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I moved from Pittsburgh, PA to San Jose, CA for a new job. My new company paid me $7500 after tax (13,340 before tax). This amount is included in box 1 of my W-2 which I think means it is classified as part of my compensation. Can I claim moving expenses while filing taxes? (Note: Mine is a qualified move of more than 50 miles and I have lived more than 39 weeks at the new place/job as required by IRS.)

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Bottom Line Up front: Yes you should be able to claim at least some of your moving expenses on IRS form 3903.

In general if they pay you exactly for all your allowable expenses, and if you meet the other IRS tests, the money is tax free because it exactly balances with your expenses. That type of plan would be called an accountable plan in IRS Pub 521:

To be an accountable plan, your employer's reimbursement arrangement must require you to meet all three of the following rules.

  • Your expenses must have a business connection — that is, you must have paid or incurred deductible expenses while performing services as an employee of your employer. Two examples of this are 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.

  • 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.

If it was an accountable plan:

If for all reimbursements you meet the three rules for an accountable plan (listed earlier), your employer shouldn't include any reimbursements of expenses in your income in box 1 of your Form W-2, Wage and Tax Statement. Instead, your employer should include the reimbursements in box 12 of your Form W-2 with code P

It appears that you employer has an nonaccountable plan:

A nonaccountable plan is a reimbursement arrangement that doesn't 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.

  • Reimbursements of nondeductible expenses. See Reimbursement of nondeductible expenses, earlier.

In your case is appears they gave a you a set amount. So that money they gave you is income. The good news is that any of your expenses are allowable by the IRS as referenced in Pub 521 can be deducted.

They even have a table (Table 2) showing you how to report your expenses based on which box on the W-2 has the moving expenses. For someone with moving expenses whose reimbursement was included in W-2 Box 1, the table says:

file Form 3903 showing all allowable expenses, but don't show any reimbursements.

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