Audit by mail for moving expenses

[AEGee]

What is the name of your state (only U.S. law)? CA
I received a reissued W-2 with box 12 marked P and 4933.90. (no taxes paid) for my 2015 income in addition to my regular W-2 (with taxes paid). In March of 2015 I took a new position with the same company moving me over 325 miles from my home. The project I am on will keep me there for approx 18 months. I had moving expenses of 13,375. which consisted of air, car rental, apartment costs (mainly travel expenses). I have now been notified that I am under a IRS audit by mail. I have all my receipts and a letter from my company stating the move based on new position with the company, their reimbursement policy (which is relocation costs and per diem). What should I present and look for from this inquiry?

Any directions or suggestions will be greatly appreciated.

 

[LdiJ]

What is the name of your state (only U.S. law)? CA
I received a reissued W-2 with box 12 marked P and 4933.90. (no taxes paid) for my 2015 income in addition to my regular W-2 (with taxes paid). In March of 2015 I took a new position with the same company moving me over 325 miles from my home. The project I am on will keep me there for approx 18 months. I had moving expenses of 13,375. which consisted of air, car rental, apartment costs (mainly travel expenses). I have now been notified that I am under a IRS audit by mail. I have all my receipts and a letter from my company stating the move based on new position with the company, their reimbursement policy (which is relocation costs and per diem). What should I present and look for from this inquiry?

Any directions or suggestions will be greatly appreciated.

Ok, I think you may have a problem. What you are describing doesn't sound like moving expenses, it sounds like traveling expenses for a temporary assignment. Unfortunately, you cannot deduct traveling expenses for an assignment that will last longer than 12 months. Over 12 months is not considered to be temporary under tax law.

Moving expenses would be the cost to move you to your new location. The only lodging that can be included in that is if you need to stay overnight somewhere on the trip to get there.

 

[AEGee]

Thank you so much for your response. That is exactly what I was worried about. Besides taking away the deduction taken what would be the penalty/fees that I should expect?

What would be the chance that these would classify as non reimbursable business expenses?

Thanks for the heads up.

 

[FlyingRon]

Thank you so much for your response. That is exactly what I was worried about. Besides taking away the deduction taken what would be the penalty/fees that I should expect?

Pretty much that is what is going to happen. They're going to recompute your tax removing the unallowable deductions. You'll pay the additional tax due, plus a penalty for not paying it timely, plus the interest between when it was due and now. Actually, the penalty and the interest from the feds isn't that bad. The states are sometimes WORSE on what you owe them.

What would be the chance that these would classify as non reimbursable business expenses?

Not sure what the question is. You were reimbursed, so they can't be classified as anything else. If you mean "nondeductible business expense," that's exactly what they'll be classified as. Living expenses (rent, food, etc...) for an 18-month assignment are taxable income if your employer pays them. The actual cost to move you to that site is allowable (as pointed out the money paid the moving company and the direct cost of moving from place to place).