discussed later).
Reimbursement of nondeductible expenses.
You may be reimbursed by your employer for moving expenses, some of
which are deductible expenses and some of which are not deductible.
The reimbursements received for the nondeductible expenses are treated
as paid under a nonaccountable plan.
Nonaccountable plans.
A nonaccountable plan is a reimbursement arrangement that does not
meet the three rules listed earlier under Accountable plans.
In addition, the following payments will be treated as paid under a
nonaccountable plan:
- Excess reimbursements you fail to return to your employer,
and
- Reimbursements of nondeductible expenses. See
Reimbursement of nondeductible expenses, earlier.
If an arrangement pays for your moving expenses by reducing
your wages, salary, or other pay, the amount of the reduction will be
treated as a payment made under a nonaccountable plan. This is because
you are entitled to receive the full amount of your pay regardless of
whether you had any moving expenses.
If you are not sure if the moving expense reimbursement arrangement
is an accountable or nonaccountable plan, ask your employer.
Your employer will combine the amount of any reimbursement paid to
you under a nonaccountable plan with your wages, salary, or other pay.
Your employer will report the total in box 1 of your Form W-2.
Example.
To get you to work in another city, your new employer reimburses
you under an accountable plan for the $7,500 loss on the sale of your
home. Since this is a reimbursement of a nondeductible expense, it is
treated as paid under a nonaccountable plan and must be included as
pay on your Form W-2.
Completing Form 3903.
Complete the Distance Test Worksheet in the instructions
for Form 3903 to see whether you meet the distance test. If so,
complete lines 1-3 using your actual expenses (except, if you
use your own car, you can figure expenses based on a mileage rate of
12 cents a mile, instead of on actual amounts for gas and oil). Enter
on line 4 the total amount of your moving expense reimbursement that
was excluded from your wages. This excluded amount should be
identified with code P in box 13 of Form W-2.
If line 3 is more than line 4, subtract line 4 from line 3 and
enter the result on line 5 and on Form 1040, line 26. This is your
moving expense deduction. If line 3 is equal to or less than line 4,
enter zero on line 5 (you have no moving expense deduction). Subtract
line 3 from line 4 and, if the result is more than zero, include it on
Form 1040, line 7.
Uniform Relocation Assistance and Real Property Acquisition
Policies Act of 1970.
Do not include in income any moving expense payment you received
under the Uniform Relocation Assistance and Real Property Acquisition
Policies Act of 1970. These payments are made to persons displaced
from their homes, businesses, or farms by federal projects.
When To Deduct Expenses
If you were not reimbursed, deduct your allowable moving expenses
either in the year you incurred them or in the year you paid them.
Example.
In December 2000, your employer transferred you to another city in
the United States, where you still work. You are single and were not
reimbursed for your moving expenses. In 2000 you paid for moving your
furniture. You deducted these expenses in 2000. In January 2001, you
paid for travel to the new city. You can deduct these additional
expenses in 2001.
Reimbursed expenses.
If you are reimbursed for your expenses, you may be able to deduct
your allowable expenses either in the year you incurred them or in the
year you paid them. If you use the cash method of accounting, you can
choose to deduct the expenses in the year you are reimbursed even
though you paid the expenses in a different year. See Choosing
when to deduct, later.
If you are reimbursed for your expenses in a year after you paid
the expenses, you may want to delay taking the deduction until the
year you receive the reimbursement. If you do not choose to delay your
deduction until the year you are reimbursed, you must include the
reimbursement in your income.
Choosing when to deduct.
If you use the cash method of accounting, which is used by most
individuals, you can choose to deduct moving expenses in the year your
employer reimburses you if:
- You paid the expenses in a year before the year of
reimbursement, or
- You paid the expenses in the year immediately after the year
of reimbursement but by the due date, including extensions, for filing
your return for the reimbursement year.
How to make the choice.
You can choose to deduct moving expenses in the year you received
reimbursement by taking the deduction on your return, or amended
return, for that year.
You cannot deduct any moving expenses for which you received a
reimbursement that was not included in your income.
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