Monday, February 08, 2010
In today’s economy more and more people are willing to relocate for a new job opportunity. Fortunately, the IRS has setup a special deduction to help taxpayers offset the high costs associated with relocating your family for a job.
Deductible Expenses
Examples of moving-related expenses that can be deducted include:
- Packing and transportation costs for moving household goods
- The cost of shipping goods from a place other than your former home (such as a storage unit)
- Any storage bills, or fees for disconnecting or reconnecting utilities
- All move-related travel expenses (such as mileage, tolls, lodging, parking fees, etc.)
- Expenses of shipping or relocating your car and pets to your new home.
Expenses that can NOT be Deducted
Although there are a number of expenses that you can deduct, there are even more that can NOT be deducted. To help our readers avoid claiming incorrect expenses, we put together the following list of expenses you cannot deduct:
- License plates and registration for your car
- Any part of the purchase of a new home, or expenses of leasing a new apartment
- Real estate taxes, or lost security deposits
Relocation Rules
According to the IRS “you can generally consider moving expenses incurred within one year from the date you first reported to work at the new location as closely related in time to the start of work. It isn't necessary that you arrange to work before moving to a new location, as long as you actually do go to work.”
Time Test
To qualify for the deduction you must work full time for at least 39 weeks during the first year after starting the new job. You do not necessarily have to work for the same employer, and you do not need to work for 39 weeks consecutively. However, you will need to work full time within the same commuting area for 39 full weeks.
Distance Test
In order to pass the distance test your new work location must be at least 50 miles further from the former home than the old job was. This means, if your old workplace was 5 miles from your house than the new position will need to be at least 55 miles away.
Claiming the Deduction
To claim the deduction you will need to complete IRS Form 3903, “Moving Expenses.” After you complete the worksheet, you will need to enter the final result on your IRS Form 1040 on Line 26. Then, make sure you attach Form 3903 to your tax return when you file.
Last week, CEO Roni Deutch posted an entry on her personal blog examining the tax proposals President Obama discussed in his recent Sate of the Union. You can find information about a few of the potential new tax laws below, but be sure to check out the full entry at The Tax Lady Blog.
Business Tax Break Extension
Small business tax incentives and the middle class were common themes in the President’s speech. One of the largest cut’s Obama mentioned during his speech was his plan to extend a set of tax breaks that will allow businesses to write off investments in equipment (such as tractors, wind turbines, solar panels, and computers) more quickly. The 50% bonus depreciation tax break would total $38 billion in savings in the 2010 alone, which would represent an estimated 13% of all corporate tax receipts expected this year.
Elimination of Capital Gains Taxes on Small Business Investment
“While we’re at it, let’s also eliminate all capital gains taxes on small business investment,” Obama explained. This is a pretty drastic change from his campaign promise of doubling capital gains taxes, but the majority of economists support his proposal.
$30 Billion for Community Banks
Another part of the President’s plan to help small business owners is to increase the amount of credit available to them. “I’m proposing that we take $30 billion of the money Wall Street banks have repaid and use it to help community banks give small businesses the credit they need to stay afloat.”
Middle-Class Tax Cuts
The President asserted that his administration would extend middle-class tax cuts, but in a cleverly worded sentence said they would “not continue tax cuts for oil companies, investment fund managers, and those making over $250,000 a year.” This is an obvious reference of his intention to let the Bush tax cuts expire, which would essentially raise taxes on couples making over a quarter of a million dollars per year.
According to Reed Smith Update the IRS issued an announcement at the end of January that outlines their plan to require certain business taxpayers to disclose uncertain tax positions on their tax returns. It is expected that this disclosure will take the form of a schedule that includes a “concise description of such positions and information regarding the potential impact of such positions on the taxpayer's federal income tax liability.”
Taxpayers are not currently required to identify and explain uncertain tax positions on their federal income tax returns. In contrast, many business taxpayers are required by FASB Interpretation No. 48 (Accounting for Uncertainty in Income Taxes, an Interpretation of FASB Statement No. 109) ("FIN 48") to identify and quantify uncertain tax positions for financial accounting purposes (and may be subject to other accounting standards with respect to uncertain tax positions). The IRS believes that the information developed in the course of complying with FIN 48 and other accounting standards would assist the IRS in focusing its audit resources toward tax returns containing uncertain tax positions of particular interest, or of sufficient magnitude, to warrant further inquiry. In furtherance of such goal, the IRS has issued the Announcement, which informs taxpayers of the proposed disclosure of uncertain tax positions on the Schedule and discusses, in general terms, the potential content of the Schedule.
Proposed Schedule
The Announcement provides that the IRS is currently developing the Schedule and that the Schedule will be required to be filed with the taxpayer's Form 1120 (U.S. Corporation Income Tax Return) or other business tax return. The Schedule will require:
- A concise description of each uncertain tax position for which; and the taxpayer or a related entity has recorded a reserve in its financial statements; and
- The maximum amount of potential federal tax liability attributable to each uncertain tax position (determined without regard to the taxpayer's assessment of its likelihood of prevailing on the merits with respect to such position).
The Schedule will not require the taxpayer's risk assessment or tax reserve amounts with respect to such positions.
Continue reading at Reed Smith Update.com…