When To Deduct Expenses

If you were not reimbursed, deduct your moving expenses either in the year you incurred them or in the year you paid them.

Example.   In December 2001, 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 2001 you paid for moving your furniture. You deducted these expenses in 2001. In January 2002, you paid for travel to the new city. You can deduct these additional expenses in 2002.

Reimbursed expenses.   If you are reimbursed for your expenses, you may be able to deduct your 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:

1. You paid the expenses in a year before the year of reimbursement, or
2. 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.

Example

Tom Smith is married and has two children. He owned his home in Detroit where he worked. On February 8, his employer told him that he would be transferred to San Diego as of April 10 that year. His wife, Peggy, flew to San Diego on March 1 to look for a new home. She put a down payment of $25,000 on a house being built and came back to Detroit on March 4. The Smiths sold their Detroit home for $1,500 less than they paid for it. They contracted to have their personal effects moved to San Diego on April 3. The family drove to San Diego where they found that their new home was not finished. They stayed in a nearby motel until the house was ready on May 1. On April 10, Tom went to work in the San Diego plant where he still works.

His records for the move show:

1)	Peggy's pre-move househunting trip:
	Travel and lodging	$ 449
	Meals	75	$  524
2)	Down payment on San Diego home		25,000
3)	Real estate commission paid on sale of Detroit home		3,500
4)	Loss on sale of Detroit home (not including real estate commission)		1,500
5)	Amount paid for moving personal effects (furniture, other household goods, etc.)		8,000
6)	Expenses of driving to San Diego:
	Mileage (Start 14,278; End 16,478)  2,200 miles at 13 cents a mile	$ 286
	Lodging	180
	Meals	320	786
7)	Cost of temporary living expenses in San Diego:
	Motel rooms	$1,450
	Meals	2,280	3,730
Total			$43,040

Tom was reimbursed $10,665 under an accountable plan as follows:

Moving personal effects	$ 6,800
Travel (and lodging) to San Diego	466
Travel (and lodging) for househunting trip	449
Lodging for temporary quarters	1,450
Loss on sale of home	1,500
Total reimbursement	$10,665

Tom's employer gave him a breakdown of the amount of reimbursement.

The employer included this reimbursement on Tom's Form W-2 for the year. The reimbursement of deductible expenses, $7,266 ($6,800 + $466) for moving household goods and travel to San Diego, was included in box 12 of Form W-2. His employer identified this amount with code P.

The employer included the balance, $3,399 reimbursement of nondeductible expenses, in box 1 of Form W-2 with Tom's other wages. He must include this amount on line 7 of Form 1040. The employer withholds taxes from the $3,399, as discussed under Nondeductible expenses, earlier. Also, Tom's employer could have given him a separate Form W-2 for his moving reimbursement.

Tom figures his deduction for moving expenses as follows:

Item 5, moving personal effects (line 1)	$8,000
Item 6, driving to San Diego ($286 + $180)  (line 2)	466
Total deductible moving expenses (line 3)	$8,466
Minus: Reimbursement included in box 12  of Form W-2 (line 4)	7,266
Deduction for moving expenses (line 5)	$1,200

Tom enters these amounts on Form 3903 to figure his deduction. His Form 3903 and Distance Test Worksheet are shown later. He also enters his deduction, $1,200, on line 28, Form 1040.

Nondeductible expenses.   Of the $43,040 expenses that Tom incurred, the following items cannot be deducted.

• Item 1, pre-move househunting expenses.
• Item 2, the down payment on the San Diego home. If any part of it were for payment of deductible taxes or interest on the mortgage on the house, that part would be deductible as an itemized deduction.
• Item 3, the real estate commission paid on the sale of the Detroit home. The commission is used to figure the gain or loss on the sale.
• Item 4, the loss on the sale of the Detroit home. The Smiths cannot deduct it even though Tom's employer reimbursed him for it.
• Item 6, the meals expenses while driving to San Diego. (However, the lodging and car expenses are deductible.)
• Item 7, temporary living expenses.

Form 3903--Smith

How To Get Tax Help

You can get help with unresolved tax issues, order free publications and forms, ask tax questions, and get more information from the IRS in several ways. By selecting the method that is best for you, you will have quick and easy access to tax help.

Contacting your Taxpayer Advocate.   If you have attempted to deal with an IRS problem unsuccessfully, you should contact your Taxpayer Advocate.

The Taxpayer Advocate represents your interests and concerns within the IRS by protecting your rights and resolving problems that have not been fixed through normal channels. While Taxpayer Advocates cannot change the tax law or make a technical tax decision, they can clear up problems that resulted from previous contacts and ensure that your case is given a complete and impartial review.

To contact your Taxpayer Advocate:

• Call the Taxpayer Advocate at
  1-877-777-4778.
• Call, write, or fax the Taxpayer Advocate office in your area.
• Call 1-800-829-4059 if you are a
  TTY/TDD user.

For more information, see Publication 1546, The Taxpayer Advocate Service of the IRS.

Free tax services.   To find out what services are available, get Publication 910, Guide to Free Tax Services. It contains a list of free tax publications and an index of tax topics. It also describes other free tax information services, including tax education and assistance programs and a list of TeleTax topics.

Personal computer. With your personal computer and modem, you can access the IRS on the Internet at www.irs.gov. While visiting our web site, you can:

• See answers to frequently asked tax questions or request help by e-mail.
• Download forms and publications or search for forms and publications by topic or keyword.
• Order IRS products on-line.
• View forms that may be filled in electronically, print the completed form, and then save the form for recordkeeping.
• View Internal Revenue Bulletins published in the last few years.
• Search regulations and the Internal Revenue Code.
• Receive our electronic newsletters on hot tax issues and news.
• Learn about the benefits of filing electronically (IRS e-file).
• Get information on starting and operating a small business.

You can also reach us with your computer using File Transfer Protocol at ftp.irs.gov.

TaxFax Service. Using the phone attached to your fax machine, you can receive forms and instructions by calling 703-368-9694. Follow the directions from the prompts. When you order forms, enter the catalog number for the form you need. The items you request will be faxed to you.

For help with transmission problems, call the FedWorld Help Desk at 703-487-4608.

Phone. Many services are available by phone.

• Ordering forms, instructions, and publications. Call 1-800-829-3676 to order current and prior year forms, instructions, and publications.
• Asking tax questions. Call the IRS with your tax questions at 1-800-829-1040.
• Solving problems. Take advantage of Everyday Tax Solutions service by calling your local IRS office to set up an in-person appointment at your convenience. Check your local directory assistance or www.irs.gov for the numbers.
• TTY/TDD equipment. If you have access to TTY/TDD equipment, call 1-800-829- 4059 to ask tax questions or to order forms and publications.
• TeleTax topics. Call 1-800-829-4477 to listen to pre-recorded messages covering various tax topics.

Evaluating the quality of our telephone services. To ensure that IRS representatives give accurate, courteous, and professional answers, we use several methods to evaluate the quality of our telephone services. One method is for a second IRS representative to sometimes listen in on or record telephone calls. Another is to ask some callers to complete a short survey at the end of the call.

Walk-in. Many products and services are available on a walk-in basis.

• Products. You can walk in to many post offices, libraries, and IRS offices to pick up certain forms, instructions, and publications. Some IRS offices, libraries, grocery stores, copy centers, city and county governments, credit unions, and office supply stores have an extensive collection of products available to print from a CD-ROM or photocopy from reproducible proofs. Also, some IRS offices and libraries have the Internal Revenue Code, regulations, Internal Revenue Bulletins, and Cumulative Bulletins available for research purposes.
• Services. You can walk in to your local IRS office to ask tax questions or get help with a tax problem. Now you can set up an appointment by calling your local IRS office number and, at the prompt, leaving a message requesting Everyday Tax Solutions help. A representative will call you back within 2 business days to schedule an in-person appointment at your convenience.

Mail. You can send your order for forms, instructions, and publications to the Distribution Center nearest to you and receive a response within 10 workdays after your request is received. Find the address that applies to your part of the country.

• Western part of U.S.:
  Western Area Distribution Center
  Rancho Cordova, CA 95743-0001
• Central part of U.S.:
  Central Area Distribution Center
  P.O. Box 8903
  Bloomington, IL 61702-8903
• Eastern part of U.S. and foreign addresses:
  Eastern Area Distribution Center
  P.O. Box 85074
  Richmond, VA 23261-5074

CD-ROM for tax products. You can order IRS Publication 1796, Federal Tax Products on CD-ROM, and obtain:

• Current tax forms, instructions, and publications.
• Prior-year tax forms and instructions.
• Popular tax forms that may be filled in electronically, printed out for submission, and saved for recordkeeping.
• Internal Revenue Bulletins.

The CD-ROM can be purchased from National Technical Information Service (NTIS) by calling 1-877-233-6767 or on the Internet at http://www.irs.gov/cdorders. The first release is available in early January and the final release is available in late February.

CD-ROM for small businesses. IRS Publication 3207, Small Business Resource Guide, is a must for every small business owner or any taxpayer about to start a business. This handy, interactive CD contains all the business tax forms, instructions and publications needed to successfully manage a business. In addition, the CD provides an abundance of other helpful information, such as how to prepare a business plan, finding financing for your business, and much more. The design of the CD makes finding information easy and quick and incorporates file formats and browsers that can be run on virtually any desktop or laptop computer.

It is available in March. You can get a free copy by calling 1-800-829-3676 or by visiting the website at www.irs.gov/smallbiz.

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