Top 5 Moving Tax Prep Questions with Orion Mobility
Most people know that if they are relocating for a job, they can deduct certain moving expenses (so long as they pass
Most people know that if they are relocating for a job, they can deduct certain moving expenses (so long as they pass the IRS’s time and distance tests). But as is the case with taxes, there are a lot of nuances and exceptions that can be easy to miss, especially if you receive a relocation package from your employer and are being reimbursed for certain expenses.
Issues like compliance and taxes related to a move often can be a point of confusion for many people. Hilldrup partners with companies whose expertise in these areas help complement the services we already provide. For example, Hilldrup’s global expense management partner, Orion Mobility, assists clients and job candidates with tax compliance.
We talked with Quentin Hormel, Orion’s tax manager, to see what tips those who are relocating for work should follow to make sure they get all the available reimbursements and deductions related to their move.
What should people first do at the start of their relocation process?
Spend some time making sure you understand your relocation benefits, including your tax benefits, for future reference. It’s also important to stay organized and start reporting expenses and tracking deductions from the beginning. Maintain your own file of office memos, any correspondence, receipts and documents related to the move. It is tremendously easier to do this from the start versus trying to go back months later to find old receipts and notes.
Every state has their own tax laws. What information should people moving to a different state update so that they don’t run into issues when it comes time to file their state return?
If you’re moving to another state, your payroll and relocation departments will need to update your work state in their systems, as well as your new mailing address and phone number. In addition, your relocation department will likely need your correct marital status and 1040 exemption number (the number of exemptions you will claim when you file your federal tax return, not the W-4 exemption number that is used for withholding purposes by payroll).
In many cases, relocation might also need to know whether you are an itemizer or non-itemizer, which is often determined by your homeowner/renter status. This information can help provide a much more accurate gross-up calculation at year-end.
There are a lot of expenses to track during a move, some you can deduct and some of which employers may offer reimbursement. What should individuals do to make sure expenses are tracked correctly?
Once a week, write down any expense payments generated by the move that do not include receipts. The IRS wants receipts, but they also recognize the fact that reasonable expenses are deductible and estimates may have to be made for certain circumstances. The records that you keep may be used to support reimbursements or tax return deductions.
What about getting rid of and donating items you don’t want to take with you?
It’s common to use a move as an opportunity to purge items you no longer need. Pay particular mind to large and bulky items that are in poor condition, such as an old boat, motorcycle or car. You can donate them to an established charity or, if possible, trade them in at a dealership and have a newer model delivered to your home. Again, just be sure to get a receipt if you donate them!
We recommend customers transport any irreplaceable items themselves. Can they deduct those expenses?
Absolutely – if you have something that insurance money cannot replace, like a family keepsake, it is best to pack it yourself and carry it along with you in the car on the move. You can deduct the cost of packing materials that you buy on your own to protect items like these.
Thanks again to Quentin and Orion Mobility for talking through these relocating tax tips! You can learn more about Orion Mobility and their services at orionmobility.com.
