How would IRS treat reimbursement in a later year of moving expenses?

Question

In the U.S., if one claims a moving expense using Form 3903 in one year because one is unsure whether a startup business will be able to even reimburse you for those expenses, but in a subsequent year, the startup business is ultimately able to reimburse you for those moving expenses, how would this be reflected in your taxes? Would you take the subsequent reimbursement as income, if so, where would it be reported on the subsequent year tax return? Alternatively, would you go back and amend the previous year tax return to not take the moving expense and pay interest and penalties on the extra tax now due for that year?

Answer 1

IRS pub 521 has all the information you need.

Expenses reimbursed. If you are reimbursed for your expenses and you use the cash method of accounting, you can deduct your expenses either in the year you paid them or in the year you received the reimbursement. 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, next. If you deduct your expenses and you receive the reimbursement in a later year, you must include the reimbursement in your income on Form 1040, line 21

This is not unusual. Anybody who moves near the end of the year can have this problem. The 39 week time test also can be an issue that span over 2 tax years.

I would take the deduction for the expenses as soon a I could, and then count the income in the later year if they pay me back. IF they do so before April 15th, then I would put them on the same tax form to make things easier.

Answer 2

I believe moving reimbursement has to be counted as income no matter when you get it. I'd just put it under miscellaneous income with an explanation.