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Tax Topic 26 - Moving Expenses

In this tax topic you will the learn how to take a deduction for certain expenses of moving to a new home because of a change in job location or starting a new job. You will become aware of what moving expenses are deductible and not deductible, who can take the moving expense deduction, when and where to report the expenses and how reimbursements affect your moving expenses deduction. Moving expense deductions can be deducted by either employees or self employed taxpayers.

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Student Instructions:

Print this page, work on the questions and then submit test by mailing the answer sheet or by completing quiz online.

Instructions to submit quiz online successfully: Step-by-Step check list

Answer Sheet            Quiz Online

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 Use IRS Publication 521 and Form 1040 Instructions (Form 1040 instructions only up to page 98) to complete this tax topic.

Please note: Form 1040 Instructions (Form 1040 instructions only up to page 98) will be used for the rest of the topics in the initial tax preparer certification course. You will be responsible to answer questions from the Form 1040 instructions booklet (up to page 98) on every topic so read it carefully.

Tax Return Situation 1:

Prepare  Form 1040, Form 3903.

Brad Johnson is married and has no children. He owned his home in Florida where he worked.  On December 8, 2012, his employer told him that he would be transferred to Saint Paul as of January 20, 2013.

His wife, Samantha (SSN 610-25-3940), flew to Saint Paul on January 2012 to look for a new home. She put a down payment of $25,000 on a house being built and came back to Florida on January 8, 2013. The Johnsons sold their Florida home for $1,500 less than they paid for it. The home was free and clear by the time the construction was completed. 

They contracted to have their personal effects moved to Saint Paul on January 15, 2013. The family arrived in Saint Paul January 18, 2013 only to find out that their new home was not yet completed. They stayed in a nearby motel awaiting completion of the house until February 12, 2013.

On January 20, 2013, Brad went to work in the Saint Paul plant where he works to the present time.

Their records for the move show:  

   Samantha's pre-move house hunting trip:  
     Travel and lodging $649
     Meals $95
  Down payment on Saint Paul home $25,000
  Real estate commission paid on sale  
      of their Florida home $3,500
  Loss on sale of Florida home  
      (not including real estate commission) $1,500
  Amount paid for storing and moving personal  
      effects (furniture, household etc) $6,515
     
  Expenses of driving to Saint Paul:  
      Mileage (Start 14,278; End 16,478; 1,100 miles after June 30, 2013)  
      Lodging $360
      Meals $640
     
  Cost of temporary living expenses in Saint Paul:  
      Motel rooms $1,050
      Meals $2,280
  They stayed in a motel for 25 days.  
     
   Brad was reimbursed $5,749 under an accountable plan as follows:  
      Moving personal effects $4,500
      Travel (and lodging) to Saint Paul $600
      Travel (and lodging) house hunting $649
      Total reimbursement $5,749
     

The employer included this reimbursement on Brad's Form W-2 for the year. The reimbursement of deductible expenses, $5,100 for moving household goods and travel to Saint Paul, was included in Box 12 of Form W-2. His employer identified this amount with code P.

The employer included the balance, $649 reimbursement of nondeductible expenses, in box 1 of W-2 with Brad's other wages. The employer withholds taxes from the $649 which is also included in W-2.

 

1. Look at the Form 1040 you prepared for Brad and Samantha Johnson. What is the amount on Form 1040, Line 26?

A. $3,265.
B. $2,303.
C. $2,215. 
D. $7,955.

2. Look at the Form 1040 you prepared for Brad and Samantha Johnson. What is the amount on Form 1040, Line 37?

A. $63,436.
B. $65,000.
C. $62,697. 
D. $65,649.

 
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