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1040x 2011 Publication 521 - Main Content Table of Contents Who Can Deduct Moving ExpensesMove Related to Start of Work Distance Test Time Test Retirees or Survivors Who Move to the United States Deductible Moving ExpensesMoves to Locations in the United States Moves to Locations Outside the United States Nondeductible Expenses ReimbursementsTypes of Reimbursement Plans Tax Withholding and Estimated Tax How and When To ReportForm 3903 When To Deduct Expenses Illustrated Example Members of the Armed Forces How To Get Tax Help Who Can Deduct Moving Expenses You can deduct your moving expenses if you meet all three of the following requirements. 1040x 2011 Your move is closely related to the start of work. 1040x 2011 You meet the distance test. 1040x 2011 You meet the time test. 1040x 2011 After you have read these rules, you may want to use Figure B to help you decide if you can deduct your moving expenses. 1040x 2011 Retirees, survivors, and Armed Forces members. 1040x 2011   Different rules may apply if you are a member of the Armed Forces or a retiree or survivor moving to the United States. 1040x 2011 These rules are discussed later in this publication. 1040x 2011 Move Related to Start of Work Your move must be closely related, both in time and in place, to the start of work at your new job location. 1040x 2011 Closely related in time. 1040x 2011   In most cases, you can consider moving expenses incurred within 1 year from the date you first reported to work at the new location as closely related in time to the start of work. 1040x 2011 It is not necessary that you arrange to work before moving to a new location, as long as you actually go to work in that location. 1040x 2011    Figure A. 1040x 2011 Illustration of Distance Test Please click here for the text description of the image. 1040x 2011 Figure A   If you do not move within 1 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. 1040x 2011 Example. 1040x 2011 Your family moved more than a year after you started work at a new location. 1040x 2011 You delayed the move for 18 months to allow your child to complete high school. 1040x 2011 You can deduct your moving expenses. 1040x 2011 Closely related in place. 1040x 2011   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. 1040x 2011 If your move does not meet this requirement, you may still be able to deduct moving expenses if you can show that: You are required to live at your new home as a condition of your employment, or You will spend less time or money commuting from your new home to your new job location. 1040x 2011 Home defined. 1040x 2011   Your home means your main home (residence). 1040x 2011 It can be a house, apartment, condominium, houseboat, house trailer, or similar dwelling. 1040x 2011 It does not include other homes owned or kept up by you or members of your family. 1040x 2011 It also does not include a seasonal home, such as a summer beach cottage. 1040x 2011 Your former home means your home before you left for your new job location. 1040x 2011 Your new home means your home within the area of your new job location. 1040x 2011 Retirees or survivors. 1040x 2011   You may be able to deduct the expenses of moving to the United States or its possessions even though the move is not related to the start of work at a new job location. 1040x 2011 You must have worked outside the United States or be a survivor of someone who did. 1040x 2011 See Retirees or Survivors Who Move to the United States, later. 1040x 2011 Distance Test 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. 1040x 2011 For example, if your old main job location was 3 miles from your former home, your new main job location must be at least 53 miles from that former home. 1040x 2011 You can use Worksheet 1 to see if you meet this test. 1040x 2011 Worksheet 1. 1040x 2011 Distance Test   Note. 1040x 2011 Members of the Armed Forces may not have to meet this test. 1040x 2011 See Members of the Armed Forces. 1040x 2011     1. 1040x 2011 Enter the number of miles from your old home to your new workplace 1. 1040x 2011 miles 2. 1040x 2011 Enter the number of miles from your old home to your old workplace 2. 1040x 2011 miles 3. 1040x 2011 Subtract line 2 from line 1. 1040x 2011 If zero or less, enter -0- 3. 1040x 2011 miles 4. 1040x 2011 Is line 3 at least 50 miles? □ Yes. 1040x 2011 You meet this test. 1040x 2011  □ No. 1040x 2011 You do not meet this test. 1040x 2011 You cannot deduct your moving expenses. 1040x 2011 The distance between a job location and your home is the shortest of the more commonly traveled routes between them. 1040x 2011 The distance test considers only the location of your former home. 1040x 2011 It does not take into account the location of your new home. 1040x 2011 See Figure A, earlier. 1040x 2011 Example. 1040x 2011 You moved to a new home less than 50 miles from your former home because you changed main job locations. 1040x 2011 Your old main job location was 3 miles from your former home. 1040x 2011 Your new main job location is 60 miles from that home. 1040x 2011 Because your new main job location is 57 miles farther from your former home than the distance from your former home to your old main job location, you meet the distance test. 1040x 2011 First job or return to full-time work. 1040x 2011   If you go to work full time for the first time, your place of work must be at least 50 miles from your former home to meet the distance test. 1040x 2011   If you go back to full-time work after a substantial period of part-time work or unemployment, your place of work also must be at least 50 miles from your former home. 1040x 2011 Armed Forces. 1040x 2011   If you are in the Armed Forces and you moved because of a permanent change of station, you do not have to meet the distance test. 1040x 2011 See Members of the Armed Forces, later. 1040x 2011 Main job location. 1040x 2011   Your main job location is usually the place where you spend most of your working time. 1040x 2011 This could be your office, plant, store, shop, or other location. 1040x 2011 If there is no one place where you spend most of your working time, your main job location is the place where your work is centered, such as where you report for work or are otherwise required to “base” your work. 1040x 2011 Union members. 1040x 2011   If you work for several employers on a short-term basis and you get work under a union hall system (such as a construction or building trades worker), your main job location is the union hall. 1040x 2011 More than one job. 1040x 2011   If you have more than one job at any time, your main job location depends on the facts in each case. 1040x 2011 The more important factors to be considered are: The total time you spend at each place, The amount of work you do at each place, and How much money you earn at each place. 1040x 2011    Table 1. 1040x 2011 Satisfying the Time Test for Employees and Self-Employed Persons IF you are. 1040x 2011 . 1040x 2011 . 1040x 2011 THEN you satisfy the time test by meeting the. 1040x 2011 . 1040x 2011 . 1040x 2011 an employee 39-week test for employees. 1040x 2011 self-employed 78-week test for self-employed persons. 1040x 2011 both self-employed and an employee at the same time 78-week test for a self-employed person or the 39-week  test for an employee. 1040x 2011 Your principal place of work  determines which test applies. 1040x 2011 both self-employed and an employee, but unable to satisfy the 39-week test for employees 78-week test for self-employed persons. 1040x 2011 Time Test To deduct your moving expenses, you also must meet one of the following two time tests. 1040x 2011 The time test for employees. 1040x 2011 The time test for self-employed persons. 1040x 2011 Both of these tests are explained below. 1040x 2011 See Table 1, below, for a summary of these tests. 1040x 2011 You can deduct your moving expenses before you meet either of the time tests. 1040x 2011 See Time Test Not Yet Met, later. 1040x 2011 Time Test for Employees 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). 1040x 2011 Full-time employment depends on what is usual for your type of work in your area. 1040x 2011 For purposes of this test, the following four rules apply. 1040x 2011 You count only your full-time work as an employee, not any work you do as a self-employed person. 1040x 2011 You do not have to work for the same employer for all 39 weeks. 1040x 2011 You do not have to work 39 weeks in a row. 1040x 2011 You must work full time within the same general commuting area for all 39 weeks. 1040x 2011 Temporary absence from work. 1040x 2011   You are considered to have worked full time during any week you are temporarily absent from work because of illness, strikes, lockouts, layoffs, natural disasters, or similar causes. 1040x 2011 You are also considered to have worked full time during any week you are absent from work for leave or vacation provided for in your work contract or agreement. 1040x 2011 Seasonal work. 1040x 2011   If your work is seasonal, you are considered to be working full time during the off-season only if your work contract or agreement covers an off-season period of less than 6 months. 1040x 2011 For example, a school teacher on a 12-month contract who teaches on a full-time basis for more than 6 months is considered to have worked full time for the entire 12 months. 1040x 2011    Figure B. 1040x 2011 Can You Deduct Expenses for a Non-Military Move Within the United States? Please click here for the text description of the image. 1040x 2011 Figure B Time Test for Self-Employed Persons If you are self-employed, you must work full time for at least 39 weeks during the first 12 months and for a total of at least 78 weeks during the first 24 months after you arrive in the general area of your new job location (78-week test). 1040x 2011 For purposes of the time test for self-employed persons, the following three rules apply. 1040x 2011 You count any full-time work you do either as an employee or as a self-employed person. 1040x 2011 You do not have to work for the same employer or be self-employed in the same trade or business for the 78 weeks. 1040x 2011 You must work within the same general commuting area for all 78 weeks. 1040x 2011 Example. 1040x 2011 You are a self-employed accountant who moves from Atlanta to New York City, and begin to work there on December 1, 2013. 1040x 2011 You pay moving expenses in 2013 and 2014 in connection with this move. 1040x 2011 On April 15, 2014, when you file your income tax return for the year 2013, you have been performing services as a self-employed individual on a full-time basis in New York City for approximately 20 weeks. 1040x 2011 Although you have not satisfied the 78-week employment condition at this time, you can deduct your 2013 moving expenses on your 2013 income tax return as there is still sufficient time remaining before December 1, 2015, to satisfy such condition. 1040x 2011 You can deduct any moving expenses you pay in 2014 on your 2014 income tax return even if you have not met the 78-week test. 1040x 2011 You have until December 1, 2015, to satisfy this requirement. 1040x 2011 Self-employment. 1040x 2011   You are self-employed if you work as the sole owner of an unincorporated business or as a partner in a partnership carrying on a business. 1040x 2011 You are not considered self-employed if you are semi-retired, are a part-time student, or work only a few hours each week. 1040x 2011 Full-time work. 1040x 2011   You can count only those weeks during which you work full time as a week of work. 1040x 2011 Whether you work full time during any week depends on what is usual for your type of work in your area. 1040x 2011 For example, you are a self-employed dentist and maintain office hours 4 days a week. 1040x 2011 You are considered to perform services full time if maintaining office hours 4 days a week is not unusual for other self-employed dentists in your area. 1040x 2011 Temporary absence from work. 1040x 2011   You are considered to be self-employed on a full-time basis during any week you are temporarily absent from work because of illness, strikes, natural disasters, or similar causes. 1040x 2011 Seasonal trade or business. 1040x 2011   If your trade or business is seasonal, the off-season weeks when no work is required or available may be counted as weeks during which you worked full time. 1040x 2011 The off-season must be less than 6 months and you must work full time before and after the off-season. 1040x 2011 Example. 1040x 2011 You own and operate a motel at a beach resort. 1040x 2011 The motel is closed for 5 months during the off-season. 1040x 2011 You work full time as the operator of the motel before and after the off-season. 1040x 2011 You are considered self-employed on a full-time basis during the weeks of the off-season. 1040x 2011   If you were both an employee and self-employed, see Table 1 earlier, for the requirements. 1040x 2011 Example. 1040x 2011 Justin quit his job and moved from the east coast to the west coast to begin a full-time job as a cabinet-maker for C and L Cabinet Shop. 1040x 2011 He generally worked at the shop about 40 hours each week. 1040x 2011 Shortly after the move, Justin also began operating a cabinet-installation business from his home for several hours each afternoon and all day on weekends. 1040x 2011 Because Justin's principal place of business is the cabinet shop, he can satisfy the time test by meeting the 39-week test. 1040x 2011    If Justin is unable to satisfy the requirements of the 39-week test during the 12-month period immediately following his arrival in the general location of his new principal place of work, he can satisfy the 78-week test. 1040x 2011 Joint Return If you are married, file a joint return, and both you and your spouse work full-time, either of you can satisfy the full-time work test. 1040x 2011 However, you cannot add the weeks your spouse worked to the weeks you worked to satisfy that test. 1040x 2011 Time Test Not Yet Met You can deduct your moving expenses on your 2013 tax return even though you have not met the time test by the date your 2013 return is due. 1040x 2011 You can do this if you expect to meet the 39-week test in 2014 or the 78-week test in 2014 or 2015. 1040x 2011 If you do not deduct your moving expenses on your 2013 return, and you later meet the time test, you can file an amended return for 2013 to take the deduction. 1040x 2011 See When To Deduct Expenses later, for more details. 1040x 2011 Failure to meet the time test. 1040x 2011    If you deduct moving expenses but do not meet the time test in 2014 or 2015, you must either: Report your moving expense deduction as other income on your Form 1040 for the year you cannot meet the test, or Use Form 1040X to amend your 2013 return, figuring your tax without the moving expense deduction. 1040x 2011 Example. 1040x 2011 You arrive in the general area of your new job location, as an employee, on September 15, 2013. 1040x 2011 You deduct your moving expenses on your 2013 return, the year of the move, even though you have not yet met the time test by the date your return is due. 1040x 2011 If you do not meet the 39-week test during the 12-month period following your arrival in the general area of your new job location, you must either: Report your moving expense deduction as other income on your Form 1040 for 2014, or Use Form 1040X to amend your 2013 return, figuring your tax without the moving expense deduction. 1040x 2011 Exceptions to the Time Test You do not have to meet the time test if one of the following applies. 1040x 2011 You are in the Armed Forces and you moved because of a permanent change of station. 1040x 2011 See Members of the Armed Forces , later. 1040x 2011 Your main job location was outside the United States and you moved to the United States because you retired. 1040x 2011 See Retirees or Survivors Who Move to the United States, later. 1040x 2011 You are the survivor of a person whose main job location at the time of death was outside the United States. 1040x 2011 See Retirees or Survivors Who Move to the United States, later. 1040x 2011 Your job at the new location ends because of death or disability. 1040x 2011 You are transferred for your employer's benefit or laid off for a reason other than willful misconduct. 1040x 2011 For this exception, you must have obtained full-time employment and you must have expected to meet the test at the time you started the job. 1040x 2011 Retirees or Survivors Who Move to the United States If you are a retiree who was working abroad or a survivor of a decedent who was working abroad and you move to the United States or one of its possessions, you do not have to meet the time test, discussed earlier. 1040x 2011 However, you must meet the requirements discussed below under Retirees who were working abroad or Survivors of decedents who were working abroad. 1040x 2011 If you are living in the United States, retire, and then move and remain retired, you cannot claim a moving expense deduction for that move. 1040x 2011 United States defined. 1040x 2011   For this section of this publication, the term “United States” includes the possessions of the United States. 1040x 2011 Retirees who were working abroad. 1040x 2011   You can deduct moving expenses for a move to a new home in the United States when you permanently retire. 1040x 2011 However, both your former main job location and your former home must have been outside the United States. 1040x 2011 Permanently retired. 1040x 2011   You are considered permanently retired when you cease gainful full-time employment or self-employment. 1040x 2011 If, at the time you retire, you intend your retirement to be permanent, you will be considered retired even though you later return to work. 1040x 2011 Your intention to retire permanently may be determined by: Your age and health, The customary retirement age for people who do similar work, Whether you receive retirement payments from a pension or retirement fund, and The length of time before you return to full-time work. 1040x 2011 Decedents. 1040x 2011   Qualified deductible moving expenses are allowed on a final return (Form 1040 or 1040NR) when a taxpayer has moved and dies within the same calendar year. 1040x 2011 The personal representative filing on behalf of that taxpayer should complete and attach Form 3903 to the final return. 1040x 2011   A personal representative can be an executor, administrator, or anyone who is in charge of the deceased person's property. 1040x 2011 For more information, see Publication 559, Survivors, Executors, and Administrators. 1040x 2011 Survivors of decedents who were working abroad. 1040x 2011   If you are the spouse or the dependent of a person whose main job location at the time of death was outside the United States, you can deduct moving expenses if the following five requirements are met. 1040x 2011 The move is to a home in the United States. 1040x 2011 The move begins within 6 months after the decedent's death. 1040x 2011 (When a move begins is described below. 1040x 2011 ) The move is from the decedent's former home. 1040x 2011 The decedent's former home was outside the United States. 1040x 2011 The decedent's former home was also your home. 1040x 2011 When a move begins. 1040x 2011   A move begins when one of the following events occurs. 1040x 2011 You contract for your household goods and personal effects to be moved to your home in the United States, but only if the move is completed within a reasonable time. 1040x 2011 Your household goods and personal effects are packed and on the way to your home in the United States. 1040x 2011 You leave your former home to travel to your new home in the United States. 1040x 2011 Deductible Moving Expenses If you meet the requirements discussed earlier under Who Can Deduct Moving Expenses, you can deduct the reasonable expenses of: Moving your household goods and personal effects (including in-transit or foreign-move storage expenses), and Traveling (including lodging but not meals) to your new home. 1040x 2011 You cannot deduct any expenses for meals. 1040x 2011 Reasonable expenses. 1040x 2011   You can deduct only those expenses that are reasonable for the circumstances of your move. 1040x 2011 For example, the cost of traveling from your former home to your new one should be by the shortest, most direct route available by conventional transportation. 1040x 2011 If during your trip to your new home, you stop over, or make side trips for sightseeing, the additional expenses for your stopover or side trips are not deductible as moving expenses. 1040x 2011 Example. 1040x 2011 Beth's employer transferred her from Boston, Massachusetts, to Buffalo, New York. 1040x 2011 On her way to Buffalo, Beth drove into Canada to visit the Toronto Zoo. 1040x 2011 Since Beth's excursion into Canada was away from the usual Boston-Buffalo route, the expenses paid or incurred for the excursion are not deductible. 1040x 2011 Beth can only deduct what it would have cost to drive directly from Boston to Buffalo. 1040x 2011 Likewise, Beth cannot deduct any expenses, such as the cost of a hotel room, caused by the delay for sightseeing. 1040x 2011 Travel by car. 1040x 2011   If you use your car to take yourself, members of your household, or your personal effects to your new home, you can figure your expenses by deducting either: Your actual expenses, such as the amount you pay for gas and oil for your car, if you keep an accurate record of each expense, or The standard mileage rate of 24 cents per mile. 1040x 2011 Whether you use actual expenses or the standard mileage rate to figure your expenses, you can deduct the parking fees and tolls you pay to move. 1040x 2011 You cannot deduct any part of general repairs, general maintenance, insurance, or depreciation for your car. 1040x 2011 Member of your household. 1040x 2011   You can deduct moving expenses you pay for yourself and members of your household. 1040x 2011 A member of your household is anyone who has both your former and new home as his or her home. 1040x 2011 It does not include a tenant or employee, unless that person is your dependent. 1040x 2011 Moves to Locations in the United States If you meet the requirements under Who Can Deduct Moving Expenses, earlier, you can deduct expenses for a move to the area of a new main job location within the United States or its possessions. 1040x 2011 Your move may be from one U. 1040x 2011 S. 1040x 2011 location to another or from a foreign country to the United States. 1040x 2011 Household goods and personal effects. 1040x 2011   You can deduct the cost of packing, crating, and transporting your household goods and personal effects and those of the members of your household from your former home to your new home. 1040x 2011 For purposes of moving expenses, the term “personal effects” includes, but is not limited to, movable personal property that the taxpayer owns and frequently uses. 1040x 2011   If you use your own car to move your things, see Travel by car, earlier. 1040x 2011   You can deduct any costs of connecting or disconnecting utilities required because you are moving your household goods, appliances, or personal effects. 1040x 2011   You can deduct the cost of shipping your car and your household pets to your new home. 1040x 2011   You can deduct the cost of moving your household goods and personal effects from a place other than your former home. 1040x 2011 Your deduction is limited to the amount it would have cost to move them from your former home. 1040x 2011 Example. 1040x 2011 Paul Brown has been living and working in North Carolina for the last 4 years. 1040x 2011 Because he has been renting a small apartment, he stored some furniture at his parents' home in Georgia. 1040x 2011 Paul got a job in Washington, DC. 1040x 2011 It cost him $900 to move the furniture from his North Carolina apartment to Washington and $3,000 to move the stored furniture from Georgia to Washington. 1040x 2011 It would have cost $1,800 to ship the stored furniture from North Carolina to Washington. 1040x 2011 He can deduct only $1,800 of the $3,000 he paid. 1040x 2011 The amount he can deduct for moving his furniture is $2,700 ($900 + $1,800). 1040x 2011 You cannot deduct the cost of moving furniture you buy on the way to your new home. 1040x 2011   Storage expenses. 1040x 2011   You can include the cost of storing and insuring household goods and personal effects within any period of 30 consecutive days after the day your things are moved from your former home and before they are delivered to your new home. 1040x 2011 Travel expenses. 1040x 2011   You can deduct the cost of transportation and lodging for yourself and members of your household while traveling from your former home to your new home. 1040x 2011 This includes expenses for the day you arrive. 1040x 2011    The day of arrival is the day you secure lodging at the new place of residence, even if the lodging is on a temporary basis. 1040x 2011   You can include any lodging expenses you had in the area of your former home within one day after you could no longer live in your former home because your furniture had been moved. 1040x 2011   The members of your household do not have to travel together or at the same time. 1040x 2011 However, you can only deduct expenses for one trip per person. 1040x 2011 If you use your own car, see Travel by car, earlier. 1040x 2011 Example. 1040x 2011   In February 2013, Josh and Robyn Black moved from Minneapolis to Washington, DC, where Josh was starting a new job. 1040x 2011 Josh drove the family car to Washington, DC, a trip of 1,100 miles. 1040x 2011 His expenses were $264. 1040x 2011 00 for mileage (1,100 miles x 24 cents per mile) plus $40 for tolls and $150 for lodging, for a total of $454. 1040x 2011 00. 1040x 2011 One week later, Robyn flew from Minneapolis to Washington, DC. 1040x 2011 Her only expense was her $400 plane ticket. 1040x 2011 The Blacks' deduction is $854. 1040x 2011 00 (Josh's $454. 1040x 2011 00 + Robyn's $400). 1040x 2011 Moves to Locations Outside the United States To deduct expenses for a move outside the United States, you must move to the area of a new place of work outside the United States and its possessions. 1040x 2011 You must meet the requirements under Who Can Deduct Moving Expenses , earlier. 1040x 2011 Deductible expenses. 1040x 2011   If your move is to a location outside the United States and its possessions, you can deduct the following expenses. 1040x 2011 The cost of moving household goods and personal effects from your former home to your new home. 1040x 2011 The cost of traveling (including lodging) from your former home to your new home. 1040x 2011 The cost of moving household goods and personal effects to and from storage. 1040x 2011 The cost of storing household goods and personal effects while you are at the new job location. 1040x 2011 The first two items were explained earlier under Moves to Locations in the United States . 1040x 2011 The last two items are discussed, later. 1040x 2011 Moving goods and effects to and from storage. 1040x 2011   You can deduct the reasonable expenses of moving your personal effects to and from storage. 1040x 2011 Storage expenses. 1040x 2011   You can deduct the reasonable expenses of storing your household goods and personal effects for all or part of the time the new job location remains your main job location. 1040x 2011 Moving expenses allocable to excluded foreign income. 1040x 2011   If you live and work outside the United States, you may be able to exclude from income part or all of the income you earn in the foreign country. 1040x 2011 You may also be able to claim a foreign housing exclusion or deduction. 1040x 2011 If you claim the foreign earned income or foreign housing exclusion, you cannot deduct the part of your moving expenses that relates to the excluded income. 1040x 2011    Publication 54, Tax Guide for U. 1040x 2011 S. 1040x 2011 Citizens and Resident Aliens Abroad, explains how to figure the part of your moving expenses that relates to excluded income. 1040x 2011 You can get the publication from most U. 1040x 2011 S. 1040x 2011 embassies and consulates, or see How To Get Tax Help at the end of this publication. 1040x 2011 Nondeductible Expenses You cannot deduct the following items as moving expenses. 1040x 2011 Any part of the purchase price of your new home. 1040x 2011 Car tags. 1040x 2011 Driver's license. 1040x 2011 Expenses of buying or selling a home (including closing costs, mortgage fees, and points). 1040x 2011 Expenses of entering into or breaking a lease. 1040x 2011 Home improvements to help sell your home. 1040x 2011 Loss on the sale of your home. 1040x 2011 Losses from disposing of memberships in clubs. 1040x 2011 Mortgage penalties. 1040x 2011 Pre-move househunting expenses. 1040x 2011 Real estate taxes. 1040x 2011 Refitting of carpet and draperies. 1040x 2011 Return trips to your former residence. 1040x 2011 Security deposits (including any given up due to the move). 1040x 2011 Storage charges except those incurred in transit and for foreign moves. 1040x 2011 No double deduction. 1040x 2011   You cannot take a moving expense deduction and a business expense deduction for the same expenses. 1040x 2011 You must decide if your expenses are deductible as moving expenses or as business expenses. 1040x 2011 For example, expenses you have for travel, meals, and lodging while temporarily working at a place away from your regular place of work may be deductible as business expenses if you are considered away from home on business. 1040x 2011 In most cases, your work at a single location is considered temporary if it is realistically expected to last (and does in fact last) for one year or less. 1040x 2011   See Publication 463, Travel, Entertainment, Gift, and Car Expenses, for information on deducting your business expenses. 1040x 2011 Reimbursements This section explains how to report a reimbursement (including advances and allowances) on your tax return. 1040x 2011 It covers reimbursements for any of your moving expenses discussed in this publication. 1040x 2011 It also explains the types of reimbursements on which your employer must withhold income, social security, and Medicare taxes. 1040x 2011 Types of Reimbursement Plans If you receive a reimbursement for your moving expenses, how you report this amount and your expenses depends on whether the reimbursement is paid to you under an accountable plan or a nonaccountable plan. 1040x 2011 For a quick overview of how to report your reimbursement and moving expenses, see Table 2 in the section on How and When To Report, later. 1040x 2011 Your employer should tell you what method of reimbursement is used and what records are required. 1040x 2011 Accountable Plans To be an accountable plan, your employer's reimbursement arrangement must require you to meet all three of the following rules. 1040x 2011 Your expenses must have a business connection – that is, you must have paid or incurred deductible expenses while performing services as an employee of your employer. 1040x 2011 Two examples of this are the reasonable expenses of moving your possessions from your former home to your new home, and traveling from your former home to your new home. 1040x 2011 You must adequately account to your employer for these expenses within a reasonable period of time. 1040x 2011 You must return any excess reimbursement or allowance within a reasonable period of time. 1040x 2011 Adequate accounting. 1040x 2011   You adequately account for your moving expenses by giving your employer documentation of those expenses, such as a statement of expense, an account book, a diary, or a similar record in which you entered each expense at or near the time you had it. 1040x 2011 Documentation includes receipts, canceled checks, and bills. 1040x 2011 Reasonable period of time. 1040x 2011   What constitutes a “reasonable period of time” depends on the facts and circumstances of your situation. 1040x 2011 However, regardless of the facts and circumstances, actions that take place within the times specified in the following list will be treated as taking place within a reasonable period of time. 1040x 2011 You receive an advance within 30 days of the time you have an expense. 1040x 2011 You adequately account for your expenses within 60 days after they were paid or incurred. 1040x 2011 You return any excess reimbursement within 120 days after the expense was paid or incurred. 1040x 2011 You are given a periodic statement (at least quarterly) that asks you to either return or adequately account for outstanding advances and you comply within 120 days of the statement. 1040x 2011 Excess reimbursement. 1040x 2011   This includes any amount you are paid (including advances and allowances) that is more than the moving expenses that you adequately accounted for to your employer within a reasonable period of time. 1040x 2011 Returning excess reimbursements. 1040x 2011   You must be required to return any excess reimbursement for your moving expenses to the person paying the reimbursement. 1040x 2011 Excess reimbursement includes any amount for which you did not adequately account within a reasonable period of time. 1040x 2011 For example, if you received an advance and you did not spend all the money on deductible moving expenses, or you do not have proof of all your expenses, you have an excess reimbursement. 1040x 2011 You meet accountable plan rules. 1040x 2011   If for all reimbursements you meet the three rules for an accountable plan (listed earlier), your employer should not include any reimbursements of expenses in your income in box 1 of your Form W-2, Wage and Tax Statement. 1040x 2011 Instead, your employer should include the reimbursements in box 12 of your Form W-2. 1040x 2011 Example. 1040x 2011 You lived in Boston and accepted a job in Atlanta. 1040x 2011 Under an accountable plan, your employer reimbursed you for your actual traveling expenses from Boston to Atlanta and the cost of moving your furniture to Atlanta. 1040x 2011 Your employer will include the reimbursement on your Form W-2, box 12, with Code P. 1040x 2011 If your moving expenses are more than your reimbursement, you may be able to deduct your additional expenses (see How and When To Report, later). 1040x 2011 You do not meet accountable plan rules. 1040x 2011   You may be reimbursed by your employer, but you may not meet all three rules for part of your expenses. 1040x 2011   If your deductible expenses are reimbursed under an otherwise accountable plan but you do not return, within a reasonable period, any reimbursement of expenses for which you did not adequately account, then only the amount for which you did adequately account is considered as paid under an accountable plan. 1040x 2011 The remaining expenses are treated as having been reimbursed under a nonaccountable plan (discussed below). 1040x 2011 Reimbursement of nondeductible expenses. 1040x 2011   You may be reimbursed by your employer for moving expenses, some of which are deductible expenses and some of which are not deductible. 1040x 2011 The reimbursements you receive for the nondeductible expenses and any allowances for miscellaneous or unspecified expenses are treated as paid under a nonaccountable plan (see below) and are included in your income. 1040x 2011 If you are reimbursed by your employer for the taxes you must pay (including social security and Medicare taxes) because you have received taxable moving expense reimbursements, you must pay tax on this reimbursement as well, and it is treated as paid under a nonaccountable plan. 1040x 2011 Nonaccountable Plans A nonaccountable plan is a reimbursement arrangement that does not meet the three rules listed earlier under Accountable Plans. 1040x 2011 In addition, the following payments will be treated as paid under a nonaccountable plan. 1040x 2011 Excess reimbursements you fail to return to your employer. 1040x 2011 Reimbursements of nondeductible expenses. 1040x 2011 See Reimbursement of nondeductible expenses, earlier. 1040x 2011 If an arrangement pays for your moving expenses by reducing your wages, salary, or other pay, the amount of the reduction will be treated as a payment made under a nonaccountable plan. 1040x 2011 This is because you are entitled to receive the full amount of your pay regardless of whether you had any moving expenses. 1040x 2011 If you are not sure if the moving expense reimbursement arrangement is an accountable or nonaccountable plan, ask your employer. 1040x 2011 Your employer will add the amount of any reimbursement paid to you under a nonaccountable plan to your wages, salary, or other pay. 1040x 2011 Your employer will report the total in box 1 of your Form W-2. 1040x 2011 Example. 1040x 2011 To get you to work in another city, your new employer reimburses you under an accountable plan for the $7,500 loss on the sale of your home. 1040x 2011 Because this is a reimbursement of a nondeductible expense, it is treated as paid under a nonaccountable plan and must be included as income in box 1 of your Form W-2. 1040x 2011 Uniform Relocation Assistance and Real Property Acquisition Policies Act of 1970 Do not include in income any moving expense payment you received under the Uniform Relocation Assistance and Real Property Acquisition Policies Act of 1970. 1040x 2011 These payments are made to persons displaced from their homes, businesses, or farms by federal projects. 1040x 2011 Tax Withholding and Estimated Tax Your employer must withhold income, social security, and Medicare taxes from reimbursements and allowances paid to you that are included in your income. 1040x 2011 See Reimbursements included in income, later. 1040x 2011 Reimbursements excluded from income. 1040x 2011   Your employer should not include in your wages reimbursements paid under an accountable plan (explained earlier) for moving expenses that you: Could deduct if you had paid or incurred them, and Did not deduct in an earlier year. 1040x 2011 These reimbursements are fringe benefits excludable from your income as qualified moving expense reimbursements. 1040x 2011 Your employer should report these reimbursements on your Form W-2, box 12, with Code P. 1040x 2011    You cannot claim a moving expense deduction for expenses covered by reimbursements excluded from income (see Accountable Plans under Types of Reimbursement Plans, earlier). 1040x 2011 Expenses deducted in earlier year. 1040x 2011   If you receive a reimbursement this year for moving expenses deducted in an earlier year, and the reimbursement is not included as wages in box 1 of your Form W-2, you must include the reimbursement in income on Form 1040, line 21. 1040x 2011 Your employer should show the amount of your reimbursement in box 12 of your Form W-2. 1040x 2011 Reimbursements included in income. 1040x 2011   Your employer must include in your income any reimbursements made (or treated as made) under a nonaccountable plan, even though they are for deductible moving expenses. 1040x 2011 See Nonaccountable Plans under Types of Reimbursement Plans, earlier. 1040x 2011 Your employer also must include in your gross income as wages any reimbursements of, or payments for, nondeductible moving expenses. 1040x 2011 This includes amounts your employer reimbursed you under an accountable plan (explained earlier) for meals, househunting trips, and real estate expenses. 1040x 2011 It also includes reimbursements that exceed your deductible expenses and that you do not return to your employer. 1040x 2011 Reimbursement for deductible and nondeductible expenses. 1040x 2011    If your employer reimburses you for both deductible and nondeductible moving expenses, your employer must determine the amount of the reimbursement that is not taxable and not subject to withholding. 1040x 2011 Your employer must treat any remaining amount as taxable wages and withhold income, social security, and Medicare taxes. 1040x 2011 Amount of income tax withheld. 1040x 2011   If the reimbursements or allowances you receive are taxable, the amount of income tax your employer will withhold depends on several factors. 1040x 2011 It depends in part on whether income tax is withheld from your regular wages, on whether the reimbursements and allowances are added to your regular wages, and on any information you have given to your employer on Form W-4, Employee's Withholding Allowance Certificate. 1040x 2011   Your employer can treat your reimbursements as supplemental wages and not include the reimbursements and allowances in your regular wages. 1040x 2011 The employer can withhold income tax on supplemental wages at a flat rate which may be different from your regular tax rate. 1040x 2011 Estimated tax. 1040x 2011    If you must make estimated tax payments, you need to take into account any taxable reimbursements and deductible moving expenses in figuring your estimated tax. 1040x 2011 For details about estimated taxes, see Publication 505, Tax Withholding and Estimated Tax. 1040x 2011 How and When To Report This section explains how and when to report your moving expenses and any reimbursements or allowances you received for your move. 1040x 2011 For a quick overview, see Table 2, later. 1040x 2011 Form 3903 Use Form 3903 to figure your moving expense deduction. 1040x 2011 Use a separate Form 3903 for each move for which you are deducting expenses. 1040x 2011 Do not file Form 3903 if all of the following apply. 1040x 2011 You moved to a location outside the United States in an earlier year. 1040x 2011 You are claiming only storage fees while you were away from the United States. 1040x 2011 Any amount your employer paid for the storage fees is included as wages in box 1 of your Form W-2. 1040x 2011 Instead, enter the storage fees (after the reduction for the part that is allocable to excluded income) on Form 1040, line 26, and enter “Storage” on the dotted line next to the amount. 1040x 2011 If you meet the special rules for members of the Armed Forces, see How to complete Form 3903 for members of the Armed Forces under Members of the Armed Forces, later. 1040x 2011 Completing Form 3903. 1040x 2011   Complete Worksheet 1, earlier, or the Distance Test Worksheet in the instructions for Form 3903 to see whether you meet the distance test. 1040x 2011 If so, complete lines 1 through 3 of the form using your actual expenses (except, if you use your own car, you can figure expenses based on the standard mileage rate, instead of actual amounts for gas and oil). 1040x 2011 Enter on line 4 the total amount of your moving expense reimbursement that was excluded from your wages. 1040x 2011 This excluded amount should be identified on Form W-2, box 12, with code P. 1040x 2011 Expenses greater than reimbursement. 1040x 2011   If line 3 is more than line 4, subtract line 4 from line 3 and enter the result on line 5 and on Form 1040, line 26. 1040x 2011 This is your moving expense deduction. 1040x 2011 Expenses equal to or less than reimbursement. 1040x 2011    If line 3 is equal to or less than line 4, you have no moving expense deduction. 1040x 2011 Subtract line 3 from line 4 and, if the result is more than zero, include it as income on Form 1040, line 7. 1040x 2011 Table 2. 1040x 2011 Reporting Your Moving Expenses and Reimbursements IF your Form W-2 shows. 1040x 2011 . 1040x 2011 . 1040x 2011 AND you have. 1040x 2011 . 1040x 2011 . 1040x 2011 THEN. 1040x 2011 . 1040x 2011 . 1040x 2011 your reimbursement reported only  in box 12 with code P moving expenses greater than the  amount in box 12 file Form 3903 showing all allowable  expenses* and reimbursements. 1040x 2011 your reimbursement reported only  in box 12 with code P moving expenses equal to the amount  in box 12 do not file Form 3903. 1040x 2011 your reimbursement divided  between box 12 and box 1 moving expenses greater than the  amount in box 12 file Form 3903 showing all allowable  expenses,* but only the  reimbursements reported in box 12 of  Form W-2. 1040x 2011 your entire reimbursement reported  as wages in box 1 moving expenses file Form 3903 showing all allowable  expenses,* but do not show any  reimbursements. 1040x 2011 no reimbursement moving expenses file Form 3903 showing all allowable  expenses. 1040x 2011 * * See Deductible Moving Expenses, earlier, for allowable expenses. 1040x 2011    Where to deduct. 1040x 2011   Deduct your moving expenses on Form 1040, line 26. 1040x 2011 The amount of moving expenses you can deduct is shown on Form 3903, line 5. 1040x 2011    You cannot deduct moving expenses on Form 1040EZ or Form 1040A. 1040x 2011   When To Deduct Expenses You may have a choice of when to deduct your moving expenses. 1040x 2011 Expenses not reimbursed. 1040x 2011   If you were not reimbursed, deduct your moving expenses in the year you paid or incurred the expenses. 1040x 2011 Example. 1040x 2011 In December 2012, your employer transferred you to another city in the United States, where you still work. 1040x 2011 You are single and were not reimbursed for your moving expenses. 1040x 2011 In 2012, you paid for moving your furniture and deducted these expenses on your 2012 tax return. 1040x 2011 In January 2013, you paid for travel to the new city. 1040x 2011 You can deduct these additional expenses on your 2013 tax return. 1040x 2011 Expenses reimbursed. 1040x 2011   If you are reimbursed for your expenses and you use the cash method of accounting, you can deduct your expenses either in the year you paid them or in the year you received the reimbursement. 1040x 2011 If you use the cash method of accounting, you can choose to deduct the expenses in the year you are reimbursed even though you paid the expenses in a different year. 1040x 2011 See Choosing when to deduct, next. 1040x 2011   If you deduct your expenses and you receive the reimbursement in a later year, you must include the reimbursement in your income on Form 1040, line 21. 1040x 2011 Choosing when to deduct. 1040x 2011   If you use the cash method of accounting, which is used by most individuals, you can choose to deduct moving expenses in the year your employer reimburses you if: You paid the expenses in a year before the year of reimbursement, or You paid the expenses in the year immediately after the year of reimbursement but by the due date, including extensions, for filing your return for the reimbursement year. 1040x 2011 How to make the choice. 1040x 2011   You choose to deduct moving expenses in the year you received reimbursement by taking the deduction on your return, or amended return, for that year. 1040x 2011    You cannot deduct any moving expenses for which you received a reimbursement that was not included in your income. 1040x 2011 Illustrated Example Tom and Peggy Smith are married and have two children. 1040x 2011 They owned a home in Detroit where Tom worked. 1040x 2011 On February 8, 2013, Tom's employer told him that he would be transferred to San Diego as of April 10 that year. 1040x 2011 Peggy flew to San Diego on March 1 to look for a new home. 1040x 2011 She put a down payment of $25,000 on a house being built and returned to Detroit on March 4. 1040x 2011 The Smiths sold their Detroit home for $1,500 less than they paid for it. 1040x 2011 They contracted to have their personal effects moved to San Diego on April 3. 1040x 2011 The family drove to San Diego where they found that their new home was not finished. 1040x 2011 They stayed in a nearby motel until the house was ready on May 1. 1040x 2011 On April 10, Tom went to work in the San Diego plant where he still works. 1040x 2011 Their records for the move show: 1) Peggy's pre-move househunting  trip:       Travel and lodging   $ 449       Meals   75   $ 524 2) Down payment on San Diego  home 25,000 3) Real estate commission paid on  sale of Detroit home 3,500 4) Loss on sale of Detroit home (not  including real estate commission) 1,500 5) Amount paid for moving personal  effects (furniture, other household  goods, etc. 1040x 2011 ) 8,000 6) Expenses of driving to San Diego:       Mileage (Start 14,278;  End 16,478) 2,200 miles at 24 cents a mile   $ 528       Lodging   180       Meals   320   1,028 7) Cost of temporary living  expenses in San Diego:       Motel rooms   $1,450       Meals   2,280   3,730 Total $43,282   Tom was reimbursed $10,907 under an accountable plan. 1040x 2011 His employer gave him the following breakdown of the reimbursement that was allowed under the employer's plan. 1040x 2011 Moving personal effects   $6,800 Travel (and lodging) to San Diego   708 Travel (and lodging) for househunting trip   449 Lodging for temporary quarters   1,450 Loss on sale of home   1,500 Total reimbursement   $10,907 The employer included this reimbursement on Tom's Form W-2 for the year. 1040x 2011 The reimbursement of allowable expenses, $7,508 for moving household goods and travel to San Diego, was included in box 12 of Form W-2. 1040x 2011 His employer identified this amount with code P. 1040x 2011 The employer included the balance, $3,399 reimbursement of nonallowable expenses, in box 1 of Form W-2 with Tom's other wages. 1040x 2011 Tom must include this amount on Form 1040, line 7. 1040x 2011 The employer withholds taxes from the $3,399, as discussed under Reimbursement for deductible and nondeductible expenses under Tax Withholding and Estimated Tax, earlier. 1040x 2011 Also, Tom's employer could have given him a separate Form W-2 for his moving expense reimbursement. 1040x 2011 To figure his tax deduction for moving expenses, Tom enters the following amounts on Form 3903. 1040x 2011 Item 5 — moving personal effects (line 1)   $8,000 Item 6 — driving to San Diego ($528 + $180)  (line 2)   708 Total tax deductible moving expenses (line 3)   $8,708 Minus: Reimbursement included in box 12  of Form W-2 (line 4)   7,508 Tax deduction for moving expenses (line 5)   $1,200   Tom's Form 3903 is shown, later. 1040x 2011 He also enters his deduction, $1,200, on Form 1040, line 26. 1040x 2011 Nondeductible expenses. 1040x 2011   Of the $43,282 expenses that Tom and Peggy incurred, the following items totaling $34,574 ($43,282 – $8,708) cannot be deducted. 1040x 2011 Item 1 — pre-move househunting expenses of $524. 1040x 2011 Item 2 — the $25,000 down payment on the San Diego home. 1040x 2011 If any part of it were for payment of deductible taxes or interest on the mortgage on the house, that part would be deductible as an itemized deduction. 1040x 2011 Item 3 — the $3,500 real estate commission paid on the sale of the Detroit home. 1040x 2011 The commission is used to figure the gain or loss on the sale. 1040x 2011 Item 4 — the $1,500 loss on the sale of the Detroit home. 1040x 2011 Item 6 — the $320 expense for meals while driving to San Diego. 1040x 2011 (However, the lodging and car expenses are deductible. 1040x 2011 ) Item 7 — temporary living expenses of $3,730. 1040x 2011    This image is too large to be displayed in the current screen. 1040x 2011 Please click the link to view the image. 1040x 2011 2012 Form 3903 Moving Expenses Members of the Armed Forces If you are a member of the Armed Forces on active duty and you move because of a permanent change of station, you do not have to meet the distance and time tests, discussed earlier. 1040x 2011 You can deduct your unreimbursed moving expenses. 1040x 2011 A permanent change of station includes: A move from your home to your first post of active duty, A move from one permanent post of duty to another, and A move from your last post of duty to your home or to a nearer point in the United States. 1040x 2011 The move must occur within one year of ending your active duty or within the period allowed under the Joint Travel Regulations. 1040x 2011 Spouse and dependents. 1040x 2011   If a member of the Armed Forces dies, is imprisoned, or deserts, a permanent change of station for the spouse or dependent includes a move to: The place of enlistment, The member's, spouse's, or dependent's home of record, or A nearer point in the United States. 1040x 2011   If the military moves you, your spouse, and dependents, to or from separate locations, the moves are treated as a single move to your new main job location. 1040x 2011 Services or reimbursements provided by government. 1040x 2011   Do not include in income the value of moving and storage services provided by the government because of a permanent change of station. 1040x 2011 In general, if the total reimbursements or allowances you receive from the government because of the move are more than your actual moving expenses, the government must include the excess in your wages on Form W-2. 1040x 2011 However, the excess portion of a dislocation allowance, a temporary lodging allowance, a temporary lodging expense, or a move-in housing allowance is not included in income and should not be included in box 1 of Form W-2. 1040x 2011   If your reimbursements or allowances are less than your actual moving expenses, do not include the reimbursements or allowances in income. 1040x 2011 You can deduct the expenses that are more than your reimbursements. 1040x 2011 See Deductible Moving Expenses, earlier. 1040x 2011 How to complete Form 3903 for members of the Armed Forces. 1040x 2011    Take the following steps. 1040x 2011 Complete lines 1 through 3 of the form, using your actual expenses. 1040x 2011 Do not include any expenses for moving services provided by the government. 1040x 2011 Also, do not include any expenses that were reimbursed by an allowance you do not have to include in your income. 1040x 2011 Enter on line 4 the total reimbursements and allowances you received from the government for the expenses claimed on lines 1 and 2. 1040x 2011 Do not include the value of moving or storage services provided by the government. 1040x 2011 Also, do not include any part of a dislocation allowance, a temporary lodging allowance, a temporary lodging expense, or a move-in housing allowance. 1040x 2011 Complete line 5. 1040x 2011 If line 3 is more than line 4, subtract line 4 from line 3 and enter the result on line 5 and on Form 1040, line 26. 1040x 2011 This is your moving expense deduction. 1040x 2011 If line 3 is equal to or less than line 4, you do not have a moving expense deduction. 1040x 2011 Subtract line 3 from line 4 and, if the result is more than zero, enter it on Form 1040, line 7. 1040x 2011 If the military moves you, your spouse and dependents, to or from different locations, treat these moves as a single move. 1040x 2011    Do not deduct any expenses for moving or storage services provided by the government. 1040x 2011 How To Get Tax Help Go online, use a smart phone, call or walk in to an office near you. 1040x 2011 Whether it's help with a tax issue, preparing your tax return or picking up a free publication or form, get the help you need the way you want it. 1040x 2011 Free help with your tax return. 1040x 2011   Free help in preparing your return is available nationwide from IRS-certified volunteers. 1040x 2011 The Volunteer Income Tax Assistance (VITA) program is designed to help low-to-moderate income, elderly, persons with disabilities, and limited English proficient taxpayers. 1040x 2011 The Tax Counseling for the Elderly (TCE) program is designed to assist taxpayers age 60 and older with their tax returns. 1040x 2011 Most VITA and TCE sites offer free electronic filing and all volunteers will let you know about credits and deductions you may be entitled to claim. 1040x 2011 Some VITA and TCE sites provide taxpayers the opportunity to prepare their return with the assistance of an IRS-certified volunteer. 1040x 2011 To find the nearest VITA or TCE site, visit IRS. 1040x 2011 gov or call 1-800-906-9887. 1040x 2011   As part of the TCE program, AARP offers the Tax-Aide counseling program. 1040x 2011 To find the nearest AARP Tax-Aide site, visit AARP's website at www. 1040x 2011 aarp. 1040x 2011 org/money/taxaide or call 1-888-227-7669. 1040x 2011   For more information on these programs, go to IRS. 1040x 2011 gov and enter “VITA” in the search box. 1040x 2011 Internet. 1040x 2011 IRS. 1040x 2011 gov and IRS2Go are ready when you are — every day, every night, 24 hours a day, 7 days a week. 1040x 2011 Apply for an Employer Identification Number (EIN). 1040x 2011 Go to IRS. 1040x 2011 gov and enter Apply for an EIN in the search box. 1040x 2011 Request an Electronic Filing PIN by going to IRS. 1040x 2011 gov and entering Electronic Filing PIN in the search box. 1040x 2011 Check the status of your 2013 refund with Where's My Refund? Go to IRS. 1040x 2011 gov or the IRS2Go app, and click on Where's My Refund? You'll get a personalized refund date as soon as the IRS processes your tax return and approves your refund. 1040x 2011 If you e-file, your refund status is usually available within 24 hours after the IRS receives your tax return or 4 weeks after you've mailed a paper return. 1040x 2011 Check the status of your amended return. 1040x 2011 Go to IRS. 1040x 2011 gov and enter Where's My Amended Return in the search box. 1040x 2011 Download forms, instructions, and publications, including some accessible versions. 1040x 2011 Order free transcripts of your tax returns or tax account using the Order a Transcript tool on IRS. 1040x 2011 gov or IRS2Go. 1040x 2011 Tax return and tax account transcripts are generally available for the current year and past three years. 1040x 2011 Figure your income tax withholding with the IRS Withholding Calculator on IRS. 1040x 2011 gov. 1040x 2011 Use it if you've had too much or too little withheld, your personal situation has changed, you're starting a new job or you just want to see if you're having the right amount withheld. 1040x 2011 Determine if you might be subject to the Alternative Minimum Tax by using the Alternative Minimum Tax Assistant on IRS. 1040x 2011 gov. 1040x 2011 Locate the nearest Taxpayer Assistance Center using the Office Locator tool on IRS. 1040x 2011 gov or IRS2Go. 1040x 2011 Stop by most business days for face-to-face tax help, no appointment necessary — just walk in. 1040x 2011 An employee can explain IRS letters, request adjustments to your tax account or help you set up a payment plan. 1040x 2011 Before you visit, check the Office Locator for the address, phone number, hours of operation and the services provided. 1040x 2011 If you have an ongoing tax account problem or a special need, such as a disability, you can request an appointment. 1040x 2011 Call the local number listed in the Office Locator, or look in the phone book under United States Government, Internal Revenue Service. 1040x 2011 Locate the nearest volunteer help site with the VITA Locator Tool on IRS. 1040x 2011 gov. 1040x 2011 Low-to-moderate income, elderly, persons with disabilities, and limited English proficient taxpayers can get free help with their tax return from the nationwide Volunteer Income Tax Assistance (VITA) program. 1040x 2011 The Tax Counseling for the Elderly (TCE) program helps taxpayers 60 and older with their tax returns. 1040x 2011 Most VITA and TCE sites offer free electronic filing and some provide IRS-certified volunteers who can help prepare your tax return. 1040x 2011 AARP offers the Tax-Aide counseling program as part of the TCE program. 1040x 2011 Visit AARP's website to find the nearest Tax-Aide location. 1040x 2011 Research your tax questions. 1040x 2011 Search publications and instructions by topic or keyword. 1040x 2011 Read the Internal Revenue Code, regulations, or other official guidance. 1040x 2011 Read Internal Revenue Bulletins. 1040x 2011 Sign up to receive local and national tax news by email. 1040x 2011 Phone. 1040x 2011 You can call the IRS, or you can carry it in your pocket with the IRS2Go app on your smart phone or tablet. 1040x 2011 Download the free IRS2Go mobile app from the iTunes app store or from Google Play. 1040x 2011 Use it to watch the IRS YouTube channel, get IRS news as soon as it's released to the public, order transcripts of your tax returns or tax account, check your refund status, subscribe to filing season updates or daily tax tips, and follow the IRS Twitter news feed, @IRSnews, to get the latest federal tax news, including information about tax law changes and important IRS programs. 1040x 2011 Call to locate the nearest volunteer help site, 1-800-906-9887. 1040x 2011 Low-to-moderate income, elderly, persons with disabilities, and limited English proficient taxpayers can get free help with their tax return from the nationwide Volunteer Income Tax Assistance (VITA) program. 1040x 2011 The Tax Counseling for the Elderly (TCE) program helps taxpayers 60 and older with their tax returns. 1040x 2011 Most VITA and TCE sites offer free electronic filing. 1040x 2011 Some VITA and TCE sites provide IRS-certified volunteers who can help prepare your tax return. 1040x 2011 Through the TCE program, AARP offers the Tax-Aide counseling program; call 1-888-227-7669 to find the nearest Tax-Aide location. 1040x 2011 Call to check the status of your 2013 refund, 1-800-829-1954 or 1-800-829-4477. 1040x 2011 The automated Where's My Refund? information is available 24 hours a day, 7 days a week. 1040x 2011 If you e-file, your refund status is usually available within 24 hours after the IRS receives your tax return or 4 weeks after you've mailed a paper return. 1040x 2011 Before you call, have your 2013 tax return handy so you can provide your social security number, your filing status, and the exact whole dollar amount of your refund. 1040x 2011 Where's My Refund? can give you a personalized refund date as soon as the IRS processes your tax return and approves your refund. 1040x 2011 Where's My Refund? includes information for the most recent return filed in the current year and does not include information about amended returns. 1040x 2011 Call the Amended Return Hotline, 1-866-464-2050, to check the status of your amended return. 1040x 2011 Call to order forms, instructions and publications, 1-800-TAX-FORM (1-800-829-3676) to order current-year forms, instructions and publications, and prior-year forms and instructions (limited to 5 years). 1040x 2011 You should receive your order within 10 business days. 1040x 2011 Call to order transcripts of your tax returns or tax account, 1-800-908-9946. 1040x 2011 Follow the prompts to provide your Social Security Number or Individual Taxpayer Identification Number, date of birth, street address and ZIP code. 1040x 2011 Call for TeleTax topics, 1-800-829-4477, to listen to pre-recorded messages covering various tax topics. 1040x 2011 Call to ask tax questions, 1-800-829-1040. 1040x 2011 Call using TTY/TDD equipment, 1-800-829-4059 to ask tax questions or order forms and publications. 1040x 2011 The TTY/TDD telephone number is for people who are deaf, hard of hearing, or have a speech disability. 1040x 2011 These individuals can also contact the IRS through relay services such as the Federal Relay Service available at www. 1040x 2011 gsa. 1040x 2011 gov/fedrelay. 1040x 2011 Walk-in. 1040x 2011 You can find a selection of forms, publications and services — in-person, face-to-face. 1040x 2011 Products. 1040x 2011 You can walk in to some post offices, libraries, and IRS offices to pick up certain forms, instructions, and publications. 1040x 2011 Some IRS offices, libraries, and city and county government offices have a collection of products available to photocopy from reproducible proofs. 1040x 2011 Services. 1040x 2011 You can walk in to your local TAC most business days for personal, face-to-face tax help. 1040x 2011 An employee can explain IRS letters, request adjustments to your tax account, or help you set up a payment plan. 1040x 2011 If you need to resolve a tax problem, have questions about how the tax law applies to your individual tax return, or you are more comfortable talking with someone in person, visit your local TAC where you can talk with an IRS representative face-to-face. 1040x 2011 No appointment is necessary—just walk in. 1040x 2011 Before visiting, check www. 1040x 2011 irs. 1040x 2011 gov/localcontacts for hours of operation and services provided. 1040x 2011 Mail. 1040x 2011 You can send your order for forms, instructions, and publications to the address below. 1040x 2011 You should receive a response within 10 business days after your request is received. 1040x 2011  Internal Revenue Service 1201 N. 1040x 2011 Mitsubishi Motorway Bloomington, IL 61705-6613 The Taxpayer Advocate Service Is Here to Help You. 1040x 2011   The Taxpayer Advocate Service (TAS) is your voice at the IRS. 1040x 2011 Our job is to ensure that every taxpayer is treated fairly and that you know and understand your rights. 1040x 2011 What can TAS do for you?   We can offer you free help with IRS problems that you can't resolve on your own. 1040x 2011 We know this process can be confusing, but the worst thing you can do is nothing at all! TAS can help if you can't resolve your tax problem and: Your problem is causing financial difficulties for you, your family, or your business. 1040x 2011 You face (or your business is facing) an immediate threat of adverse action. 1040x 2011 You've tried repeatedly to contact the IRS but no one has responded, or the IRS hasn't responded by the date promised. 1040x 2011   If you qualify for our help, you'll be assigned to one advocate who'll be with you at every turn and will do everything possible to resolve your problem. 1040x 2011 Here's why we can help: TAS is an independent organization within the IRS. 1040x 2011 Our advocates know how to work with the IRS. 1040x 2011 Our services are free and tailored to meet your needs. 1040x 2011 We have offices in every state, the District of Columbia, and Puerto Rico. 1040x 2011 How can you reach us?   If you think TAS can help you, call your local advocate, whose number is in your local directory and at www. 1040x 2011 irs. 1040x 2011 gov/advocate, or call us toll-free at 1-877-777-4778. 1040x 2011 How else does TAS help taxpayers?   TAS also works to resolve large-scale, systemic problems that affect many taxpayers. 1040x 2011 If you know of one of these broad issues, please report it to us through our Systemic Advocacy Management System at www. 1040x 2011 irs. 1040x 2011 gov/sams. 1040x 2011 Low Income Taxpayer Clinics. 1040x 2011   Low Income Taxpayer Clinics (LITCs) serve individuals whose income is below a certain level and need to resolve tax problems such as audits, appeals, and tax collection disputes. 1040x 2011 Some clinics can provide information about taxpayer rights and responsibilities in different languages for individuals who speak English as a second language. 1040x 2011 Visit www. 1040x 2011 TaxpayerAdvocate. 1040x 2011 irs. 1040x 2011 gov or see IRS Publication 4134, Low Income Taxpayer Clinic List. 1040x 2011 Prev  Up  Next   Home   More Online Publications
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Am I Eligible for the Making Work Pay Credit or Government Retiree Credit?

Making Work Pay Credit: This credit is available for tax years 2009 and 2010 only.

Government Retiree Credit: This credit was only available in tax year 2009.

Information You Will Need:

  • Whether you can be claimed as a dependent 
  • You will need to provide basic adjusted gross income information, such as the type and amount of your various income sources.

Estimated Completion Time: 5 minutes. However: 5 minutes of inactivity will end the interview and you will be forced to start over.

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Page Last Reviewed or Updated: 14-Feb-2014

The 1040x 2011

1040x 2011 2. 1040x 2011   Possession Source Income Table of Contents Types of IncomeCompensation for Labor or Personal Services Investment Income Sales or Other Dispositions of Property Scholarships, Fellowships, Grants, Prizes, and Awards Effectively Connected Income In order to determine where to file your return and which form(s) you need to complete, you must determine the source of each item of income you received during the tax year. 1040x 2011 Income you received from sources within, or that was effectively connected with the conduct of a trade or business within, the relevant possession must be identified separately from U. 1040x 2011 S. 1040x 2011 or foreign source income. 1040x 2011 This chapter discusses the rules for determining if the source of your income is from: American Samoa, The Commonwealth of the Northern Mariana Islands (CNMI), The Commonwealth of Puerto Rico (Puerto Rico), Guam, or The U. 1040x 2011 S. 1040x 2011 Virgin Islands (USVI). 1040x 2011 Generally, the same rules that apply for determining U. 1040x 2011 S. 1040x 2011 source income also apply for determining possession source income. 1040x 2011 However, there are some important exceptions to these rules. 1040x 2011 Both the general rules and the exceptions are discussed in this chapter. 1040x 2011 U. 1040x 2011 S. 1040x 2011 income rule. 1040x 2011   This rule states that income is not possession source income if, under the rules of Internal Revenue Code sections 861–865, it is treated as income: From sources within the United States, or Effectively connected with the conduct of a trade or business within the United States. 1040x 2011 Table 2-1 shows the general rules for determining whether income is from sources within the United States. 1040x 2011 Table 2-1. 1040x 2011 General Rules for Determining U. 1040x 2011 S. 1040x 2011 Source of Income Item of Income Factor Determining Source Salaries, wages, and other compensation for labor or personal services Where labor or services performed Pensions Contributions: Where services were performed that earned the pension Investment earnings: Where pension trust is located Interest Residence of payer Dividends Where corporation created or organized Rents Location of property Royalties:   Natural resources Location of property Patents, copyrights, etc. 1040x 2011 Where property is used Sale of business inventory—purchased Where sold Sale of business inventory—produced Allocation if produced and sold in different locations Sale of real property Location of property Sale of personal property Seller's tax home (but see Special Rules for Gains From Dispositions of Certain Property , later, for exceptions) Sale of natural resources Allocation based on fair market value of product at export terminal. 1040x 2011 For more information, see Regulations section 1. 1040x 2011 863-1(b). 1040x 2011 Types of Income This section looks at the most common types of income received by individuals, and the rules for determining the source of the income. 1040x 2011 Generally, the same rules shown in Table 2-1 are used to determine if you have possession source income. 1040x 2011 Compensation for Labor or Personal Services Income from labor or personal services includes wages, salaries, commissions, fees, per diem allowances, employee allowances and bonuses, and fringe benefits. 1040x 2011 It also includes income earned by sole proprietors and general partners from providing personal services in the course of their trade or business. 1040x 2011 Services performed wholly within a relevant possession. 1040x 2011   Generally, all pay you receive for services performed in a relevant possession is considered to be from sources within that possession. 1040x 2011 However, there is an exception for income earned as a member of the U. 1040x 2011 S. 1040x 2011 Armed Forces or a civilian spouse. 1040x 2011 U. 1040x 2011 S. 1040x 2011 Armed Forces. 1040x 2011   If you are a bona fide resident of a relevant possession, your military service pay will be sourced in that possession even if you perform the services in the United States or another possession. 1040x 2011 However, if you are not a bona fide resident of a possession, your military service pay will be income from the  United States even if you perform services in a possession. 1040x 2011 Civilian spouse of active duty member of the U. 1040x 2011 S. 1040x 2011 Armed Forces. 1040x 2011   If you are a bona fide resident of a U. 1040x 2011 S. 1040x 2011 possession and choose to keep that possession as your tax residence under MSRRA when relocating with your servicemember spouse under military orders, the source of income for your labor or personal services is considered to be that possession. 1040x 2011 Likewise, if your tax residence is in one of the 50 states or the District of Columbia before relocating and you choose to keep it as your tax residence, the source of income for services performed in any of the U. 1040x 2011 S. 1040x 2011 possessions is considered to be the United States and, specifically, your state of residence or the District of Columbia. 1040x 2011 Services performed partly inside and partly outside a relevant possession. 1040x 2011   If you are an employee and receive compensation for labor or personal services performed both inside and outside the relevant possession, special rules apply in determining the source of the compensation. 1040x 2011 Compensation (other than certain fringe benefits) is sourced on a time basis. 1040x 2011 Certain fringe benefits (such as housing and education) are sourced on a geographical basis. 1040x 2011   Or, you may be permitted to use an alternative basis to determine the source of compensation. 1040x 2011 See Alternative basis , later. 1040x 2011   If you are self-employed, determine the source of your income for labor or personal services from self-employment on the basis that most correctly reflects the proper source of that income under the facts and circumstances of your particular case. 1040x 2011 In many cases, the facts and circumstances will call for an apportionment on a time basis as explained next. 1040x 2011 Time basis. 1040x 2011   Use a time basis to figure your compensation for labor or personal services from the relevant possession (other than the fringe benefits discussed later). 1040x 2011 Do this by multiplying your total compensation (other than the fringe benefits discussed later) by the following fraction:   Number of days you performed  services in the relevant  possession during the year     Total number of days you  performed services during the year           You can use a unit of time less than a day in the above fraction, if appropriate. 1040x 2011 The time period for which the income is made does not have to be a year. 1040x 2011 Instead, you can use another distinct, separate, and continuous time period if you can establish to the satisfaction of the IRS that this other period is more appropriate. 1040x 2011 Example. 1040x 2011 In 2013, you worked in your employer's office in the United States for 60 days and in the Puerto Rico office for 180 days, earning a total of $80,000 for the year. 1040x 2011 Your Puerto Rico source income is $60,000, figured as follows. 1040x 2011       180 days 240 days × $80,000 = $60,000                 Multi-year compensation. 1040x 2011   The source of multi-year compensation is generally determined on a time basis over the period to which the compensation is attributable. 1040x 2011 Multi-year compensation is compensation that is included in your income in 1 tax year but is attributable to a period that includes 2 or more tax years. 1040x 2011 You determine the period to which the income is attributable based on the facts and circumstances of your case. 1040x 2011 For more information on multi-year compensation, see Treasury Decision (T. 1040x 2011 D. 1040x 2011 ) 9212 and Regulations section 1. 1040x 2011 861-4, 2005-35 I. 1040x 2011 R. 1040x 2011 B. 1040x 2011 429, available at www. 1040x 2011 irs. 1040x 2011 gov/irb/2005-35_IRB/ar14. 1040x 2011 html. 1040x 2011 Certain fringe benefits sourced on a geographical basis. 1040x 2011   If you received any of the following fringe benefits as compensation for labor or services performed as an employee partly inside and partly outside a relevant possession, you must source that income on a geographical basis. 1040x 2011 Housing. 1040x 2011 Education. 1040x 2011 Local transportation. 1040x 2011 Tax reimbursement. 1040x 2011 Hazardous or hardship duty pay. 1040x 2011 Moving expense reimbursement. 1040x 2011 For information on determining the source of the fringe benefits listed above, see Regulations section 1. 1040x 2011 861-4. 1040x 2011 Alternative basis. 1040x 2011   You can determine the source of your compensation under an alternative basis if you establish to the satisfaction of the IRS that, under the facts and circumstances of your case, the alternative basis more properly determines the source of your income than the time or geographical basis. 1040x 2011 If you use an alternative basis, you must keep (and have available for inspection) records to document why the alternative basis more properly determines the source of your income. 1040x 2011 De minimis exception. 1040x 2011   There is an exception to the rule for determining the source of income earned in a possession. 1040x 2011 Generally, you will not have income from a possession if during a tax year you: Are a U. 1040x 2011 S. 1040x 2011 citizen or resident, Are not a bona fide resident of that possession, Are not employed by or under contract with an individual, partnership, or corporation that is engaged in a trade or business in that possession, Temporarily perform services in that possession for 90 days or less, and Earned $3,000 or less from such services. 1040x 2011 This exception began with income earned during your 2008 tax year. 1040x 2011 Pensions. 1040x 2011   Generally, pension income has two components: contributions to the pension plan and the earnings accrued from investing those contributions. 1040x 2011 The contribution portion is sourced according to where services were performed that earned the pension. 1040x 2011 The investment earnings portion is sourced according to the location of the pension trust. 1040x 2011 Example. 1040x 2011 You are a U. 1040x 2011 S. 1040x 2011 citizen who worked in Puerto Rico for a U. 1040x 2011 S. 1040x 2011 company. 1040x 2011 All services were performed in Puerto Rico. 1040x 2011 Upon retirement you remained in Puerto Rico and began receiving your pension from the U. 1040x 2011 S. 1040x 2011 pension trust of your employer. 1040x 2011 Distributions from the U. 1040x 2011 S. 1040x 2011 pension trust must be allocated between (1) contributions, which are Puerto Rico source income, and (2) investment earnings, which are U. 1040x 2011 S. 1040x 2011 source income. 1040x 2011 Investment Income This category includes such income as interest, dividends, rents, and royalties. 1040x 2011 Interest income. 1040x 2011   The source of interest income is generally determined by the residence of the payer. 1040x 2011 Interest paid by corporations created or organized in a relevant possession (possession corporation) or by individuals who are bona fide residents of a relevant possession is considered income from sources within that possession. 1040x 2011   However, there is an exception to this rule if you are a bona fide resident of a relevant possession, receive interest from a corporation created or organized in that possession, and are a shareholder of that corporation who owns, directly or indirectly, at least 10% of the total voting stock of the corporation. 1040x 2011 See Regulations section 1. 1040x 2011 937-2(i) for more information. 1040x 2011 Dividends. 1040x 2011   Generally, dividends paid by a corporation created or organized in a relevant possession will be considered income from sources within that possession. 1040x 2011 There are additional rules for bona fide residents of a relevant possession who receive dividend income from possession corporations, and who own, directly or indirectly, at least 10% of the voting stock of the corporation. 1040x 2011 For more information, see Regulations section 1. 1040x 2011 937-2(g). 1040x 2011 Rental income. 1040x 2011   Rents from property located in a relevant possession are treated as income from sources within that possession. 1040x 2011 Royalties. 1040x 2011   Royalties from natural resources located in a relevant possession are considered income from sources within that possession. 1040x 2011   Also considered possession source income are royalties received for the use of, or for the privilege of using, in a relevant possession, patents, copyrights, secret processes and formulas, goodwill, trademarks, trade brands, franchises, and other like property. 1040x 2011 Sales or Other Dispositions of Property The source rules for sales or other dispositions of property are varied. 1040x 2011 The most common situations are discussed below. 1040x 2011 Real property. 1040x 2011   Real property includes land and buildings, and generally anything built on, growing on, or attached to land. 1040x 2011 The location of the property generally determines the source of income from the sale. 1040x 2011 For example, if you are a bona fide resident of Guam and sell your home that is located in Guam, the gain on the sale is sourced in Guam. 1040x 2011 If, however, the home you sold was located in the United States, the gain is U. 1040x 2011 S. 1040x 2011 source income. 1040x 2011 Personal property. 1040x 2011   The term “personal property” refers to property (such as machinery, equipment, or furniture) that is not real property. 1040x 2011 Generally, gain (or loss) from the sale or other disposition is sourced according to the seller's tax home. 1040x 2011 If personal property is sold by a bona fide resident of a relevant possession, the gain (or loss) from the sale is treated as sourced within that possession. 1040x 2011   This rule does not apply to the sale of inventory, intangible property, depreciable personal property, or property sold through a foreign office or fixed place of business. 1040x 2011 The rules applying to sales of inventory are discussed below. 1040x 2011 For information on sales of the other types of property mentioned, see Internal Revenue Code section 865. 1040x 2011 Inventory. 1040x 2011   Your inventory is personal property that is stock in trade or that is held primarily for sale to customers in the ordinary course of your trade or business. 1040x 2011 The source of income from the sale of inventory depends on whether the inventory was purchased or produced. 1040x 2011 Purchased. 1040x 2011   Income from the sale of inventory that you purchased is sourced where you sell the property. 1040x 2011 Generally, this is where title to the property passes to the buyer. 1040x 2011 Produced. 1040x 2011   Income from the sale of inventory that you produced in a relevant possession and sold outside that possession (or vice versa) is sourced based on an allocation. 1040x 2011 For information on making the allocation, see Regulations section 1. 1040x 2011 863-3(f). 1040x 2011 Special Rules for Gains From Dispositions of Certain Property There are special rules for gains from dispositions of certain investment property (for example, stocks, bonds, debt instruments, diamonds, and gold) owned by a U. 1040x 2011 S. 1040x 2011 citizen or resident alien prior to becoming a bona fide resident of a possession. 1040x 2011 You are subject to these special rules if you meet both of the following conditions. 1040x 2011 For the tax year for which the source of the gain must be determined, you are a bona fide resident of the relevant possession. 1040x 2011 For any of the 10 years preceding that year, you were a citizen or resident alien of the United States (other than a bona fide resident of the relevant possession). 1040x 2011 If you meet these conditions, gains from the disposition of this property will not be treated as income from sources within the relevant possession for purposes of the Internal Revenue Code. 1040x 2011 Accordingly, bona fide residents of American Samoa and Puerto Rico, for example, may not exclude the gain on their U. 1040x 2011 S. 1040x 2011 tax return. 1040x 2011 (See chapter 3 for additional filing information. 1040x 2011 ) With respect to the CNMI, Guam, and the USVI, the gain from the disposition of this property will not meet the requirements for certain tax rules that may allow bona fide residents of those possessions to reduce or obtain a rebate of taxes on income from sources within the relevant possessions. 1040x 2011 These rules apply to dispositions after April 11, 2005. 1040x 2011 For details, see Regulations section 1. 1040x 2011 937-2(f)(1) and Examples 1 and 2 of section 1. 1040x 2011 937-2(k). 1040x 2011 Example 1. 1040x 2011 In 2007, Cheryl Jones, a U. 1040x 2011 S. 1040x 2011 citizen, lived in the United States and paid $1,000 for 100 shares of stock in the Rose Corporation, a U. 1040x 2011 S. 1040x 2011 corporation listed on the New York Stock Exchange. 1040x 2011 On March 1, 2010, she moved to Puerto Rico and changed her tax home to Puerto Rico on the same date. 1040x 2011 Cheryl satisfied the presence test in 2010 and, under the year-of-move exception, she was considered a bona fide resident of Puerto Rico for the rest of 2010. 1040x 2011 On March 1, 2010, the closing value of Cheryl's stock in the Rose Corporation was $2,000. 1040x 2011 On January 5, 2013, while still a bona fide resident of Puerto Rico, Cheryl sold all her Rose Corporation stock for $7,000. 1040x 2011 Under the earlier rules, none of Cheryl's $6,000 gain will be treated as income from sources within Puerto Rico. 1040x 2011 The source rules discussed in the preceding paragraphs supplement, and may apply in conjunction with, an existing special rule. 1040x 2011 This existing special rule applies if you are a U. 1040x 2011 S. 1040x 2011 citizen or resident alien who becomes a bona fide resident of American Samoa, the CNMI, or Guam, and who has gain from the disposition of certain U. 1040x 2011 S. 1040x 2011 assets during the 10-year period beginning when you became a bona fide resident. 1040x 2011 The gain is U. 1040x 2011 S. 1040x 2011 source income that generally is subject to U. 1040x 2011 S. 1040x 2011 tax if the property is either (1) located in the United States; (2) stock issued by a U. 1040x 2011 S. 1040x 2011 corporation or a debt obligation of a U. 1040x 2011 S. 1040x 2011 person or of the United States, a state (or political subdivision), or the District of Columbia; or (3) property that has a basis in whole or in part by reference to property described in (1) or (2). 1040x 2011 See chapter 3 for filing information. 1040x 2011 Special election. 1040x 2011   For dispositions after April 11, 2005, you can choose to treat the part of gain (or loss) attributable to the time you held the property while a bona fide resident of the relevant possession (the possession holding period) as gain (or loss) from sources within that possession. 1040x 2011 Make the election by reporting the gain attributable to the possession holding period on your income tax return for the year of disposition. 1040x 2011 This election overrides both of the special rules discussed earlier. 1040x 2011   There are two methods for figuring the gain for the possession holding period, one for marketable securities and another for other types of investment property. 1040x 2011 Marketable securities. 1040x 2011   Marketable securities are those actively traded on an established financial market, such as stock in a publicly held corporation. 1040x 2011 Under the special election, allocate the gain (or loss) by figuring the appreciation separately for your possession and U. 1040x 2011 S. 1040x 2011 holding periods. 1040x 2011   Your possession holding period begins on the first day you do not have a tax home outside the relevant possession. 1040x 2011 The gain (or loss) attributable to the possession holding period is the difference in fair market value of the security at the close of the market on the first and last days of this holding period. 1040x 2011 This is your gain (or loss) that is treated as being from sources within the relevant possession. 1040x 2011 If you were a bona fide resident of the relevant possession for more than one continuous period, combine the gains (or losses) from each possession holding period. 1040x 2011 Example 2. 1040x 2011 Assume the same facts as in Example 1, except that Cheryl makes the special election to allocate the gain between her U. 1040x 2011 S. 1040x 2011 and possession holding periods. 1040x 2011 Cheryl's possession holding period began March 1, 2010, the date her tax home changed to Puerto Rico. 1040x 2011 Therefore, the portion of gain attributable to her possession holding period is $5,000 ($7,000 sale price – $2,000 closing value on first day of the possession holding period). 1040x 2011 By reporting $5,000 of her $6,000 gain as Puerto Rico source income on her 2013 Puerto Rico tax return (and the remainder as non-Puerto Rico source income), Cheryl elects to treat that amount as Puerto Rico source income. 1040x 2011 Other personal property. 1040x 2011   For personal property other than marketable securities, use a time-based allocation. 1040x 2011 Figure the gain (or loss) attributable to the possession holding period by multiplying your total gain (or loss) by the following fraction. 1040x 2011      Number of days in the  possession holding period     Total number of days  in your holding period         The result is your gain (or loss) that is treated as being from sources within the relevant possession. 1040x 2011 Example 3. 1040x 2011 In addition to the stock in Rose Corporation, Cheryl acquired a 5% interest in the Alder Partnership on January 1, 2009. 1040x 2011 On March 1, 2010, when she established bona fide residency in Puerto Rico, her partnership interest was not considered a marketable security. 1040x 2011 On September 16, 2013, while still a bona fide resident of Puerto Rico, Cheryl sold her interest in Alder Partnership for a $100,000 gain. 1040x 2011 She had owned the interest for a total of 1,720 days. 1040x 2011 Cheryl's possession holding period (from March 1, 2010, through September 16, 2013) is 1,296 days. 1040x 2011 The portion of her gain attributable to Puerto Rico is $75,349 ($100,000 x (1,296 Puerto Rico days ÷ 1,720 total days)). 1040x 2011 By reporting $75,349 of her $100,000 gain as Puerto Rico source income on her 2013 Puerto Rico tax return (and the remainder as non-Puerto Rico source income), Cheryl elects to treat that amount as Puerto Rico source income. 1040x 2011 Scholarships, Fellowships, Grants, Prizes, and Awards The source of these types of income is generally the residence of the payer, regardless of who actually disburses the funds. 1040x 2011 Therefore, in order to be possession source income, the payer must be a resident of the relevant possession, such as an individual who is a bona fide resident or a corporation created or organized in that possession. 1040x 2011 These rules do not apply to amounts paid as salary or other compensation for services. 1040x 2011 See Compensation for Labor or Personal Services, earlier in this chapter, for the source rules that apply. 1040x 2011 Effectively Connected Income In limited circumstances, some kinds of income from sources outside the relevant possession must be treated as effectively connected with a trade or business in that possession. 1040x 2011 These circumstances are listed below. 1040x 2011 You have an office or other fixed place of business in the relevant possession to which the income can be attributed. 1040x 2011 That office or place of business is a material factor in producing the income. 1040x 2011 The income is produced in the ordinary course of the trade or business carried on through that office or other fixed place of business. 1040x 2011 An office or other fixed place of business is a material factor if it significantly contributes to, and is an essential economic element in, the earning of the income. 1040x 2011 The three kinds of income from sources outside the relevant possession to which these rules apply are the following. 1040x 2011 Rents and royalties for the use of, or for the privilege of using, intangible personal property located outside the relevant possession or from any interest in such property. 1040x 2011 Included are rents or royalties for the use of, or for the privilege of using, outside the relevant possession, patents, copyrights, secret processes and formulas, goodwill, trademarks, trade brands, franchises, and similar properties if the rents or royalties are from the active conduct of a trade or business in the relevant possession. 1040x 2011 Dividends or interest from the active conduct of a banking, financing, or similar business in the relevant possession. 1040x 2011 Income, gain, or loss from the sale or exchange outside the relevant possession, through the office or other fixed place of business in the relevant possession, of: Stock in trade, Property that would be included in inventory if on hand at the end of the tax year, or Property held primarily for sale to customers in the ordinary course of business. 1040x 2011 Item (3) will not apply if you sold the property for use, consumption, or disposition outside the relevant possession and an office or other fixed place of business in a foreign country was a material factor in the sale. 1040x 2011 Example. 1040x 2011 Marcy Jackson is a bona fide resident of American Samoa. 1040x 2011 Her business, which she conducts from an office in American Samoa, is developing and selling specialized computer software. 1040x 2011 A software purchaser will frequently pay Marcy an additional amount to install the software on the purchaser's operating system and to ensure that the software is functioning properly. 1040x 2011 Marcy installs the software at the purchaser's place of business, which may be in American Samoa, in the United States, or in another country. 1040x 2011 The income from selling the software is effectively connected with the conduct of Marcy's business in American Samoa, even though the product's destination may be outside the possession. 1040x 2011 However, the compensation she receives for installing the software (personal services) outside of American Samoa is not effectively connected with the conduct of her business in the possession—the income is sourced where she performs the services. 1040x 2011 Prev  Up  Next   Home   More Online Publications