Today TaxMama hears from Monica, who just moved. “My husband and I moved 600 miles away from his last employer in December of ‘05. His new job is a different corporation. He was unemployed from December 16th ‘05 – February 16th ‘06. And he’s been working ever since. My question is – are we eligible for the moving deduction line 26 (1040) using Form 3903? Or is that deduction only applicable to persons being transferred through a company.”
Dear Monica,
This was going to be such an easy answer – until I saw those nasty little words – “He was unemployed from December 16th ‘05 – February 16th ‘06.”
Here’s why. There are two tests you have to pass to deduct moving costs. One is distance; the other is time.
You can read about them in IRS Publication 521 – Moving Expenses.
Distance Test
https://www.irs.gov/publications/p521/ar02.html#d0e356
Your move will meet the distance test if your new main job location is at least 50 miles farther from your former home than your old main job location was from your former home.
You’ve certainly qualified for the distance test – having moved well over 50 miles.
But, you haven’t met the time test yet:
Time Test for Employees https://www.irs.gov/publications/p521/ar02.html#d0e583
If you are an employee, you must work full time for at least 39 weeks during the first 12 months after you arrive in the general area of your new job location (39-week test). Full-time employment depends on what is usual for your type of work in your area.
In other words, before your move can be deducted, you or your husband must work for 39 weeks during the time from December 16, 2005 – December 15, 2006. Since he wasn’t working until mid-February, your husband won’t qualify to take the moving deduction until sometime in November.
If not for that niggling little note about being out of work until February 16, 2006, I would have suggested that you wait until after mid-September to file your tax return. Then you would be qualified to use the moving
expenses as an adjustment to income – on line 26 of the first page of the 1040 return.
As it stands, it looks you two won’t qualify until after your tax return due date has passed. So here’s what you do:
1) File your tax return without deducting the move.
2) After you or your husband has finished working his 39 weeks before December 16, 2005 – file an amended return – Form 1040X https://www.irs.gov/pub/irs-pdf/f1040X.pdf and the related state return. Include the Form 3903 Moving Expense Form and report the deduction on line 26 of the Form 1040.
Or – if you remember to file before December 31, 2006, you may use the Form 1045 to get a Quick Refund.
https://www.irs.gov/pub/irs-pdf/f1045.pdf
What’s if you file your tax return using the moving expense in the first place? Nothing will happen – as long as:
1) Your husband keeps his job for the full 39 months and/or 2) You’re not audited.
And frankly, if your original return is ever audited, it will be at least 12 months after you filed it. And by then, either you’ve qualified to deduct the moving expense – or you haven’t. If you haven’t – you pay it back.
If you have qualified, then, it’s just a technicality and, after some argument, you’d break even – or no changes would result. So, Monica, this answer is waaaaay longer than you wanted. But now you have all the options.
You decide whether to file now – or after you’re sure about the 39 weeks.
And remember, you can find answers to questions about moving expenses and all kinds of other tax issues, free. Where? Where else? At TaxMama.com
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- IRS Publication 521 :: Moving Expenses
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