Topic 27 - Moving Expenses

In this tax topic you will the learn how to take a deduction for certain expenses of moving to a new home because of a change in job location or starting a new job. You will become aware of what moving expenses are deductible and not deductible, who can take the moving expense deduction, when and where to report the expenses and how reimbursements affect your moving expenses deduction. Moving expense deductions can be deducted by either employees or self employed taxpayers.

Student Instructions:

Print this page, work on the questions and then submit test by mailing the answer sheet or by completing quiz online.

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Use IRS Publication 521 to complete this topic.

Prepare Form 1040, Form 3903 and California Form 540 .

Brad Johnson is married and has no children. He owned his home in Florida where he worked. On December 8, 2007, his employer told him that he would be transferred to Saint Paul as of January 20, 2008.

His wife, Samantha (SSN 610-25-3940), flew to Saint Paul on January 2008 to look for a new home. She put a down payment of $25,000 on a house being built and came back to Florida on January 8, 2008. The Johnsons sold their Florida home for $1,500 less than they paid for it. The home was free and clear by the time the construction was completed.

They contracted to have their personal effects moved to Saint Paul on January 15, 2008. The family arrived in Saint Paul January 18, 2008 only to find out that their new home was not yet completed. They stayed in a nearby motel awaiting completion of the house until February 12, 2008.

On January 20, 2008, Brad went to work in the Saint Paul plant where he works to the present time.

Their records for the move show:

1). Samantha's pre-move house hunting trip:

	Travel and lodging..........................$649.
	Meals...........................................$95.

2). Down payment on Saint Paul home.......$25,000.

3). Real estate commission paid on sale

of their Florida home......................$3,500.

4). Loss on sale of Florida home (not

including real estate commission)......$1,500.

5). Amount paid for storing and moving personal

effects (furniture, household etc)......$6,515.

6). Expenses of driving to Saint Paul:

	Mileage (Start 14,278; End 16,478; 1,100 miles after June 30, 2008).
	Lodging ..............................$360.
	Meals..................................$640.

7). Cost of temporary living expenses in Saint Paul:

	Motel rooms..........................$1,050.
	Meals..................................$2,280.
	They stayed in a motel for 25 days.

Brad was reimbursed $5,749 under an accountable plan as follows:

	Moving personal effects.................$4,500.
	Travel (and lodging) to Saint Paul....$600.
	Travel (and lodging) house hunting...$649.
	Total reimbursement..................$5,749

The employer included this reimbursement on Brad's Form W-2 for the year. The reimbursement of deductible expenses, $5,100 for moving household goods and travel to Saint Paul, was included in Box 12 of Form W-2. His employer identified this amount with code P.

The employer included the balance, $649 reimbursement of nondeductible expenses, in box 1 of W-2 with Brad's other wages. The employer withholds taxes from the $649 which is also included in W-2.

1. Look at the Form 1040 you prepared for Brad and Samantha Johnson. What is the amount on Form 1040, Line 26?

A. $ 3,265.
B. $ 2,682.
C. $ 2,215.
D. $ 7,955.

2. Look at the Form 1040 you prepared for Brad and Samantha Johnson. What is the amount on Form 1040, Line 73a?

A. $ 1,044.
B. $ 1,651.
C. $ 1,749.
D. $ 1,034.

3. You can deduct your moving expenses if

A. Your move is closely related to the start of work.
B. You meet the distance test.
C. You meet the time test.
D. All of the above.

4. If your move does not meet the "Closely related in place" requirement, you may still be able to deduct moving expenses if

A. You can show that you are required to live at your new home as a condition of your employment.
B. You can show that you will spend less time commuting from your new home to your new job location.
C. You can show that you will spend less money commuting from your new home to your new job location.
D. All of the above.

5. Your move will meet the distance test if your new main job location is at least __________ farther from your former home than your old main job location was from your former home.

A. 30 miles.
B. 50 miles.
C. 60 miles.
D. 80 miles.

6. If you are an employee, you must work full time for at least ________ during the 1st 12 months after you arrive in the general area of your new job location to meet the time test.

A. 30 weeks.
B. 4 weeks.
C. 53 weeks.
D. 39 weeks.

7. If you are self-employed, you must work full time for at least 39 weeks during the 1st 12 months and for a total of at least ___________ during the 1st 24 months after you arrive in the general area of your new job location to meet the time test.

A. 30 weeks.
B. 53 weeks.
C. 78 weeks.
D. 39 weeks.

8. You can deduct only those expenses that are reasonable for the circumstances of your move. The cost of traveling from your former home to your new home should be by

A. Any route available.
B. The shortest and most direct route available by conventional transportation.
C. Any route that you choose and you can still deduct expenses for stopover or side trips.
D. All of the above.

9. Pat had the following moving expenses:

*Cost of packing and crating and transporting her household goods $1,200.

*Lodging for travel between her old home and her new home $550.

*Meals during the trip $150.

*$250 to break the lease on her old home.

Pat moved to start a new job and met the distance and time tests. What are the total moving expenses that can be deducted

A. $2,150.
B. $1,900.
C. $1,750.
D. $2,000.

10. Excess reimbursement includes any amount for which you did not adequately account to your employer within a reasonable period of time. Any excess reimbursement for you moving expenses must be returned to the person paying the reimbursement. You adequately account by

A. Giving your employer documentary evidence of your moving expenses.
B. Listing on a sheet of paper the expense at or near the time you had the expense.
C. Keeping documentation that includes receipts, cancelled checks, and bills.
D. Any of the above.

11. You can generally consider moving expenses incurred within 1 year form the date you first reported to work at the new location as closely related to in time to the start of work. If you do not move within 1 year of the date you begin work, you

A. Can file an extension to be able to claim the moving expenses.
B. Cannot deduct the moving expenses since too much time lapsed.
C. Can still deduct the expenses if you can show that circumstances existed that prevented the move within that time.
D. None of the above.

12. You can deduct moving expenses for a move to a new home in the United States when you permanently retire. You are considered permanently retired when you cease gainful full-time employment or self-employment. If, at the time you retire, you intend your retirement to be permanent, you

A. Will not be able to claim moving expenses unless you can prove retirement will be permanent.
B. Will be considered retired even though you later return to work.
C. Will not be considered retired because intention in not enough.
D. None of the above.

13. If you deduct moving expenses but do not meet the time test in 2009 or 2010, you must

A. Report your moving expense deduction as other income on your Form 1040 for the year you cannot meet the test.
B. Use Form 1040X to amend your 2008 return, figuring your tax without the moving expense deduction.
C. Either A or B above.
D. None of the above.

14. A move begins when

A. You contract for your household goods and personal effects to be moved to your home in the United States, but only if the move is completed within a reasonable time.
B. Your household goods and personal effects are packed and on the way to your home in the United States.
C. You leave your formal home to travel to your new home in the United States.
D. Any of the above.

15. If you are living in the United State, retire, and then move and remain retired, you can claim a moving expense deduction for that move.

True False

16. Roxana's employer transferred her from Boston, Massachusetts, to Buffalo, New York. On her way to Buffalo, Roxana drove into Canada to visit the Toronto Zoo. As a result

A. The expenses paid or incurred for the excursion are deductible.
B. Roxana can deduct what it would have cost to drive directly form Boston to Buffalo.
C. Roxana can deduct the cost of a hotel room due to the delay.
D. All of the above.

17. If you use your car to take yourself, members of your household, or your personal effects to your new home, you can figure your expenses by deducting

A. You actual expenses, such as gas and oil for your car, if you keep an accurate record of each expense.
B. The standard mileage rate of 19 cents per mile (27 cents per mile after June 30, 2008).
C. The standard mileage rate of 48.5 cents per mile.
D. Either A or B above.

18. Paul Brown is a resident of North Carolina and has been working there for the last 4 years. Because of the small size of his apartment, he stored some of his furniture in Georgia with his parents. Paul got a job in Washington D.C. It cost him $1,200 to move his furniture from N.C. to D.C. and $4,000 to move his furniture to Georgia from North Carolina (his former home), it would have cost him $1,500 to move his stored furniture from N.C. to Washington. Moving expense amount he can deduct is

A. $2,700.
B. $3,700.
C. $2,500.
D. $5,200.

19. Use Form 3903 to figure your moving expense deduction. Use a separate Form 3903 for each move for which you are deducting expenses. You do not have to complete Form 3903 if

A. You moved to a location outside the United States in an earlier year.
B. You are claiming only storage fees while you are away from the United States.
C. Any amount your employer paid for the storage fees is included as wages in box 1 of your Form W-2.
D. All of the above.

20. If you are claiming only storage fees while you are away from the United States as a moving expense deduction

A. Enter the storage fees on line 1 of Form 3903.
B. Enter the storage fees directly on line 26 of Form 1040, and enter "Storage" next to the amount.
C. You don't have a moving expense deduction as storage fees are not allowed.
D. None of the above.

21. Enter on line 4 of Form 3903 the total amount of your moving expense reimbursement that was excluded from your wages. If the moving expenses less than reimbursement,

A. Include it as income on Form 1040, line 7.
B. Don't include it as income anywhere.
C. The extra amount is considered a gift so it does not need to be include in income.
D. None of the above.

22. Sonia's pre-move house-hunting trip includes:

	$600 for travel and lodging.
	$120 for meals.
	$3,500 real estate commission paid.

The amount that Sonia can deduct for moving expenses is

A. $600.
B. $4,220.
C. $4,100.
D. $-0-.

23. 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. You can deduct your un-reimbursed moving expenses. A permanent change of station is

A. A move from your home to your first post of active duty.
B. A move from one permanent post of duty to another.
C. A move from your last post of duty to your home or nearest point in the United States.
D. Any of the above.

24. To get you to work in another city, your new employer reimburses you under an accountable plan for the $6,500 loss on the sale of your home. You

A. Are reimbursed under an accountable plan so nothing needs to be done.
B. Have a re-imbursement of your own money.
C. Must include the amount as pay in box 1 of your Form W-2 because this is a reimbursement of a nondeductible expense.
D. None of the above.

25. You lived in Boston an accepted a job in Atlanta. Under an accountable plan, your employer reimbursed you for your actual traveling expenses from Boston to Atlanta and the cost of moving your furniture to Atlanta. Your employer will include the re-imbursement in

A. Box 1 of your Form W-2.
B. Box 2 of your Form W-2.
C. Box 12 of your Form W-2.
D. Box 5 of your Form W-2.

26. You can include the cost of storing and insuring household goods and personal effects within any period of _____ after the day your things are moved form your former home and before they are delivered to your new home.

A. 30 consecutive days.
B. 90 consecutive days.
C. 60 consecutive days.
D. 45 consecutive days.

27. If you claim the foreign earned income or foreign housing exclusion, you cannot deduct the part of your moving expenses that relates to the excluded income.

True False

28. To be an accountable plan, your employer's reimbursement arrangement must require that

A. Your expenses must have a business connection.
B. You must adequately account to your employer for these expenses within a reasonable period of time.
C. You must return any excess reimbursement or allowance within a reasonable period of time.
D. All of the above.

29. You can deduct your moving expenses (for the same expenses) on both Form 3903 and Schedule A and thus get a higher deduction.

True False

30. What constitutes a "reasonable period of time" depends on the facts and circumstances of your situation. The following action will be treated as taking place within a reasonable period of time.

A. You receive an advance within 30 days of the time you have an expense.
B. You adequately account for your expenses within 60 days after they were paid or incurred.
C. You return any excess reimbursement within 120 days after the expense was paid or incurred, or you are given a periodic statement (at least quarterly) that asks you to either return or adequately account for outstanding advances and you comply within 120 days of the statement.
D. Any of the above.

Topic 27 - Moving Expenses

Copyright © 2009 [Hera's Income Tax School]. All rights reserved. Revised: 05/21/10

Copyright © 2009 [Hera's Income Tax School]. All rights reserved.
Revised: 05/21/10