Tag Archive for IRS Pub 521
According to IRS Publication 3, Armed Forces Tax Guide if you are a member of the Armed Forces on active duty and you move because of a permanent change of station, you do not have to meet the distance and time tests, addressed in IRS Publication 521, Moving Expenses. You deduct moving expenses that were not reimbursed. A permanent change of station includes:
A move from your home to your first post of active duty,
A move from one permanent post of duty to another, and
A move from your last post of duty to your home or to a nearer point in the United States. The move must occur within one year of ending your active duty or within the period allowed under the Joint Travel Regulations.
If the military moves you, your spouse, and dependents, to or from separate locations, the moves are treated as a single move to your new main job location. Also do not include in income the value of moving and storage services provided by the government because of a permanent change of station.
In general, if the total reimbursements or allowances you receive from the government because of the move are more than your actual moving expenses, the government must include the excess in your wages on Form W-2.
However, the excess portion of a dislocation allowance, a temporary lodging allowance, a temporary lodging expense, or a move-in housing allowance is not included in income and should not be included in box 1 of Form W-2.
If your reimbursements or allowances are less than your actual moving expenses, do not include the reimbursements or allowances in income, instead deduct the expenses that are more than your reimbursements using IRS Form 3903, Moving Expenses by taking the following steps.
Complete lines 1 through 3 of the form, using your actual expenses. Do not include any expenses for moving services provided by the government. Also, do not include any expenses that were reimbursed by an allowance you do not have to include in your income.
Enter on line 4 the total reimbursements and allowances you received from the government for the expenses claimed on lines 1 and 2. Do not include the value of moving or storage services provided by the government. Also, do not include any part of a dislocation allowance, a temporary lodging allowance, a temporary lodging expense, or a move-in housing allowance.
Complete line 5. 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, you do not have a moving expense deduction. Subtract line 3 from line 4 and, if the result is more than zero, enter it on Form 1040, line 7
If the military moves you, your spouse and dependents, to or from different locations, treat these moves as a single move.
When Transitioning Back to Civilian Life You may be able to deduct some costs you incur while looking for a new job including travel, resume preparation fees, and outplacement agency fees. Moving expenses may be deductible if your move is closely related to the start of work at a new job location subject to moving related tests detailed in IRS Publication 521, Moving Expenses.
Recently the IRS’ Outreach Corner published an article stating that if you’re searching for a job, “you may be able to deduct some of your expenses, such as attending career fairs, moving expenses and submitting resumes, on your tax return as long as you are looking for a new job in your current occupation.”
This is a true statement of fact however I worry for taxpayers because particular care needs to be had in understanding, substantiating as well as representing how long it has been since your last ‘job’ as well as whether the new ‘job’ in question is in the same ‘occupation’ as your previous ‘job’ and ultimately what the definition of a ‘job’ really is. These are the questions I am regularly faced with in IRS audits when job search expenses are being scrutinized and in Appeals if job search expenses have been disallowed.
For more information about job search expenses check out:
• Job search expenses fall into the category of miscellaneous itemized deductions on Schedule A, Itemized Deductions. If your total itemized deductions are higher than the standard deduction, it’s generally better to choose to include your itemized deductions. Also, in most cases, these expenses must exceed your adjusted gross income by two percent to provide a tax benefit.
• Expenses incurred while searching for a job in your current occupation can be deductible. However, you may not deduct expenses incurred while looking for a job in a new occupation.
• Fees paid to employment and outplacement agencies are deductible. However, if your employer reimburses you for these fees in a later year, you must include the amount in your gross income up to the amount of your tax benefit in the earlier year.
• Costs for resume preparation and postage for mailing your resume to prospective employers is deductible.
• Travel expenses may be deductible if the primary purpose for the trip is to look for a new job. The amount of time you spend on personal activity compared to the amount of time you spend looking for work is important in determining whether or not the trip is primarily personal or primarily to look for a new job.
• Moving costs to a new job location may be deductible. However, you must meet certain criteria relating to distance moved and timing of the move. See IRS Publication 521, Moving Expenses.
• Job search expenses cannot be deducted if there was a substantial break between the end of your last job and the time you began looking for a new one.
• You cannot deduct job search expenses if you are looking for a job for the first time.