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The publication of this booklet is based on the IRS tax rules that were in effect on December 17, 2015 for the 2015 and 2016 tax years. This booklet is not intended to be a substitute for professional tax advice and should not be considered a substitute for consulting with a qualified tax professional. If you have further questions about your income tax situation and relocation expenses, please contact a qualified income tax professional.

© 2015 Equus Software, LLC

All rights reserved. This booklet was printed in the USA. No part of this booklet may be printed or reproduced without express written consent from the

publisher.

EQUUS SOFTWARE is the leader in state-of-the-art technology solutions for corporate workforce mobility. Our expat software product line includes US relocation tax gross-up software, web-based international assignment management/expatriate tracking software, and expat cost projection software. Our products are used by over 500 corporations, including many of the Fortune 100. Our experienced staff provides our customers with the best software, services and support available.

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Table of Contents

Introduction to Relocation—The Basics...............................................................................1

Employer-Assisted Relocation.................................................................................................2

Taxation of Relocation Expenses................................................................................................3

Who Can Deduct Moving Expenses?.........................................................................................4

Deductible Moving Expenses.......................................................................................................5

Other Deductible Expenses...........................................................................................................7

Accountable Plans vs. Nonaccountable Plans........................................................................9

How and When to Report Deductible Moving Expenses............................................10

Tax Assistance/Grossup................................................................................................................10

Year-End Tax Reporting Matters...............................................................................................14

Capital Gain or Loss from a Home Sale.................................................................................14

Overpayment of Social Security Taxes..................................................................................15

Multiple State Income Tax Returns......................................................................................16

Relocation FAQs..............................................................................................................................20

2015 Federal Income Tax Table..................................................................................................22

2016 Federal Income Tax Table..................................................................................................23

Exemptions, Phaseouts and Helpful Tax Information...................................................24

Introduction to Relocation—The Basics

Wikipedia defi nes relocation as “mov(ing)...from one place to another; to change one’s domicile or place of business.” It is common for employers to relocate or transfer employees from one work location to another, as they assume diff erent responsibilities within their company. To make relocating an attractive opportunity, employers often provide relocation assistance for their employees. When an employer decides to relocate an employee, both employer and employee need to consider several things.

The employer should have a company relocation policy in place to assist in determining how to compensate employees for their relocation. There are diff erent approaches a company may take for assessing appropriate compensation for relocation. For the most part, company policy determines what expenses will be reimbursed and if tax assistance will be provided to employees.

Employees need to consider all of the factors they would normally review when relocating and accepting new or diff erent employment, along with compensation and the impact of taxation of relocation expenses. The IRS requires that the majority of relocation expenses paid by an employer to, or on behalf of, an employee be treated as taxable income…which can signifi cantly increase an employee’s taxable wages without increasing his/her take-home pay.

The purpose of this booklet is to outline which relocation expenses are

taxable, which items are deductible, and which moving expenses should

not be included as taxable income. We will cover other relocation issues

which may aff ect your income tax return to assist you in understanding

the impact of a move on your tax situation.

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Domestic Relocation A domestic relocation occurs when an employee is transferred from one work location to another within the United States for the purpose of staying there long term. It is designed to be a one-way, one-time move for an employee and is the main focus of this booklet.

Short-Term Domestic Assignments Not discussed in this booklet are short-term assignments. These are work assignments within the US lasting less than one year and are not intended to permanently transfer an employee to a diff erent work location. Usually, if an employee is on short-term assignment the employee maintains a home in the employee’s original work location and travels to the employee’s new work location for periods of time.

Certain expenses, such as meals, transportation, and temporary housing or lodging are not included as taxable wages to an employee if incurred during a short-term assignment. If your employer does not pay for or reimburse you for expenses incurred while on short-term domestic assignment, these expenses may be deducted as unreimbursed business expenses on your tax return.

Foreign RelocationInternational relocation is highly complex. This publication does not discuss relocations that involve transfer out of the US to another country, transfer from another country to work in the US, or employment of non-citizens of the US.

Employer-Assisted Relocation

In general, employers have a relocation policy that determines how they compensate their employees and how they manage expenses. Companies determine how much to pay for relocating an employee and if they want to track and reimburse each expense incurred or provide employees with a Lump Sum Payment to cover relocation costs.

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By providing assistance in the form of a Lump Sum Payment, it is easier for the employer to manage a relocating employee. These plans usually cover the entire cost of relocation and are included as taxable wages on an employee’s Form W-2. If you are the recipient of a Lump Sum Payment for relocation, it is your responsibility to keep track of your relocation-related expenses so the qualifying deductions can be made when preparing your income tax return.

Often, relocation companies are engaged by employers to assist in tracking the relocation and related expenses of employees. This helps employees by ensuring that all expenses are captured, reimbursed, and reported correctly; it helps employers by eliminating the need to allocate additional internal resources (human resources, payroll, accounting, and so on) to assist with relocation.

Taxation of Relocation Expenses

The IRS dictates the reportability and taxability of compensation to an employee related to an employer-assisted move, as well as the deductability of expenses related to the move: your move must meet three tests for certain expenses to qualify as deductions. If a move meets all three tests, only specifi c expenses outlined in this section can be deducted as moving expenses on your income tax return.

Note: While certain expenses may be deductible, they are not ‘itemized deductions.’ They are deducted from a diff erent part of your income tax return. These deductions are subtracted from your taxable income and will lower your Adjusted Gross Income (AGI). Qualifi ed moving expense deductions can benefi t all taxpayers, even those who do not itemize their tax deductions.

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Who Can Deduct Moving Expenses? The IRS Tests

You can deduct your moving expenses if you meet all three of the following requirements.

1. Your move is closely related to the start of work2. You meet the distance test3. You meet the time test

1) Move Related to Start of WorkYour move must be closely related, both in time and in place, to the start of work at your new job location.

You can generally consider moving expenses incurred within one year from the date you fi rst reported to work at the new location as closely related in time to the start of work. It is not necessary that you arrange to work before moving to a new location, so long as you actually go to work in that location. If you do not move within one year of the date you begin work, you ordinarily cannot deduct the expenses unless you can show that circumstances existed that prevented the move within that time.

You can generally consider your move closely related in place to the start of work if the distance from your new home to the new job location is not more than the distance from your former home to the new job location.

2) Distance TestYour 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. If you live and work in Sacramento, California, and your company transfers you to Danbury, Connecticut, you have obviously met the distance test. If you live and work in Dallas, Texas, and accept work in Fort Worth, Texas, your new work location must be at least 50 miles farther from your home than your work location in Dallas to qualify.

3) Time TestTo deduct your moving expenses, you also must meet the time test for employees or self-employed persons. After relocating to a new area and


beginning work, you must work 39 weeks out of the next year if you are an employee. If you are self employed, you must work 78 weeks out of the fi rst two years at the new location. All work must be full-time employment as defi ned by the industry in which you are working, in that area, at that time.

If you meet all three of the tests your move is a qualifi ed move and you are able to deduct certain moving expenses on your federal tax return.

Deductible Moving Expenses

The IRS limits and defi nes which relocation expenses are deductible on your federal income tax return. If you meet the three tests for a qualifi ed move, you may deduct:

• the cost of moving your personal eff ects and household goods from your original home to your new home (including some short-term storage costs, if necessary)

• the traveling costs of moving you and your family from your original location to your new location

Moving Your Household GoodsThe IRS allows a deduction for the cost to move your household goods from your original residence to your new residence. This includes:

• costs to pack up, crate and ship or move items from your main residence, as well as some short-term storage costs

• costs associated with storing your household goods for up to 30 consecutive days after they have been moved from your original home and before they are delivered to your new home

• costs associated with connecting or disconnecting utilities required as the result of your move

• costs of shipping your cars and pets to your new home

If you have personal property or household goods stored in a location other than your primary residence, you may deduct the cost of moving those goods to your new home. But the deduction amount is limited to the amount it would cost to move them from your original home location.

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EXAMPLE: John and Lisa live together in a home they purchased when they were married three

years ago. Prior to their marriage, Lisa purchased a condominium in Olympia, WA, which she

converted to a furnished rental property when she moved to Seattle with John. In preparing for

their job transfer and move to Chicago, Lisa is going to sell her condo and arrange to have her

Olympia furnishings shipped. She can either have them sent to Seattle ($250) and then have them

moved with the rest of her furnishings to Chicago ($800) or arrange to have them sent directly to

Chicago from Olympia ($1000). The maximum amount she can deduct for moving these goods from

Olympia to Chicago is the cost of moving them from Seattle to Chicago ($800) since her home in

Seattle is her primary residence.

If you decide to transport your household goods yourself, the IRS will allow a deduction for lodging for yourself and your family while en route to your new home location. They will also allow for one additional night of lodging if you are unable to stay in your home because everything is packed. Members of your family do not all have to travel together at the same time, but the IRS limits the deduction of expenses allowed for moving trips to one trip per family member. You may deduct actual expenses paid for transportation or the standard mileage rate of 23.0 cents per mile for 2015.

EXAMPLE: Greg and Linda have a son who is living at home while attending a local college. Greg is

being transferred from his job in Atlanta, GA, to a new position with his company at their offi ce in

Memphis, TN. Greg and Linda are able to deduct the costs of two moving trips to Memphis if they

decide to drive and move themselves (one trip for Greg and one for Linda). They can deduct the cost

of a third trip, if their son is still claimed as a dependent on their income tax returns and is moving

with them to Tennessee.

Traveling CostsYou may deduct the traveling costs for moving you and your family from your original location to your new location. If traveling by air, you can deduct the airfare cost. If traveling by car, the actual cost of gas and oil or the standard mileage rate ($0.230/mile for 2015) can be deducted.

Whether you use actual expenses or the standard mileage rate to fi gure your expenses, you can deduct the parking fees and tolls you pay to move. You can deduct lodging expenses between the two locations. However, meals and other incidental expenses are not deductible. You


may only deduct costs associated with traveling the shortest distance possible between your original residence and your new residence.

EXAMPLE: Jason and Amanda have been living in Los Angeles. Amanda was off ered a new job

through her company in Tucson, AZ. Jason and Amanda are planning on having their household

goods shipped to their new home and plan to stop at the Grand Canyon on their way to Tucson.

Since the Grand Canyon isn’t directly in between Los Angeles and Tucson (it is 230 miles north of

the shortest travel route between the two cities), the cost to travel to this location is not deductible.

They can only deduct the cost to travel between LA and Tucson, through the shortest route possible.

They will need to separate out their Grand Canyon travel expenses from the rest of their travel

expenses for tax purposes.

Other Deductible Expenses

There are some expenses which you may incur at the time of a move that do not qualify as moving expenses, but may be deducted as an unreimbursed business expense or an itemized deduction on your income tax return.

Usually these other expenses are tied to the sale or purchase of a home. When purchasing a home in your new work location, points, mortgage interest, or real estate taxes may be paid by your employer on your behalf. Additionally, some employers may assist their employees by paying duplicate housing costs. Any points, mortgage interest, and property taxes paid as a result of a home purchase, home sale, or duplicate housing reimbursement are deductible as itemized deductions on your IRS Form 1040 Schedule A. Please see the section on Year End Tax and Reporting Matters for more information.

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Helpful TipReviewing your settlement statements from your home sale and/or purchase may capture some property taxes or mortgage interest paid and not reported on your Form 1098. It is a good idea to reconcile the Form 1098 you receive at the end of the year with your settlement statement.

It is important that you are not ‘double deducting’ expense items on your tax return. For example, you may not deduct an item as a moving expense and also deduct the same expense as an unreimbursed business expense or include it as another type of deduction. You should determine which expenses are qualifi ed deductible moving expenses and include them as moving deductions only.

Expenses considered deductible moving expenses:

• Costs for movers (to pack and move household goods)• Tips paid to movers• Costs to move family• Costs to move pets• Costs to move cars• Travel from original home location to new home • Short-term storage costs (up to 30 consecutive days)

Expenses not considered deductible moving expenses:

• Any costs associated with purchasing or selling a home (some expenses may be added to the cost basis of your home for determining a gain or loss on your home sale)

• Capital losses on the sale of your home • Car registration and licensing in new location• Costs to get a new drivers license • Charges for breaking a lease or security deposits• Charges for breaking memberships in clubs• Home improvement costs to put your home on the market • Homeowners Association (HOA) fees• Househunting trips/expenses• Temporary living expenses• Return trips to former residence

You will need to complete IRS Form 3903 to deduct your qualifi ed moving expenses and include it with your federal income tax return. For more information on how to complete this form, please fi nd our

instructions and sample on pages 12-13 of this booklet.


Accountable Plans vs. Nonaccountable Plans

There are two types of reimbursement plans used by employers. The two types of plans are accountable plans and nonaccountable plans. The type of reimbursement plan determines how your employer will report your moving expense reimbursements to the IRS. If you are unsure which type of plan was used for your relocation, contact your employer.

In accountable plans, employer reimbursements must meet three

rules:

• Your expenses must be deductible moving expenses and must be incurred while working for your employer.

• You must adequately account to your employer for these expenses (provide receipts, statements, invoices, cancelled checks, etc.).

• You must return any excess reimbursements, advances or allowances within a reasonable period of time.

If your plan meets all three of these rules, your deductible moving expense reimbursements will be included in box 12 of your Form W-2 with code ‘P’ next to the amount reimbursed.

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Items included in box 12 are for reporting purposes only. These expense reimbursements are not included as income in box 1. Since they are not included in your income, no deduction can be taken for these expenses. Such expense reimbursements are often referred to as Excludable Expense Reimbursements as they are excluded from your income.

Nonaccountable plans are all relocation expense reimbursement plans that do not meet the three rules listed above to qualify as accountable plans. Reimbursements of non-deductible moving expenses are always treated as being paid under a nonaccountable plan. For nonaccountable plans your employer is required to add all relocation expense reimbursements to your taxable wages (included in box 1 on the employee’s Form W-2) and to withhold applicable taxes.

Amounts Paid to a Third Party

Instead of reimbursing you for relocation expenses, your employer may elect to pay a third party directly for expenses on your behalf. If your employer pays a third party for deductible moving expenses (as previously defi ned) on your behalf, such payments are not reported anywhere on your Form W-2. If your employer pays a third party for non-deductible moving expenses on your behalf, such payments are added to your income, and included in box 1 of your Form W-2.

How and When to Report Deductible Moving Expenses

Deductible moving expenses should be reported on IRS Form 3903. The total allowable amount (line 5 of Form 3903) of your moving deduction is carried over to your Form 1040 (to line 26).

If you are reimbursed for moving expenses, you can deduct your moving expenses either in the year you paid for the moving expenses or in the year you were reimbursed for them. Typically, this will be the same year. If you were not reimbursed for your moving expenses, you should report your moving expense deduction on your tax return in the year you pay the expenses.

Tax Assistance/Grossup

Tax assistance or grossup (GUP) is an added benefi t some employers provide to their transferred employees. Since a great deal of relocation expenses are required by the IRS to be added as taxable income to a transferred employee’s Form W-2, employer-assisted relocation has the potential to signifi cantly increase your taxable wages and your tax burden.

Caution: Relocation expenses have the potential to not only increase the amount of income on which taxes are paid, but the additional income may push you into higher tax brackets, and may cause a ‘phaseout’ of deductions and credits you might otherwise qualify for.

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Sometimes an employer will elect to provide additional tax assistance to off set the additional tax burden caused by the additional income. This is called a grossup. Employers are under no obligation whatsoever to provide a relocated employee with a grossup. You should refer to your employer’s relocation policy to see if your employer provides any sort of tax assistance.

If your employer does provide tax assistance in the form of a grossup, there is no right or wrong way to calculate the grossup amount. You should refer to your employer’s relocation policy for details on how the grossup amount is calculated. The following list of questions provides a sample of some of the issues to consider when analyzing your grossup calculation:

• Are all moving expenses grossed up?• What income is considered?• Which taxing authorities are considered?• Is my fi ling status taken into consideration?• Is my family size taken into consideration?• What tax rates are used in the calculation, and how are they

determined?• Are itemized deductions considered in the calculation, and how is the

amount to use calculated?• Does the calculation consider any phaseouts of deductions,

exemptions, or credits to which I would have been entitled?

The grossup calculation can become quite complex depending on the methodology used. Because of the variables involved in calculating a grossup, the grossup amount is rarely intended to compensate you for 100% of any increased tax burden. (You should not expect to be “made whole.”).

Generally, the grossup amount is intended to provide assistance, and to help off set any additional tax liability. Tax assistance or grossup payments do not qualify as deductible moving expenses. Accordingly, any amount that your employer provides for tax assistance will be added to your income, and reported in box 1 of Form W-2.

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a Employee’s social security number

OMB No. 1545-0008

Safe, accurate,

FAST! Use

Visit the IRS website at www.irs.gov/efile

b Employer identification number (EIN)

c Employer’s name, address, and ZIP code

d Control number

e Employee’s first name and initial Last name Suff.

f Employee’s address and ZIP code

1 Wages, tips, other compensation 2 Federal income tax withheld

3 Social security wages 4 Social security tax withheld

5 Medicare wages and tips 6 Medicare tax withheld

7 Social security tips 8 Allocated tips

9 10 Dependent care benefits

11 Nonqualified plans 12a See instructions for box 12Co d e

12bCo d e

12cCo d e

12dCo d e

13 Statutory employee

Retirement plan

Third-party sick pay

14 Other

15 State Employer’s state ID number 16 State wages, tips, etc. 17 State income tax 18 Local wages, tips, etc. 19 Local income tax 20 Locality name

Form W-2 Wage and Tax Statement 2015

Department of the Treasury—Internal Revenue Service

Copy B—To Be Filed With Employee’s FEDERAL Tax Return.

This information is being furnished to the Internal Revenue Service.


23048.75 141380.37

XX-XXXXXXXX

7347.00

XXX-XX-XXXX

CO XXXXXXXX 91325.37

Scott X. Sample1234 Oak StreetAnytown, TX 71234

141380.37 2050.02

5740.53

118500.00

EXAMPLE: In this example, Scott Sample has been reimbursed for $1892 of deductible moving expenses (Form W-2, box 12). Scott also paid $720 in deductible moving expenses which were not reimbursed by his employer ($500 in tips to his moving company and $220 to get his water and sewage lines connected at his new residence). Since the majority of his deductible moving expenses were reimbursed by his employer and excluded from his wages (as shown in box 12 of his Form W-2) the only amount he can deduct as a moving expense is the $720 he was not reimbursed for.

The Best Company1111 Acme RoadAnytown, CA 91000

If all of your deductible moving expenses are reimbursed by your employer and included in box 12 of your Form W-2, line 5 of Form 3903 will be zero. If you have deductible moving expenses not reimbursed by your employer, the sum of these expenses will appear on line 5 of Form 3903.

$1,892.00

P 1892.00

Form 3903Department of the Treasury Internal Revenue Service (99)

Moving Expenses

Information about Form 3903 and its instructions is available at www.irs.gov/form3903. Attach to Form 1040 or Form 1040NR.

OMB No. 1545-0074

2015Attachment Sequence No. 170

Name(s) shown on return Your social security number

Before you begin: See the Distance Test and Time Test in the instructions to find out if you can deduct your moving expenses. See Members of the Armed Forces in the instructions, if applicable.

1 Transportation and storage of household goods and personal effects (see instructions) . . . 1

2

Travel (including lodging) from your old home to your new home (see instructions). Do not include the cost of meals . . . . . . . . . . . . . . . . . . . . . . . . 2

3 Add lines 1 and 2 . . . . . . . . . . . . . . . . . . . . . . . . . . 3

4

Enter the total amount your employer paid you for the expenses listed on lines 1 and 2 that is not included in box 1 of your Form W-2 (wages). This amount should be shown in box 12 of your Form W-2 with code P . . . . . . . . . . . . . . . . . . . . . . . . 4

5 Is line 3 more than line 4?

No. You cannot deduct your moving expenses. If line 3 is less than line 4, subtract line 3 from line 4 and include the result on Form 1040, line 7, or Form 1040NR, line 8.

Yes. Subtract line 4 from line 3. Enter the result here and on Form 1040, line 26, or Form1040NR, line 26. This is your moving expense deduction . . . . . . . . . 5

For Paperwork Reduction Act Notice, see your tax return instructions. Cat. No. 12490K Form 3903 (2015)

Distance Test Worksheet Keep a Copy for Your Records

1. Number of miles from your old home to your new workplace . . . . . . . . . . . 1. miles

2. Number of miles from your old home to your old workplace . . . . . . . . . . . . 2. miles

3. Subtract line 2 from line 1. If zero or less, enter -0- . . . . . . . . . . . . . . . 3. miles

Is line 3 at least 50 miles?

Yes. You meet this test. No. You do not meet this test. You cannot deduct your moving expenses. Do not complete Form 3903.

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1565

8

1557

X

X

Scott X. Sample XXX XX XXXX

720 00

720 00

2612 00

1892 00

1892 00$1,892.00

General Instructions

Future DevelopmentsFor the latest information about developments related to Form 3903 and its instructions, such as legislation enacted after they were published, go to www.irs.gov/form3903.

What’s New

For 2015, the standard mileage rate for using your vehicle to move to a new home is 23 cents a mile.

Purpose of Form Use Form 3903 to figure your moving expense deduction for a move related to the start of work at a new principal place of work (workplace). If the new workplace is outside the United States or its possessions, you must be a U.S. citizen or resident alien to deduct your expenses.

If you qualify to deduct expenses for more than one move, use a separate Form 3903 for each move.

For more details, see Pub. 521, Moving Expenses.

Moving Expenses You Can Deduct You can deduct the reasonable expenses of moving your household goods and personal effects and of traveling from your old home to your new home. Reasonable expenses can include the cost of lodging (but not meals) while traveling to your new home. You cannot deduct the cost of sightseeing trips.

Who Can Deduct Moving Expenses If you move to a new home because of a new principal workplace, you may be able to deduct your moving expenses whether you are self-employed or an employee. But you must meet both the distance and time tests that follow. Also, your move must be closely related both in time and place to the start of work at your new job location. For more details, see Pub. 521.

TIPMembers of the Armed Forces may not have to meet the distance and time tests. See Members of the Armed Forces later in the instructions.

Distance Test Your new principal workplace must be at least 50 miles farther from your old home than your old workplace was. For example, if your old workplace was 3 miles from your old home, your new workplace must be at least 53 miles from that home. If you did not have an old workplace, your new workplace must be at least 50 miles from your old home. The distance between the two points is the shortest of the more commonly traveled routes between them.

TIPTo see if you meet the distance test, you can use the worksheet below.

Year-End Tax Reporting Matters

As a result of your relocation, your Form W-2 may look considerably diff erent than it has looked in past years:

• Non-deductible moving expenses paid to you and on your behalf will be added to your income, which will increase the amount of wages on your Form W-2.

• If you were the recipient of a Lump Sum Payment, this amount will be added to your income.

• Deductible moving expenses paid to you will appear in box 12 of your Form W-2.

• You may have income reported to multiple states and show income tax withholding in those states.

You may want to review the amounts reported to each state, to determine that the amounts were properly allocated to the states in which you earned your wages. In most cases if your employer provided tax assistance or a grossup, these additional tax amounts will already be added to your withholding amounts (as well as your income) on your Form W-2. If you transferred from one division of a company to another, you may be provided with separate Forms W-2 showing income and withholding for each division.

If you are relocating and your employer is reimbursing you for expenses, you should receive an expense summary report at the end of the year with your Form W-2. Your expense summary report should include all of the expenses your employer paid directly to you, or paid on your behalf for your relocation. It should outline the amounts excluded from wages (deductible relocation expenses) and the amount of tax assistance provided. You should be able to reconcile the amounts on your expense summary report to the amounts on your Form W-2.

Capital Gain or Loss from a Home Sale

If you sell your primary residence, you may be allowed to exclude up to $500,000 (for married fi ling joint taxpayers) of capital gain from your income ($250,000 for taxpayers with a fi ling status of single).


The IRS has two tests you must meet to qualify for exclusion of the capital gain on your home sale:

• You must have lived in the home for two of the last fi ve years prior to the date of its sale.

• You must have owned the home for at least two of the last fi ve years prior to the date of its sale.

If your fi ling status is married fi ling joint, both you and your spouse are required to meet the two IRS tests to exclude the full amount of allowable capital gain. If for some reason you do not meet the two tests, you may still be allowed to exclude part of the gain. Please see IRS Publication 523 for more information.

If you have any taxable gain on the sale of your main home that cannot be excluded, you will need to report it on IRS Schedule D, Capital Gains and Losses. If you have a loss on the sale of your main home for which you received a Form 1099-S, you must report the loss on Schedule D even though the loss is not deductible.

To fi gure out the amount of capital gain or loss on the sale of your primary residence take:

The Selling Price

Minus Selling Expenses (commissions, advertising, etc)to get the Amount Realized

Take the Amount Realized

Minus the Adjusted Basis (cost basis or other basis)to get the amount of GAIN or LOSS

Overpayment of Social Security Taxes

If you have more than one employer during the year, or if you are transferred from one division to another division within a company that has separate payroll systems, you may end up overpaying Social Security taxes. Social Security taxes (OASDI) are assessed at a rate of 6.2% for the fi rst $118,500 of wages for the 2015 tax year.

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Multiple State Income Tax Returns

When working and living in multiple states, you will need to complete multiple state income tax returns at the end of the year. You will most likely fi le part-year resident returns for the states in which you lived and worked. You may also be required to fi le local income tax returns.

It is important that all income, deductions, and credits be allocated properly to each state when completing your income tax returns. Wages earned by state are already allocated on your Forms W-2. Diff erent methods exist for allocating other income; the most common is allocating based on the actual dates when the income was earned (dividend income, gains/losses, and so on can usually be tied to the date that they were paid). The other common method is to determine a percentage of time spent living in each location and allocate your income based on that percentage.

If you are preparing your income taxes yourself with one of the popular pre-packaged software programs, the program will pick up this overpayment of tax automatically when you key in your Form W-2 information.

That means the maximum amount of OASDI taxes that you should pay is $7,347.00 in 2015. If you work for more than one employer or are paid through more than one payroll system, you may have paid more than the maximum amount of OASDI taxes for the year. This is due to the fact that one payroll system does not know that you have already paid taxes under another payroll system. Any overpayment of OASDI taxes can be claimed on your Federal Income Tax return (line 71 of Form 1040) as excess Social Security tax withheld.

Generally speaking, states follow the IRS regulations with respect to moving expenses. However, diff erences do exist. The most notable exceptions are the states of New Jersey and Pennsylvania. Both of these states consider the cost for meals incurred during the move from your old home to your new home to be deductible moving expenses. In addition, the distance requirement for the state of Pennsylvania is 35 miles as opposed to the 50 miles required by the IRS.

The following states do not allow for itemized deductions on their state income tax returns: Connecticut, Illinois, Indiana, Massachusetts, Michigan, New Jersey, Ohio, Pennsylvania, Rhode Island, and West Virginia. Utah and Wisconsin do not allow for itemized deductions in the same manner as the IRS; however, they do allow a credit based on the amount of itemized deductions allowed by the IRS.

There are also nine states that do not tax wages (including non-deductible moving expenses, which are considered wages by the IRS). These states are Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington, and Wyoming.

EXAMPLE: Employee Moving Expense Report, Form W-2, and IRS Form 3903

On the following page, we have included an example for transferee “Joe Example.” This example shows Joe’s Employee Moving Expense Information report for the Tax Year 2015, Form W-2 and Form 3903. In this instance, Joe has $3,500 of Qualifi ed Moving Expenses paid to him, excluded from his wages and included in box 12 of his Form W-2.

Joe has $10,000 of Qualifi ed Moving Expenses which were paid to a third party, not included on his Form W-2 and excluded from his wages. Joe does not have any unreimbursed moving expenses (all of his qualifed moving expenses were reimbursed by his employer or paid to a third party by his employer) so his moving expense deduction (as calculated on IRS Form 3903) is zero.

TA X Y E A R S 2 0 1 5 A N D 2 0 1 6 | 1 7

This amount is the total of all mortgage interest, points and property taxes paid by the employer to this employee and on their behalf. This total may be added to their itemized deductions on Form 1040 Schedule A of their Federal Income Tax return. The employee should only enter this amount on Form 1040 Schedule A if it has not been included on any Form 1098 mortgage interest statements.


This is the total amount of tax assistance (Grossup) paid by the employer on behalf of the employee. These payments are to help off set additional income tax liabilities an employee may incur as the result of relocation. These amounts are paid directly to the appropriate taxing authorities and included in the appropriate withholding boxes on Form W-2.

This is the total amount of deductible moving expenses paid to this employee. This amount will appear in box 12 of their Form W-2 (code ‘P’). The amounts in the same column, separated by transportation of goods and travel are the amounts which will be included on IRS Form 3903 to calculate the Moving Expense Deduction for line 26 on their Federal Income Tax Return. This total was excluded from taxable income.

Form 3903Department of the Treasury Internal Revenue Service (99)

Moving Expenses

Information about Form 3903 and its instructions is available at www.irs.gov/form3903. Attach to Form 1040 or Form 1040NR.

OMB No. 1545-0074

2015Attachment Sequence No. 170

Name(s) shown on return Your social security number

Before you begin: See the Distance Test and Time Test in the instructions to find out if you can deduct your moving expenses. See Members of the Armed Forces in the instructions, if applicable.

1 Transportation and storage of household goods and personal effects (see instructions) . . . 1

2

Travel (including lodging) from your old home to your new home (see instructions). Do not include the cost of meals . . . . . . . . . . . . . . . . . . . . . . . . 2

3 Add lines 1 and 2 . . . . . . . . . . . . . . . . . . . . . . . . . . 3

4

Enter the total amount your employer paid you for the expenses listed on lines 1 and 2 that is not included in box 1 of your Form W-2 (wages). This amount should be shown in box 12 of your Form W-2 with code P . . . . . . . . . . . . . . . . . . . . . . . . 4

5 Is line 3 more than line 4?

No. You cannot deduct your moving expenses. If line 3 is less than line 4, subtract line 3 from line 4 and include the result on Form 1040, line 7, or Form 1040NR, line 8.

Yes. Subtract line 4 from line 3. Enter the result here and on Form 1040, line 26, or Form1040NR, line 26. This is your moving expense deduction . . . . . . . . . 5

For Paperwork Reduction Act Notice, see your tax return instructions. Cat. No. 12490K Form 3903 (2015)

Joseph A. Example

0 00

3500 00

3500 00

3500 00

0 00

X

XXX XX XXXX

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144280.37

XX-XXXXXXXX

The Best Company1111 Acme RoadAnytown, CA 91000

XXX-XX-XXXX

CA XXXXXXXX 91325.37 5740.53

144280.37

118500.00

52955.00 2999.35 MN XXXXXXXX

Joseph A. Example123 Main StreetAnytown, CA 91001

23048.75

P 3500.00

2092.07

7347.00

a Employee’s social security number

OMB No. 1545-0008

Safe, accurate,

FAST! Use

Visit the IRS website at www.irs.gov/efile

b Employer identification number (EIN)

c Employer’s name, address, and ZIP code

d Control number

e Employee’s first name and initial Last name Suff.

f Employee’s address and ZIP code

1 Wages, tips, other compensation 2 Federal income tax withheld

3 Social security wages 4 Social security tax withheld

5 Medicare wages and tips 6 Medicare tax withheld

7 Social security tips 8 Allocated tips

9 10 Dependent care benefits

11 Nonqualified plans 12a See instructions for box 12Co d e

12bCo d e

12cCo d e

12dCo d e

13 Statutory employee

Retirement plan

Third-party sick pay

14 Other

15 State Employer’s state ID number 16 State wages, tips, etc. 17 State income tax 18 Local wages, tips, etc. 19 Local income tax 20 Locality name

Form W-2 Wage and Tax Statement 2015

Department of the Treasury—Internal Revenue Service

Copy B—To Be Filed With Employee’s FEDERAL Tax Return.

This information is being furnished to the Internal Revenue Service.

Relocation FAQs

Q. My husband was relocated this year. He started working at his new job location in April, but the kids and I did not move until July. Which date should I use for my relocation date?

A. The relocation date for you and the kids would be the July date. Any income earned by you should be allocated using this date. The relocation date for your husband would be the date in April. Any income earned by your husband should be allocated using this date.

Q. We received a lump sum reimbursement for our relocation. Can we deduct our deductible moving expenses even though we were ‘reimbursed’ through the Lump Sum Payment we received?

A. Yes. Your employer should have added the entire amount of the lump sum to your income. Accordingly, you are able to take a moving expense deduction for the entire amount of deductible moving expenses you incurred. You will need to complete Form 3903 to calculate the amount of your moving expense deduction. You will also want to keep receipts/documentation to support any amount claimed as deductible moving expenses in the event of an IRS audit.

Q. We moved and had to stay in temporary housing for three months while we found a home. I know I can only deduct 30 days of storage costs, but what about the cost to transport my household goods from storage to my new home? Is that cost deductible?

A. Yes. The IRS considers the cost to move your household goods from storage to your new home to be a deductible moving expense. The IRS also considers the cost to move your household goods from your old home into storage to be a deductible moving expense.


Q. We usually get a tax refund every year. This year we owe taxes. How do I tell if my grossup (tax assistance) amount was correct?

A. To determine whether or not your grossup amount is correct, you must fi rst understand how your employer determines your grossup amount. This should be explained in your employer’s relocation policy. Even if your grossup amount is correct, it is still possible that you will incur an additional tax burden. This is due to the fact that employer provided tax assistance is rarely intended to make you whole.

While there are numerous components of a grossup calculation that can prevent you from being made whole, there are two issues that most frequently cause your tax assistance to be less than your additional tax liability:

1. The fi rst issue is that your employer may have reimbursed you for certain expenses without providing tax assistance on those expenses. This is often the case with miscellaneous expense allowances, relocation bonuses, home sale bonuses, and loss-on-sale payments.

2. The other issue is that most employers use only “company-source” income in their grossup calculation. If you have a working spouse or other sources of income in addition to your wages, it is possible that the tax assistance provided by your employer will be less than the increase to your tax liability.

Q. In looking at my W-2, the wage amount looks high. How can I tell if the amount is correct?

A. To determine whether or not your Form W-2 is correct, you should fi rst determine your annual salary and any bonuses paid as wages. The diff erence between that amount and your gross wages should equal the sum total of your taxable relocation expenses.

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2015 Federal Income Tax Table

Filing Status Tax Rate Income Range

Married FilingJoint

10% $0 - $18,450

15% $18,451 - $74,900

25% $74,901 - $151,200

28% $151,201 - $230,450

33% $230,451 - $411,500

35% $411,501 - $464,850

39.6% $464,851 and above

Single

10% $0 - $9,225

15% $9,226 - $37,450

25% $37,451 - $90,750

28% $90,751 - $189,300

33% $189,301 - $411,500

35% $411,501 - $413,200

39.6% $413,201 and above

Head of Household

10% $0 - $13,150

15% $13,151 - $50,200

25% $50,201 - $129,600

28% $129,601 - $209,850

33% $209,851 - $411,500

35% $411,501 - $439,000

39.6% $439,001 and above

MarriedFiling

Separate

10% $0 - $9,225

15% $9,226 - $37,450

25% $37,451 - $75,600

28% $75,601 - $115,225

33% $115,226 - $205,750

35% $205,751 - $232,425

39.6% $232,426 and above


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2016 Federal Income Tax Table

Filing Status Tax Rate Income Range

Married FilingJoint

10% $0 - $18,550

15% $18,551 - $75,300

25% $75,301 - $151,900

28% $151,901 - $231,450

33% $231,451 - $413,350

35% $413,351 - $466,950

39.6% $466,951 and above

Single

10% $0 - $9,275

15% $9,276 - $37,650

25% $37,651 - $91,150

28% $91,151 - $190,150

33% $190,151 - $413,350

35% $413,351 - $415,050

39.6% $415,051 and above

Head of Household

10% $0 - $13,250

15% $13,251 - $50,400

25% $50,401 - $130,150

28% $130,151 - $210,800

33% $210,801 - $413,350

35% $413,351 - $441,000

39.6% $441,001 and above

MarriedFiling

Separate

10% $0 - $9,275

15% $9,276 - $37,650

25% $37,651 - $75,950

28% $75,951 - $115,725

33% $115,726 - $206,675

35% $206,676 - $233,475

39.6% $233,476 and above


$4,000 $4,050 Married Filing Joint $309,900 $311,300 Single $258,250 $259,400 Head of Household $284,050 $285,350 Married Filing Separate $154,950 $155,650 Married Filing Joint $12,600 $12,600 Single $6,300 $6,300 Head of Household $9,250 $9,300 Married Filing Separate $6,300 $6,300 Married Filing Joint $309,900 $311,300 Single $258,250 $259,400 Head of Household $284,050 $285,350 Married Filing Separate $154,950 $155,650

$1,000 $1,000

$.230/mile $.190/mile

$.575/mile $.540/mile

25%/39.6% 25%/39.6% Wage Base Limit $118,500 $118,500 Tax Rate 6.20% 6.20% Maximum Withholding $7,347 $7,347

1.45% 1.45%

0.90% 0.90% Married Filing Joint $250,000 $250,000 Single $200,000 $200,000 Head of Household $200,000 $200,000 Married Filing Separate $125,000 $125,000

AdditionalMedicareThreshold

Moving Mileage Rate

Business Mileage Rate

Supplemental Withholding Rate

SocialSecurity (OASDI)

Medicare Tax Rate

Additional Medicare Tax Rate

Child Tax Credit

Exemptions, Phase Outs and Helpful Tax Information 2015 Tax Year 2016 Tax Year

Personal Exemption

Exemption Phase Out

StandardDeduction

DeductionPhase Out

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