How Do You Report It to the IRS?
The following discussions explain how to report your moving
expenses and any reimbursements or allowances you received
for your move. Use Form 3903 to report your moving
expenses. Use a separate Form 3903 for each qualified move.
Where to deduct. Deduct your moving expenses on line
26 of Form 1040. The amount of moving expenses you can deduct
is shown on line 5 of Form 3903.
You cannot deduct moving expenses on Form 1040EZ or Form
This section explains what to do when you receive a reimbursement
(including advances and allowances) for any of your moving
expenses discussed in this publication.
If you received a reimbursement for your allowable moving
expenses, how you report this amount and your expenses depends
on whether the reimbursement was paid to you under an accountable
plan or a nonaccountable plan. These plans are discussed later.
For a quick overview of how to report the reimbursement, see
Your employer should tell you what method of reimbursement
is used and what records they require.
Employers. If you are an employer and you reimburse
employee moving expenses, how you treat this reimbursement
on your employee's Form W-2 depends in part on whether you
have an accountable plan. Reimbursements treated as paid under
an accountable plan are reported in box 13 with code P.
For more information, see Publication
535, Business Expenses.
Reimbursements treated as paid under nonaccountable plans,
as explained later, are reported as pay. See Publication
15, Circular E, Employer's Tax Guide, for information
on employee pay.
Accountable plans. To be an accountable plan, your
employer's reimbursement arrangement must require you to meet
all three of the following rules.
- Your expenses must be of the type for which a deduction
would be allowed had you paid them yourself. 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 are two examples.
- 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.
An excess reimbursement includes any amount
you are paid or allowed that is more than the moving expenses
that you adequately accounted for to your employer. See Returning
excess reimbursements, later, for information on how to
handle these excess amounts.
Adequate accounting. You adequately account
by giving your employer documentary evidence of your moving
expenses, along with a statement of expense, an account book,
a diary, or a similar record in which you entered each expense
at or near the time you had it. Documentary evidence includes
receipts, canceled checks, and bills.
Returning excess reimbursements. You must be
required to return any excess reimbursement for your moving
expenses to the person paying the reimbursement. Excess reimbursement
includes any amount for which you did not adequately account
within a reasonable period of time. For example, if you received
an advance and you did not spend all the money on deductible
moving expenses, or you do not have proof of all your expenses,
you have an excess reimbursement.
Reasonable period of time. What constitutes
a "reasonable period of time" depends on the facts and circumstances
of your situation. However, regardless of the facts and circumstances
of your situation, actions that take place within the time
specified in the following list will be treated as taking
place within a reasonable period of time.
- You receive an advance within 30 days of the time you
have an expense.
- You adequately account for your expenses within 60 days
after they were paid or incurred.
- You return any excess reimbursement within 120 days after
the expense was paid or incurred.
- 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.
Employee meets accountable plan rules. If for
all reimbursements you meet the three rules for an accountable
plan, your employer should not include any reimbursements
of allowable expenses in your income in box 1 of your Form
W-2. Instead, your employer should include the reimbursements
in box 13 of your Form W-2.
2. Reporting Employee Moving Expenses and Reimbursements
Example. You lived in Boston and 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 reimbursement in box 13 of
your Form W-2. If your allowable expenses are more than your
reimbursement, show all of your expenses on lines 1 and 2
of Form 3903. Include the reimbursement on line 4 of Form
Employee does not meet accountable plan rules.
You may be reimbursed by your employer, but for part of your
expenses you may not meet all three rules.
If your deductible expenses are reimbursed under an otherwise
accountable plan but you do not return, within a reasonable
period, any reimbursement of expenses for which you did not
adequately account, then only the amount for which you did
adequately account is considered as paid under an accountable
plan. The remaining expenses are treated as having been reimbursed
under a nonaccountable plan (discussed later).
Reimbursement of nondeductible expenses. You
may be reimbursed by your employer for moving expenses, some
of which are deductible expenses and some of which are not
deductible. The reimbursements received for the nondeductible
expenses are treated as paid under a nonaccountable plan.
Nonaccountable plans. A nonaccountable plan is a reimbursement
arrangement that does not meet the three rules listed earlier
under Accountable plans.
In addition, the following payments will be treated as paid
under a nonaccountable plan:
If an arrangement pays for your moving expenses by reducing
your wages, salary, or other pay, the amount of the reduction
will be treated as a payment made under a nonaccountable plan.
This is because you are entitled to receive the full amount
of your pay regardless of whether you had any moving expenses.
- Excess reimbursements you fail to return to your employer,
- Reimbursements of nondeductible expenses. See Reimbursement
of nondeductible expenses, earlier.
If you are not sure if the moving expense reimbursement arrangement
is an accountable or nonaccountable plan, ask your employer.
Your employer will combine the amount of any reimbursement
paid to you under a nonaccountable plan with your wages, salary,
or other pay. Your employer will report the total in box 1
of your Form W-2.
Example. To get you to work in another city,
your new employer reimburses you under an accountable plan
for the $7,500 loss on the sale of your home. Since this is
a reimbursement of a nondeductible expense, it is treated
as paid under a nonaccountable plan and must be included as
pay on your Form W-2.
Completing Form 3903. Complete the Distance Test
Worksheet in the instructions for Form 3903 to see whether
you meet the distance test. If so, complete lines 1-3 using
your actual expenses (except, if you use your own car, you
can figure expenses based on a mileage rate of 10 cents a
mile, instead of on actual amounts for gas and oil). Enter
on line 4 the total amount of your moving expense reimbursement
that was excluded from your wages. This excluded amount should
be identified with code P in box 13 of Form W-2.
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, enter zero on line 5 (you have no
moving expense deduction). Subtract line 3 from line 4 and,
if the result is more than zero, include it on Form 1040,
Uniform Relocation Assistance and Real Property Acquisition
Policies Act of 1970. Do not include in income any moving
expense payment you received under the Uniform Relocation
Assistance and Real Property Acquisition Policies Act of 1970.
These payments are made to persons displaced from their homes,
businesses, or farms by federal projects.
When To Deduct Expenses
If you were not reimbursed, deduct your allowable moving
expenses either in the year you had them or in the year you
Example. In December 1999, your employer transferred
you to another city in the United States, where you still
work. You are single and were not reimbursed for your moving
expenses. In 1999 you paid for moving your furniture. You
deducted these expenses in 1999. In January 2000, you paid
for travel to the new city. You can deduct these additional
expenses in 2000.
Reimbursed expenses. If you are reimbursed for your
expenses, you may be able to deduct your allowable expenses
either in the year you had them or paid them. 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, later.
If you are reimbursed for your expenses in a year after you
paid the expenses, you may want to delay taking the deduction
until the year you receive the reimbursement. If you do not
choose to delay your deduction until the year you are reimbursed,
you must include the reimbursement in your income, even if
you are reimbursed under an accountable plan. See Reimbursements
excluded from income and its discussion, Expenses deducted
in earlier year, under Tax Withholding and Estimated
Choosing when to deduct. If you use the cash
method of accounting, which is used by most individuals, you
can choose to deduct moving expenses in the year your employer
reimburses you if:
- You paid the expenses in a year before the year of reimbursement,
- You paid the expenses in the year immediately after the
year of reimbursement but by the due date, including extensions,
for filing your return for the reimbursement year.
How to make the choice. You can choose to deduct
moving expenses in the year you received reimbursement by
taking the deduction on your return, or amended return, for
You cannot deduct any moving expenses for which you received
a reimbursement that was excluded from your income. Reimbursements
excluded from, or included in, income are discussed under
Tax Withholding and Estimated Tax, earlier.
More information on Moving and Your Taxes from the
Professional Moving Companies with Mover MAX