Tax Deduction on Moving Expense

In: Business and Management

Submitted By hyalite125
Words 1928
Pages 8
Tax Deduction on Moving Expense

Table of Contents
Executive Summary 3
Moving Expenses 4 What is a Moving Expense? 4 Conditions Needed to Deduct Moving Expenses 5-6 What can we Deduct? 6 Reimbursement and Withholdings 7 How to Report Moving Expenses 8
Works Cited 10
Executive Summary The process of deducting moving expenses is long and contains many conditions such as the time test, the distance test, and closely related to work condition. Therefore, some mistakes may easily be made along the way, such as deciding whether or not to include reimbursement as income or as an expense, and if it is counted as income. The employer has the responsibility to withhold tax from the reimbursement, unless the move was solely for the benefit of the employer, not as compensation for the employee, only the personal expenses such as meals and lodging is counted in income. Also expenses must be deemed reasonable so one must watch out account for expenses only related to the trip, not sightseeing detours. Therefore, one must take great care when handling moving expenses, because it might become a deduction, or a determination of income.

Tax Deduction: Moving Expense

When we graduate from xxxx, we will get a new job in another city or state. The good news is that we may be able to list our moving expenses tax deductable on our itemized tax forms if we meet certain qualifications. Although there are many expenses we can deduct, there are even more expenses that we cannot be deducted. Now, to fully understand the value of these tax deductions has been an important benefit to us.

First of all, we should figure out the definition of moving expenses. “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…...

Similar Documents

Income Tax: Small Family and Minimal Deductions

...Income Tax: Small Family and Minimal Deductions ACC 401 July 23, 2012 Instructor Income Tax: Small Family and Minimal Deductions One of the jobs of tax consultants is to determine the types of forms to complete when assisting a person in completing his or her income tax forms. The number and types of forms used is determined based-on the person’s income, if the person is having his personal or business tax forms completed, the deductions the person is taking, and the proof of deductions that a person has saved. The family chosen for this paper is a small one-child family completing their personal income tax, filing jointly, and using minimal deductions. Based on the couple’s income, a recent home purchase, attendance in college, dependent child, and deductions, the most appropriate forms to complete are the 1040 U.S. Individual Income Tax Return, earned income credit form, form 8812-Additional child tax credit, form 8863 education credits and form 5405 (First Time Homebuyer Credit and Repayment of the Credit) (Internal Revenue Service, 2012). Scenario: The couple is Jackson R. Parker and his wife Elizabeth Parker. They have a healthy non-disabled three-year-old son named Colton. Mr. Parker is in the United States Army. Mrs. Parker is unemployed and does not work, but attends college full-time. The couple purchased their first home on February 23, 2011. They paid $300,000 for their home. They had few receipts with the exception of the husband’s W-2......

Words: 1560 - Pages: 7

Deductions

...Ken and Mary Jane Blough have failed to keep records of their itemized deductions. The IRS now is asking for verification of these deductions. The standard deduction for the Blough’s is $11,900. If the amount of their itemized deductions is less than the standard deduction than they should have just taken the standard deduction and this audit would not be necessary. In the Blough’s case the total of their itemized deductions is much more than the standard deduction and therefore they must show verification if they want to itemize. The first deduction they took was in regards to medical expenses of $7,102 which only $1,477 was deductible because of the 7.5% floor of AGI from the taxpayer (Internal Revenue Code Sec. 213). The second deduction they took was taxes of $6,050 which are fully deductible as long as none of them are fees (Internal Revenue Code Sec 164). The third deduction they took was interest of $10,659 which is fully deductible depending on the type of interest that is involved (Internal Revenue Code 163). The last deduction they took was charitable contributions of $2,693 which are fully deductible as long they are donated to a 50% organization (Internal Revenue Code 170). No deduction is allowed for a charitable contribution unless the taxpayer gathers the appropriate documentation and substantiation. Therefore the $1,477 is not deductible. The total amount of their itemized deductions is $19,402. This is an estimate because the research problem does......

Words: 326 - Pages: 2

Business Expense Deductions, Oil Company

...From: Jordan King Re: Case 3 Business Expense Deductions Executive Summary: A taxpayer, who became a 25% owner with Oil Company, paid back certain creditors of Oil Company when the Oil Company went bankrupt. The taxpayer is also a partner of an architectural firm whose primary customers were also creditors of Oil Company. The taxpayer deducted the debt repayment as a business expense of the firm. The IRS argues that the repayment is not an “ordinary and necessary” expense of the architectural firm and therefore cannot be deducted. It is determined that this case will be ruled in favor of the taxpayer. Facts: * Richard is a partner at a well-established architectural firm. * Richard invests enough to become a 25% owner of Oil Company. Oil Company goes bankrupt due to a drop in foreign oil prices. They cannot pay back their creditors. * Many of the creditors to Oil Company are also customers to Richard’s architectural firm. * The architectural firm starts to lose profits. Richard firmly believes this is due to his involvement with Oil Company. * Richard and his partner agree to use earnings of the architectural firm to pay back the creditors of Oil Company. They both believe this will improve their business profits. * The IRS is disallowing these deductions claiming they are neither ordinary nor necessary. Issues: According to Sec 162(a), There shall be allowed as a deduction all the ordinary and necessary expenses paid or incurred during the......

Words: 1477 - Pages: 6

Tax Treatment for Private Jet Expenses

...TAX TREATMENT OF PRIVATE JET EXPENSES Facts: Alex Jones owns a small software company, Find Donuts, Inc in Michigan. A patent on a smartphone application named Find Donuts which is designed to locate donuts shops, is the only asset of Find Donuts, Inc. With the intention of promoting the sales of the Find Donuts smartphone app and increasing company revenue, Alex Jones attended a computer conference in June 2010, in San Francisco. Alex also owns a Christmas tree farm in Oregon. Primary purpose of this farm being profit but not leisure, it qualifies as a business to be reported in Schedule C of Alex’s federal income tax return. In December 2010, Alex paid a visit to this farm to oversee the sales of trees. In July 2010, Alex flew to Honolulu, Hawaii to supervise the construction of two additional bedrooms to a house he owns there. He leases this house to a couple, and they operate the house as bed and breakfast (B&B). Those two newly constructed bedrooms were an addition to their B&B. For the above trips he made to San Francisco, Oregon and Hawaii in 2010, Alex used his Lear jet that he purchased in 2000 for 1 million. Each trip cost him $ 100,000. Issues: Does the operational cost for Alex Jones’ jet for the above three trips qualify to be deducted as a necessary or ordinary business expense incurred in conducting a trade or business under IRC Sec. 162? Conclusions: Alex Jones’s expense of $300,000 made in using his Lear jet to travel to three...

Words: 1193 - Pages: 5

Tax Deduction in the Philippines

...Tax Deduction Definition: Tax deductions pertain to taxes proper which do not include surcharges, penalties, or fines incident to delinquency. These are taxes which have been previously deducted from gross income and a refund of the same was received. Nature: According to NIRC Sec 34 C., taxes are deductible with the exception of those with respect to which the law does not permit deduction. (1) In General. - Taxes paid or incurred within the taxable year in connection with the taxpayer's profession, trade or business, shall be allowed as deduction, except (a) The income tax provided for under this Title; (b) Income taxes imposed by authority of any foreign country; but this deduction shall be allowed in the case of a taxpayer who does not signify in his return his desire to have to any extent the benefits of paragraph (3) of this subsection (relating to credits for taxes of foreign countries); (c) Estate and donor's taxes; and (d) Taxes assessed against local benefits of a kind tending to increase the value of the property assessed.  Provided, That taxes allowed under this Subsection, when refunded or credited, shall be included as part of gross income in the year of receipt to the extent of the income tax benefit of said deduction.    (2) Limitations on Deductions. - In the case of a nonresident alien individual engaged in trade or business in the Philippines and a resident foreign corporation, the deductions for taxes provided in paragraph (1) of this......

Words: 304 - Pages: 2

Deduction

...LESSON 12 DEDUCTIONS Dr Vandana Bansal STRUCTURE 12.0 Objectives 12.1 Introduction 12.2 Deductions from gross total income 12.3 Basic rules governing deductions under sections 80C to 80U 12.4 Deductions 12.5 Deductions to encourage savings 12.5.1 Deduction in respect of life insurance premium, etc.80C 12.5.2 Deduction in respect of pension fund 80CCC 12.5.3 Deduction in respect of contribution to pension scheme of central government 80CCD 12.6 Deductions for certain personal expenditure 12.6.1 Deduction in respect of medical insurance premium 80D 12.6.2 Deduction in respect of maintenance including medical treatment of dependent who is a person with disability - section 80DD 12.6.3 Deduction in respect of medical treatment - section 80DDB 12.6.4 Deduction in respect of repayment of loan taken for higher education - section 80E. 12.6.5 Amount of rent paid - section 80GG 12.7 Deductions for socially desirable activities 12.7.1 Donation to certain funds, charitable institution etc. (section 80G) 12.8 Deductions for persons with disability 12.8.1 Deduction allowed to a person with disability - section 80U __________________________________________________________________ 12.0 OBJECTIVES After studying the Unit you should be able to: • List the deductions available from gross total income • Know who is eligible for deduction • List the conditions for claiming deduction • Calculate the amount of each deduction......

Words: 4690 - Pages: 19

Income Tax Expense

...December 31, 2013 Corporate Tax Return Problem - first year of operation Cash $180,000 1,400,000 Other assets (fixed assets and bond investments) Accounts payable and other liabilities $250,000 Capital stock 1,000,000 Retained earnings Service revenue 700,000 Sec. 103 Interest income - State of North Carolina Bonds 50,000 Salary expense, payroll taxes, rent, depreciation, etc. 400,000 Sec. 1211, 1212 Loss on sale of capital assets 20,000 Trial Balance Total (before recording the income tax provision) $2,000,000 $2,000,000 Assume federal corporate income tax rate is 40% for all years, and there is no state income tax. 1 What is the amount of the corporation's GAAP net income before taxes? 3 Points Revenue $750,000 Note: Only two Expenses 420,000 accounts have bookNet income before income tax $330,000 tax differences. 2 Enter net income per books. Present adjustments needed to compute taxable income. 3 Points Net income per books $330,000 Less Municipal bond interest (50,000) Add capital loss 20,000 Taxable income $300,000 3 Compute the deferred tax account balance(s). 3 Points Capital loss $20,000 Tax rate 40% Deferred tax asset $8,000 4 Provide journal entry for income tax provision (current & deferred). Do not record an allowance account for the deferred tax account. Ignore uncertain positions when making this set of journal entries. 3 Points Current income tax expense 120,000 Current income tax payable 120,000 Deferred tax asset 8,000 Deferred tax benefit 8,000 5 Compute......

Words: 1362 - Pages: 6

Itemized Deductions

...Itemized Tax Deductions for Individuals: Data Analysis Sean Lowry Analyst in Public Finance February 12, 2014 Congressional Research Service 7-5700 www.crs.gov R43012 CRS Report for Congress Prepared for Members and Committees of Congress Itemized Tax Deductions for Individuals: Data Analysis Summary Reforming or limiting itemized tax deductions for individuals has gained the interest of policymakers as one way to increase federal tax revenue, increase the share of taxes paid by higher-income tax filers, simplify the tax code, or reduce incentives that might lead to inefficient economic behavior. However, limits on deductions could cause adverse economic effects or changes in the distributional burden of the federal income tax code. This report is intended to identify who claims itemized deductions, for how much, and for which provisions? This report analyzes data to inform the policy debate about reforming itemized tax deductions for individuals. In 2011, 32% of all tax filers chose to itemize their deductions rather than claim the standard deduction. In addition, the data indicate that both the share of tax filers who itemize their deductions and the amount claimed by each tax filer as adjusted gross income (AGI) increases. AGI is the basic measure of income under the federal income tax and is the income measurement before itemized deductions and personal exemptions are taken into account. Although higherincome tax filers are more likely to itemize their......

Words: 3452 - Pages: 14

Case Study Analysis (General Deductions U/S 37-Income Tax Act, 1961)

...Corporate Taxation | Case Study Analysis | Section 37: General Deductions | By | K Srilekha MBA | | I. FACTS: The assessee company who carried on the business of manufacture of silk was a member of Indian Silk Mills Association. The members entered into a working time agreement to restrict the working hours of the looms to 42 hours per week, so that over-production could be avoided. But, the members could transfer these loom hours amongst themselves. The assessee purchased loom hours from two members for a consideration of Rs 20 lakhs for a period of 6 months. The assessee claimed deduction of Rs. 20 lakhs as business expenditure, under section 37(1) of Income Tax Act. Is the claim justified? II. ANALYSIS OF FACTS: Each member of the association was manufacturing less than what it could have, if it was working full time. The members agreed to such an agreement as otherwise there would have been over-production of silk. The loom hours could be traded for, if you had an excess of them. Loom hours are the number of hours that you work your looms (mills) for. Section 37 speaks about ‘General Deductions’: Any expenditure not specifically covered by sections 30 to 36 is deductible under section 37, if the following conditions are satisfied: a) It should be in respect of business carried on by the assessee b) It should have been laid out or expended wholly or exclusively for the purpose of business c) It must have been incurred in the......

Words: 1476 - Pages: 6

Tax Research Project Treatment of Mba Expense

...Tax Research Memorandum To: Lauren Smith From: Date: May 18, 2012 Re: Tax Treatment of MBA education expenses Facts You incurred $15,000 in educational expenses in the course of earning a MBA. You want to deduct these expenses as an employee business expense in your tax return since your employer does not have an education expense reimbursement program. Issue The issue is (1) whether the education was required to keep your present salary, status or job and/or the education maintains or improves skills needed in your present work, and (2) whether the education was needed to meet the minimum educational requirements of your present trade or business, and (3) whether the education is part of a program of study that will qualify you for a new trade or business. Rule It has been established that education expenses can be deducted as business expenses when the education maintains or improves skills needed in your current work but the education was not needed to meet minimum requirements and did not qualify you for a new trade or business. Publication 970 (2011) Tax Benefits for education Federal Tax Regulations, Regulation, §1.162-5., Internal Revenue Service, Expenses for education Singleton-Clarke v. Commissioner, T.C. Summary Opinion 2009-182, Allemeier v. Commissioner, T.C. Memo. 2005-207 Blair v. Commissioner, T.C. Memo. 1980-488 Sherman v. Commissioner, T.C. Memo. 1977-301 Link v. Commissioner, 90 T.C. 460, 463-464 (1988) Schneider v.......

Words: 652 - Pages: 3

Bill Robinson - Tax File Deductions

...distributor. Joy has been deducting $20,000 as business losses from five years since she started business. IRS audited Mr. and Mrs. Robinson tax filings and disallowed deductions for business losses stating them under Hobby losses. --------------------------------- Johnson and Jason, CPAs 100 Dorsett Boulevard St.Louis, MO 63043 October 18, 2010 Mr. and Ms. Robinson 120 Boulevard Richmond Hill, Georgia 31324 Dear Mr. and Ms. Robinson This letter is in response for your request of our advice and review of your recent filed tax returns. Our conclusions are based upon the tax laws and research of different cases we have studied. After review of your tax situation, we came to conclusion that we do not have enough significant reasons to support deduction of Marketing Business losses. We can deduct losses only if we satisfy certain factors according to Regulation 1.183-2(b). There are nine factors under Regs. § 1.183-2(b) used to evaluate whether an activity is engaged in for profit. And the way the Marketing Business has been conducted Merely satisfy few of them. Please see brief explanation of the factors to understand why the direct marketing business deduction have been disallowed. (1) Manner in which taxpayer carries the activity: Even though the activity is conducted business like manner by keeping track of expenses, by preparing sales reports and by preparing business plans including goals, the books did not indicate that the plan has been......

Words: 1739 - Pages: 7

Tax Hw

...Tax HW6 30. $240*33mil=$7,920*0.56=$4,435 35. Airfare $1,500 Lodging $1,920* (5/8)=$1,200 Meals $1,440*(5/8)=$900/2=$450 Trans $ 120 Total $3,270 37. a. When the number of “business days” is greater than the number of "personal days" your travel is generally considered primarily for business. The IRS also gives you a break when counting the number of days spent on business by allowing you to count travel days as business days. b. While on a business trip, if you engage inn on-business-related activities, the IRS does not require you to prorate transportation costs incurred to and from your main destination. However, this does not include any extra, non-business-related days spent at the destination. If the trip is primarily for business, travel costs such as plane fare, a cab to the airport, and lodging can generally be deducted only the cost of meals, lodging, etc., for the business days are deductible-not for the personal vacation days. c. So the difference the number of business vs. vacation day makes is very Big when determining deductions. Could Monica have spent more vacation days. In terms of overall travel expenses. yes should could have spent more days vacationing without effecting these deductions. However for any extra day she vacationed this would have affected the meals and lodging benefits...so the answer is YES and NO. Depending on what aspect of deductions you were looking at. 39. The......

Words: 1023 - Pages: 5

How to Dig Up a Tax Deduction

...How Your Pet Can Dig Up a Tax Deduction Dan Caplinger Feb 6th 2015 6:00AM Americans love their pets, and they aren't afraid to open up their wallets to take care of them. Americans spent close to $60 billion on pet expenses during 2014, according to estimates from the American Pet Products Association. Between food, veterinary care and other supplies, it's easy for costs to add up. As the dog days of tax season approach, one question that many people have is whether there's any way they can get any sort of tax break for their pet expenses. As outlandish as it might sound, there actually are some perfectly legal tax deductions you can claim from what you spend on your pets. Before turning to those deductions, let's first take a look at what you can't do with pet expenses. Pet Dependent? Forget About It The most obvious tax break that might tempt you is the personal exemption for dependents, which on your 2014 return will give you a reduction of $3,950 on your taxable income. Certainly, your dogs, cats or other pets rely on you for their survival. But the Internal Revenue Service takes the view that only human dependents can qualify for the valuable personal exemption. Several other similarly enticing deductions also don't work. Veterinary care might cost you as much as a doctor's visit for yourself, but you're not allowed to deduct those vet charges as medical expenses on your tax return. Similarly, if you're traveling on business, you can't write off the......

Words: 869 - Pages: 4

Tax Federal Itemized Deduction

...and Mary Jane Blough have failed to keep records of their itemized deductions. The IRS now is asking for verification of these deductions. The standard deduction for the Blough’s is $11,900. If the amount of their itemized deductions is less than the standard deduction than they should have just taken the standard deduction and this audit would not be necessary. In the Blough’s case the total of their itemized deductions is much more than the standard deduction and therefore they must show verification if they want to itemize. The first deduction they took was in regards to medical expenses of $7,102 which only $1,477 was deductible because of the 7.5% floor of AGI from the taxpayer (Internal Revenue Code Sec. 213). The second deduction they took was taxes of $6,050 which are fully deductible as long as none of them are fees (Internal Revenue Code Sec 164). The third deduction they took was interest of $10,659 which is fully deductible depending on the type of interest that is involved (Internal Revenue Code 163). The last deduction they took was charitable contributions of $2,693 which are fully deductible as long they are donated to a 50% organization (Internal Revenue Code 170). No deduction is allowed for a charitable contribution unless the taxpayer gathers the appropriate documentation and substantiation. Therefore the $1,477 is not deductible. The total amount of their itemized deductions is $19,402. This is an estimate because the research problem......

Words: 326 - Pages: 2

Miscellaneous Tax Deductions

...If you have expenses that qualify as miscellaneous itemized deductions, you can deduct the total amount of those expenses only to the extent that they exceed 2% of your adjusted gross income. There are three types of expenses that are subject to the 2% limit. They are unreimbursed employee expenses, tax preparation fees and other expenses. For an explanation of deductible and nondeductible expenses refer to Publication 529, Miscellaneous Deductions. Certain unreimbursed employee expenses are deductible as miscellaneous itemized deductions on Form 1040, Schedule A. To be deductible, the expense must be: * Paid or incurred in the tax year * For carrying on your trade or business of being an employee, and * Ordinary and necessary You can deduct other expenses subject to the 2% limit that you pay to: * Produce or collect taxable income * Manage, conserve, or maintain property held for producing such income, or * Determine, contest, pay, or claim a refund of any tax http://www.irs.gov/taxtopics/tc508.html For example, you can donate a car to a homeless shelter and receive a miscellaneous itemized tax deduction. Congress enacted Title 26, Section 170 of the US Code which allows taxpayers to deduct the fair market value of property contributions or value of cash gifts to qualified, tax-exempt charities. The government does put a limit on the ceiling amount for a charitable donation to 50% of the taxpayer's AGI. Also, if the fair market value......

Words: 309 - Pages: 2