feature book - tax & move information
Steiner's Complete How-To-Move Handbook Paperback – May 1, 1999
STUDENT TAX INFORMAITON
IRS Help Desk
(1-800-876-1715 or email)
Low Income Taxpayer Clinics http://www.irs.gov/Advocate/Low-Income-Taxpayer-Clinics/Low-Income-Taxpayer-Clinics
LITCs conduct educational and outreach activities
low income and ESL taxpayers. These activities serve
multiple purposes: empowering individuals with
knowledge about their rights and responsibilities as U.S.
taxpayers, enhancing tax compliance, and generating
cases for controversy representation and consultations.
Clinics conducted nearly 3,500 educational activities
for over 102,000 attendees in the 2012 grant year,
and nearly 2,000 educational activities for 58,000
taxpayers during the first the half of 2013. LITCs that
operate ESL programs generally direct their education
and outreach activities to specific groups of taxpayers,
many of whom are new residents of the U.S. These
efforts provide information and education to help ESL
individuals understand their federal tax responsibilities.
Clinics address a wide range of substantive tax issues
in their educational programs and materials (e.g., filing
requirements, tax recordkeeping, family status issues,
refundable credits, worker classification, identity theft,
information about the audit and appeals process, and
collection alternatives). Clinics prepare and distribute
materials in languages appropriate for the ESL
communities they serve.
Students and families with children
EITC CENTRAL http://www.eitc.irs.gov/
EITC, the Earned Income Tax Credit, sometimes called EIC is a tax credit to help you keep more of what you earned. To qualify, you must meet certain requirements and file a tax return, even if you do not owe any tax or are not required to file
Earned Income Tax Credit (EITC) – Use the EITC Assistant to Find Out if You Should Claim it.
Filing Out of State?
Nonresident Alien - Figuring Your Tax
Nonresident aliens can deduct certain itemized deductions if they receive income effectively connected with their U.S. trade or business. These deductions include:
- State and local income taxes,
- Charitable contributions to U.S. non-profit organizations,
- Casualty and theft losses,
- Miscellaneous itemized deductions, and
- The ordinary and necessary expenses related to a U.S. trade or business.
Use Schedule A of Form 1040NR
to claim itemized deductions. If you are filing Form 1040NR-EZ, you can only claim a deduction for state or local income taxes. If you are claiming any other deduction, you must file Form 1040NR. For a discussion about certain itemized deductions refer to IRS Publication 519.
W-2 in Box 12/Code “P”
NOTICES REQUIRED BY SEVERAL STATES TO BE ISSUED TO EMPLOYEES REGARDING POTENTIAL ELIGIBILITY FOR EARNED INCOME TAX CREDIT
by Robert W. Ditmer, CPP*
In the case of some fringe benefits that are offered to or given to employees, certain benefits can be excluded from an employee�s income because the expenses would normally be deductible on an individual�s personal income tax return. A moving or relocation expense is one such benefit. An individual who relocates because of a change in employment may attach a Form 3903 to his annual Form 1040 to deduct certain qualified moving expenses. And employers may either pay or reimburse an employee�s moving expenses without taxing the payments if the expenses would otherwise have been deductible using Form 3903.
Employers who pay for the relocation expenses of an employee have the freedom to pay for whatever expenses they wish, but only those expenses that qualify as deductible can be excluded from the employee�s income. All other expenses paid or reimbursed are subject to withholding for federal income, social security, and Medicare taxes. The employer is also responsible for including such payments for FUTA taxes, and in most states the expenses are also subject to tax withholding.
So employers must be able to answer the following questions in order to determine if relocation payments are subject to tax withholding:
Who can deduct moving expenses?
What moving expenses are deductible?
How should moving expenses be reported?
The answers to the first two questions can be found in IRS Publication 521, �Moving Expenses.,� so we will only cover the basics in this article, and we will be focusing only on employees whose expenses may be paid or reimbursed by employers. For an employee�s relocation expenses to be qualified moving expenses, the employee must meet three tests:
The move is closely related to the start of the employee�s work.
The location of the employee�s new home must meet the distance test.
The individual�s employment must actually or potentially meet the time test.
Closely Related to the Start of Work
Moving expenses that are incurred within one year of when the employee starts working for your company may be qualified moving expenses. The move must have been necessitated by the new job because the employee is required to live near the place of employment or the employee will spend less time commuting than he would have if he had remained in his old home. If an individual relocated before having obtained a job with your business, his moving expenses may still qualify for tax-free reimbursement as long as he started working for your business within 1 year of his move.
The employee�s move may qualify for special tax treatment if it meets the distance test. The distance test is based on the location of the employee�s former home, the location of his old place of work, and the location of his new place of work. It has nothing to do with the location of his new home. The employee�s new place of work must be at least 50 miles further from his old residence than his old place of work was from his old residence. For instance, suppose that the employee used to travel 18 miles from his old home to his old place of work. His new place of work must be located at least 68 miles (18 + 50) from his old residence.
To meet the time test an employee must work full-time at least 39 weeks during the first 12 months after arriving in the general location of his new job. Full-time does not necessarily mean 40 hours per week. In some areas and in some businesses, full-time may be defined as 30 hours per week as long as the employee is receiving all benefits to which full-time employees of your business are entitled.
The 39 weeks does not all have to be with your company and they do not all have to be in a row. For instance, an individual may move into his new home and start work with one employer for 6 months. He then leaves that job and 2 months later is hired by your company. Your company agrees to pay his original moving expenses if he agrees that he will remain with your company for at least 2 years. So he will have worked at least 44 weeks during the 12-month period after his move, so he could have qualified moving expenses.
Qualified Moving Expenses
The following expenses qualify as moving expenses as long as the employee meets the other tests:
Moving the employee�s household goods and personal effects (including in-transit storage expenses), and
Travel for the employee and his family (including lodging but not meals) from the employee�s old home to his new home. So meals are never deductible, and house-hunting trips do not qualify as deductible expenses.
Moving expenses, according to the Internal Revenue Code, must be reasonable, but the definition of reasonable is not defined. However, Publication 521 basically indicates that expenses are reasonable if the cost of traveling from the employee�s former home to his new one is by the shortest, most direct route available by conventional transportation. Where the regulations refer to members of an employee�s household, it refers to any individuals who were living with the employee in his old home and are relocating with the employee to his new home.
The following moving expenses are considered to be reasonable and deductible:
The cost of packing, crating, and transporting household goods and personal effects and those of members of the household from the former home to the new one. A professional moving company can be used, or the employee may use his own vehicle for moving some items.
The cost of storing and insuring household goods and personal effects within any period of 30 consecutive days after the employee�s things have been moved from his former home and before they are delivered to the employee�s new home.
The cost of connecting or disconnecting utilities.
The cost of shipping an employee�s car or pets to his new home.
The cost of moving household goods and personal effects from a place other than the employee�s former home, but the deductible portion is limited to the amount it would have cost to move it from the employee�s old home.
The cost of transportation and lodging for the employee and members of the employee�s household while traveling from the former home to the new home. Lodging expenses include the cost of lodging for one day after the employee could no longer live in his old home and expenses incurred on the day the employee arrives in the area of his new home.
If an employee uses his own vehicle, or if additional personal vehicles are driven to relocate the employee�s family, the deductible mileage rate for 2007 is 20 cents per mile.
All expenses are for one trip by the employee and the employee�s household, although the employee and the members of his household do not have to travel together or at the same time.
Employers can handle an employee�s moving expenses in two different ways. Employers may pay all or some of the employee�s moving expenses directly, such as paying a moving company to move the employee�s household goods and personal effects. Or the employer may choose to reimburse the employee for all or some of his moving expenses. Payments that are made directly to a third party do not have to be reported to the IRS, but all reimbursements to the employee do.
How to Report Moving Expenses
Both qualified and non-qualified moving expenses have to be reported on Form W-2. Non-qualified moving expenses are subject to withholding at the time the reimbursements are made. Qualified moving expenses should be reported on the Form W-2 in Box 12 with Code P. Non-qualified reimbursements must be included in the employee�s wages in Boxes 1, 3 and 5. All qualified moving expenses, including payments made to a third party, must be included on Line 1 of Part I of Form 940 for FUTA tax reporting, but the entire amount should also be reported on Line 2 of Part I as excludable wages.
So let�s take a look at a practical example. Suppose that an employer pays all of the moving and house-hunting expenses to relocate an employee to a new district office. The distance from the employee�s old home to his new one is 850 miles and he makes only one house-hunting trip and the overnight lodging expense is $168. On the day the employee moves his family his lodging expenses, including one night near his new home while he is closing on the purchase of his new home is $187. The company chooses to reimburse the employee for 20 cents per mile for both trips and his total meal expenses are $235. The company pays a moving company directly $4,200 to move the employee�s household goods.
Calculate the total costs reimbursed to the employee:
Mileage reimbursement. (3 x 850 mi x $0.20/mi = $510.00)
Lodging costs. ($168 + $187 = $355.00)
Meal costs. ($235.00)
Total costs reimbursed to employee. ($510.00 + $355.00 + $235.00 = $1,100.00)
Calculate the qualified moving expenses reimbursed to employee:
Mileage reimbursement for one trip only at $0.20/mile. (850 mi x .20/mi = $170.00)
Lodging for moving his family. ($187.00)
Total qualified moving expenses reimbursed to employee. ($170.00 + $187.00 = $357.00
Total non-qualified moving expenses reimbursed to employee. ($1,100.00 - $357.00 = $743.00)
Calculation of tax withholding:
Federal income tax. ($743.00 x 25% = $185.75)
Social security tax. ($743.00 x 6.2% = $46.06)
Medicare tax. ($743.00 x 1.45% = $10.77)
Reporting of fringe benefit:
Include $743.00 in Boxes 1, 3 and 5 of Form W-2.
Include $185.750 in Box 2 of Form W-2.
Include $46.06 in Box 4 of Form W-2.
Include $10.77 in Box 6 of Form W-2.
Report $357.00 in Box 12 with Code P. (Note: Qualified moving expenses paid directly to a third-party should not be reported anywhere on Form W-2.)
Include total qualified expenses of $4,557.00 ($4,200 + $357) on Line 1 of Part I for Form 940.
Report $4,557.00 on Line 2 of Part I of Form 940 as excludable wages.
Employers are no longer required to provide employees with a copy of Form 4782, Moving Expenses. However, employers should provide employees with some kind of statement breaking down all payments and reimbursements. Every individual who receives moving expense reimbursements must complete Form 3903 and attach it to his Form 1040. If the employee has been reimbursed for all of his qualified expenses, then he has to report that fact and he will not be able to deduct the expenses on his personal income tax return. If, however, the employee later relocates and invalidates the time test, the qualified expenses report on Form W-2 in Box 12 have to be included in income in the year the employee invalidates the time test. The employee will then have to file an amended Form 1040 for the year in which he received the original reimbursements.
Reimbursement of an employee�s moving expenses is often a valuable fringe benefit, and many companies use the promise of such reimbursements as an incentive in the hiring process. Companies that relocate employees to other company locations often provide this benefit. But employers can avoid the snares and pitfalls that often surround the taxation and reporting of this benefit if the follow the guidelines provided above and the guidelines provided in the appropriate IRS publications.
Robert W. Ditmer, CPP, is the owner of RWD Financial Support Service, located in Raleigh, North Carolina. Mr. Ditmer provides support and consulting services in the areas of bookkeeping, accounting, payroll and human resources. With over 25 years of experience Mr. Ditmer has worked in a wide variety of industries, and he worked as a Controller in four different businesses including a land planning/landscape architecture firm in Philadelphia, PA, a private dining and catering facility in Wilmington, DE, an IT support company in Glastonbury, CT, and a commercial construction management firm in Columbia, MD. Mr. Ditmer has also spoken at conferences and provided training on various issues, and he has written a number of articles in the field of payroll and payroll taxation. He is a member of the American Institute of Professional Bookkeepers and the American Payroll Association, and qualified as a Certified Payroll Professional in 2000. He can be reached at
Payroll-Taxes.com is a free online resource featuring a compilation of research, collaboration and web tools for use by payroll professionals and more including information about payroll tax articles
, federal tax information
and state tax information
Start by looking at the definition of a "qualified move" as defined by the Internal Revenue Service, which requires:
- The move must be closely related in both time and place to the start of work at a new job location (work-related test).
- The distance between the employee's new principal place of work and old residence must be at least 50 miles greater than the distance between the old principal place of work and old residence, and the employee's commuting distance must have increased by at least 50 miles (distance test)
- In the 12-month period following the move, the employee must be a full-time employee for at least 39 weeks in that location or meet a qualified exception to the time limit (time test).
Certain moving expenses, paid or reimbursed by the employer, are not taxable under the definition of U.S. wage income. To qualify as "non-taxable," the expenses generally must be accountable, substantiated and reasonable for the circumstances of the move. Expenses that can qualify as non-taxable include:
- The transportation of household goods and personal effects (including in-transit storage and insurance expenses) from the old residence to the new residence. The costs of moving automobiles and pets are included in this category.
? Note: Special rules apply for international relocations.
- Travel expenses for the employee and household members from the old residence to the new residence (in-transit). These expenses usually include lodging, but not meals, during the trip. It is not necessary that all members of the household travel together at the same time.
Other expenses, such as house-hunting expenses, temporary living, car rental, reimbursement for the loss on home sale, tax gross-ups, etc., are taxable benefits, as are unsubstantiated cash payments (e.g., cash allowances).
Can the employee take a deduction on their individual income tax return for reimbursed moving expenses?
Reimbursed "non-taxable" moving expenses are not deductible on the employee's individual income tax return, if those expenses have not been reported as taxable wages. If the employee has been reimbursed for "non-taxable" moving expenses, either directly or via a third party, there are no tax implications on the employee's tax return (no moving-expense deduction should be claimed). If the amounts are reported as taxable in the W-2, the employee can take a deduction on their U.S. federal individual income tax return for the qualified moving expenses.
What are the tax implications of a lump-sum relocation payment?
Many companies have moved away from the administration side of a relocation program that required reimbursements and are instead using a "lump-sum" approach to support relocating employees.
Some companies structure their program to cover taxable moving expenses, such as house hunting, temporary living, etc., and then reimburse the "non-taxable" expenses. The lump-sum reimbursement would be fully taxable to the employee, and depending on the company program, either the company or the employee would ultimately bear the associated tax cost of including these amounts in the employee's wages.
Other companies have structured their lump-sum program to cover all relocation expenses. If the company uses this method, the lump sum would be fully taxable to the employee. The employee should be instructed to track the "non-taxable" expenses, as a claim for a moving expense deduction may be available on their U.S. federal individual income tax return. The applicable moving expense amount would then be a reduction to a taxpayer's adjusted gross income (AGI).
Are there other areas of concern for an employee to be aware of associated with a company supported move?
If there are "taxable" moving expenses paid by the company, these amounts should be reported as taxable wages in the employee's Form W-2. As mentioned, the tax part is often an after-thought until the W-2 is issued, which could be well after the move. The surprising numbers on the W-2 can leave employees in shock, before even getting to the tax return. Some items to be aware of:
- U.S. federal individual income taxes are calculated based on graduated tax rates and tax brackets. As the taxable income increases, it can push taxpayers into a higher tax bracket.
- The higher "gross" income and taxable income can impact the return by phasing-out deductions and credits. These phase-outs can impact items such as:
- Child Tax Credits
- Higher Education Credits
- Tuition and Fees Deduction
- Passive Activity Losses
- Deductible IRA's
- Student Loan Interest
- Contributions to a ROTH IRA
Item (a) is pretty straightforward – you can deduct what you spend to pack and ship household items and personal goods from the old location to the new location, as long as those costs are what the IRS would consider reasonable e.g. not in excess of market rates. You can also deduct the costs of storage and insurance of your household items and personal goods for any period of 30 consecutive days from the time they leave your old residence to the time they are delivered to your new residence, as well as any in-transit storage costs. Finally, you can deduct any costs of connecting or disconnecting utilities that are required solely
because you are moving personal effects – if you have a gas dryer, for example, and you need to have the gas company do a disconnect on one end and a connect on the other, you can deduct those costs.
Item (b) is a little different – you can only deduct the cost of transportation and lodging enroute for you and the members of your household. You cannot deduct meals and entertainment, nor can you deduct the costs related to any personal side trips you might make – if you stop and visit Grandma enroute, for example, you cannot deduct the lodging related to that portion of the trip. You can deduct one day’s worth of lodging costs in your old location if you could not stay in your house because your furniture had been moved, and you can deduct lodging costs for the day that you arrive in your new location, if you have any.
If you drive your own vehicle, you can deduct the actual costs you accrued on the trip for gas and oil, as long as you keep a record of those costs, or you can deduct 24 cents per mile (for 2009) – keeping in mind that if you detour off the most direct route between the two locations for personal reasons, the costs related to that portion of the trip are not deductable. You do not have to travel at the same time as the other members of your household. However, you can only claim the expenses for one trip per household member. (By the way, a member of your household can be anyone who lives with you at both the old location and the new address.)
You cannot deduct the costs of trips made for househunting purposes before you have moved, nor can you deduct the costs of selling your old home, buying a new home, or any improvements that you needed to make to your old home in order to sell it. Nor can you deduct the costs of breaking a lease or lost security deposits if you are renting in the old location. You also cannot deduct the cost of return trips to the old location.
Now... Are you looking for a way to work at home to make your life simpler while still earning money?
Are you interested in the benefits of telecommuting work options for employees and employers?
What is telecommuting?
- Save time and money by not driving to work each day
- Find more personal time with a more flexible work schedule
- Avoid the stress associated with commuting through traffic
- Persons with mobility issues or disabilities can find opportunities for employment
- Employers may save money on facilities and gain productivity from key employees
- Retain employees who require flexible schedules or move to another location
- Employers can reach untapped labor pools to support their business
Telecommuting is essentially working from home full-time or several days out of the work week. Someone who telecommutes may be an independent contractor, an entrepreneur, or an employee of an organization that has telecommuting work options. More and more workers are telecommuting. Why?
Reasons To Telecommute:
Flexible Work Hours:
If you are telecommuting then your schedule becomes more flexible. This flexibility allows you to choose when it is most practical and time-efficient to run errands, see doctors, and transport children. Most work-from-home jobs offer
individuals opportunities to work part-time, full-time and often around the clock.
Spend Less Money:
Telecommuters can save money on transportation costs such as gas, parking, public transportation, work clothes, and dry cleaning bills. Employers can save money by reducing overhead and retaining employees.
Telecommuters have greater flexibility to plan non work-related activities around their business schedule instead of searching for time in the early morning, late evening, or during lunch.
Telecommuters will save the time they now take to commute to their place of employment.
At times employees in an office setting can be distracted from their work by untimely interruptions from peers, impromptu meetings, or pulled away onto other projects. Telecommuters may find themselves more productive.
More Family Time:
Working from home usually means telecommuters have more time with their family. You can adjust your hours to work during non-family time and be available for the people you care about.
Help The Environment:
Working from home part or full-time reduces the auto emissions and decreases gas consumption. By working from home, you can feel good about reducing your commuting costs and contributing to a cleaner environment.
Working from home decreases the stress caused by inflexible hours, commuting time and costs, continual rushing to unmet family needs, sitting idle during a commute and provides time to exercise or pursue endeavors of particular interest to you.
Potential Tax Deductions:
Income deductions are available for home-based work-related expenses such as fax, scanner, phone, computer and office supplies.
Reduce the Need for Outsourcing or Off-shoring Work:
Working from home helps keep jobs domestic and reduces need or desire for business and industry to contract with other countries for work that can be done at sites other than the main office.
If any of the above reasons for teleworking sounds appealing, you might be an excellent candidate for a career in telecommuting to work.
More information on the reasons to telecommute for jobseekers, training, and employment service providers, employees, and employers can be found under the Jobseeker, Provider and Employer sections of TeleworkTools.org. Other on-line resources include eWEEK.com and Staffcentrix.
WELCOME TO STAFFCENTRIXWelcome to Staffcentrix. We're the training and development company that designed the first virtual-work training programs for the US Department of State and the US Armed Forces. Since 1999, we've been showing organizations and people how to work virtually.
We also maintain the leading online destination for legitimate home-based jobs and projects, http://www.ratracerebellion.com/.
Our longstanding focus on virtual and home-based work -- at times a magnet for the dishonest -- has also led to our extensive expertise in Internet fraud and safety.
Come in and let us know how we can help you. We promise you'll be glad you did.
Why not join those who are experiencing the financial and human resource benefits of a workforce with flexible work options?
Are you an employer who is looking to:
- Exploring telecommuting as a winning human resource strategy for increasing productivity?
- Attracting and retaining qualified workers, including those with disabilities?
- Reducing overhead costs and hours spent commuting?
- Preserving natural resources?
- Strengthening community relationships?
Telework or telecommuting has a variety of definitions but for most employers it means work that would normally have been performed from a central office setting can now be performed at home or remote location. To telecommute includes the use of a computer, internet connection, telephone, scanner, or even fax machine. It involves moving work to the workers instead of workers to work. Part-time or full-time telecommuting can be an informal or formal arrangement between the employer and the employee.
Over the last 15 years increases in commuter traffic, business property taxes, employee benefits, and fuel prices have combined with advances in technology (including security protection) and concerns about work/family balance to motivate employers to explore alternatives, such as restructuring work and work sites. Many employers have discovered that integrating telecommuting into their human resource structures for those tasks that lend themselves to working from sites other than the primary work site allow companies to decrease costs and increase profits. At the same time, technology now makes it possible for both employers and employees, particularly those with short term and long term disabilities, to increase productivity and add value to the economy.
Telecommuting Websites & Resources on the Internet
– The “Rat Race” used to refer only to the world of work -- and a 9-to-5, short-commute world at that! Now the Rat Race -- and hence the Rebellion -- takes many forms such as telecommuting and working from home. The site offers job postings.
– Statewide initiative providing free assistance to Connecticut employers with the design, development, and implementation of telecommuting as a worksite alternative.
Call: 1-800-ALL-RIDE or 1-800-255-7433.
The American Telecommuting Association
– For a free publication “How Can I Start Telecommuting?” Call: 1-800-ATA-4-YOU.
– If you're ready to join the growing ranks of telecommuting moms you have come to the right place. Its mission is to help any mom to become a telecommuting mom! The site provides resources, information, articles, tips, and work at home jobs.
– Rehabilitation research and training center on workplace supports and job retention.
– Montero’s Consulting, helping you find a more flexible way to work via virtual team training, virtual offices and mobile technology.
sample 1098 & W-2
Can you take a deduction for the interest you paid on student loans? These site will help you to find the information you need. (Documents labeled "PDF" require the Acrobat Plug-in.)
Internal Revenue Service (IRS) Main Site
Tax Information for Students
Tax Benefits for Higher Education (Publication 970) (PDF)
IRS Form 8863 - Education Credits (PDF)
IRS Notice 97-60
Taxpayer Relief Act of 1997 (PDF)
Tax Trails is a service of the IRS that helps filers determine tax consequences. The two Tax Trails below deal with education expenses, credits and interest deductions.
Student Loan Interest (1098-E)
Education Tax Credit (1098-T)
IRS FAQs (Frequently Asked Questions)
Student Loan Interest (1098-E)
Education Tax Credits (1098-T)