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Form 3903: What can be deducted as a moving expense?

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  • Form 3903: What can be deducted as a moving expense?

    I moved to Japan from the US in July 2012 to start a new job, so I applied for an extension to file my taxes in order to qualify for the Foreign Income Exclusion. I got it and am now completing my taxes to be filed by October.

    I have a question regarding Form 3903, the form allowing you to figure your moving expense deduction for a work-related move. With this form, can I deduct certain expenses related to moving into a new apartment, like key money, agency fee, fire insurance fee, lock change fee, etc.?

    The form can be found here: http://www.irs.gov/pub/irs-access/f3903_accessible.pdf

    I have read in some places that security deposits cannot be deducted, I assume because that is not an actual "expense" since presumably you get some or part of a security deposit back. Also have read that "expenses related to entering into a new lease" are not deductible, but none of the expenses listed above are directly related to the lease.

    Any thoughts you might have are greatly appreciated!

  • #2
    Originally posted by hudwa View Post
    I moved to Japan from the US in July 2012 to start a new job, so I applied for an extension to file my taxes in order to qualify for the Foreign Income Exclusion. I got it and am now completing my taxes to be filed by October.

    I have a question regarding Form 3903, the form allowing you to figure your moving expense deduction for a work-related move. With this form, can I deduct certain expenses related to moving into a new apartment, like key money, agency fee, fire insurance fee, lock change fee, etc.?

    The form can be found here: http://www.irs.gov/pub/irs-access/f3903_accessible.pdf

    I have read in some places that security deposits cannot be deducted, I assume because that is not an actual "expense" since presumably you get some or part of a security deposit back. Also have read that "expenses related to entering into a new lease" are not deductible, but none of the expenses listed above are directly related to the lease.

    Any thoughts you might have are greatly appreciated!

    Pay an accountant to make sure your return is done correct the first time. Then use the return as a guide for next year and do it yourself.

    An accountant may cost a bit of money but it's better than ____ing up and worrying about the IRS contacting you later on.

    The US government may screw up a lot of things but you are sure when they will come calling when it's time to collect money.

    Comment


    • #3
      Originally posted by Ken44 View Post
      The US government may screw up a lot of things but you are sure when they will come calling when it's time to collect money.
      I wonder when they will come calling for me. It's been 17 years since my last filing.

      Comment


      • #4
        Originally posted by hml View Post
        I wonder when they will come calling for me. It's been 17 years since my last filing.

        My guess is when the US government starts to link passport info. with the IRS and you go visit the US Embassy to renew your passport.

        I'm surprised it's not already in place.

        Comment


        • #5
          Originally posted by hml View Post
          I wonder when they will come calling for me. It's been 17 years since my last filing.
          Obviously you're not investing with any outfit in the states, or they'd've hammered you long ago.

          Good luck when/if it does come back to bite you.

          Comment


          • #6
            Originally posted by Ken44 View Post
            My guess is when the US government starts to link passport info. with the IRS and you go visit the US Embassy to renew your passport.

            I'm surprised it's not already in place.
            Honestly, so am I. I was a bit worried when I renewed my passport not too long ago, but nothing happened. I got my passport no problem. Same with my drivers license renewal last year. Nothing.

            Originally posted by johnnyG View Post
            Obviously you're not investing with any outfit in the states, or they'd've hammered you long ago.
            No investments at all.

            Originally posted by johnnyG View Post
            Good luck when/if it does come back to bite you.
            Thanks, but I'm not too worried. I have no assets at all in the states and I don't see a jail sentence for what is *obviously* a case of confusion. "Sorry, your honor. I thought that I did not have to file taxes if I lived overseas." Maybe a fine, but no taxes will be due, I'm sure.

            Comment


            • #7
              If you are a corporation you are not required to pay US taxes on overseas income. Real persons, on the other hand, are supposed to pay tax to Uncle Sam, unless they get the foreign income exclusion. From what I've heard, the exclusion is relatively easy to get, so long as your employer helps with the paperwork.

              Perhaps we could become a corporation for tax purposes, and avoid the entire mess? There may be tax lawyers who could figure it out.

              Comment


              • #8
                Originally posted by JohnELSI View Post
                If you are a corporation you are not required to pay US taxes on overseas income. Real persons, on the other hand, are supposed to pay tax to Uncle Sam, unless they get the foreign income exclusion. From what I've heard, the exclusion is relatively easy to get, so long as your employer helps with the paperwork.

                Perhaps we could become a corporation for tax purposes, and avoid the entire mess? There may be tax lawyers who could figure it out.
                To take the exemption if you are eligible all you need to do is file your return and claim it. AFAIK there is not even any form needed for the basic exemption, just claim it on the right line of your 1040 and subtract it out of your taxable income. Basically you have to be out of US for 330 days of a 365 days period or be a 'bona fide' foreign resident to qualify. For corporate employees getting a housing allowance there is an additional exemption that would require help from you employer, but not for the simple exclusion of about 90,000 in earned income (from work, not from investments).

                The thing is you have to "claim it to be eligible". I don't understand exactly what that means, except perhaps that if you never filed and they found out about your income, they *might* be able to charge you taxes and penalties because you never claimed the exemption, even though you could have claimed it and then owed nothing. That's just a guess. Maybe as long as your income is below 90,000 the won't even come after you even if they realized you haven't filed.

                Comment


                • #9
                  Originally posted by hudwa View Post
                  I moved to Japan from the US in July 2012 to start a new job, so I applied for an extension to file my taxes in order to qualify for the Foreign Income Exclusion. I got it and am now completing my taxes to be filed by October.

                  I have a question regarding Form 3903, the form allowing you to figure your moving expense deduction for a work-related move. With this form, can I deduct certain expenses related to moving into a new apartment, like key money, agency fee, fire insurance fee, lock change fee, etc.?

                  The form can be found here: http://www.irs.gov/pub/irs-access/f3903_accessible.pdf

                  I have read in some places that security deposits cannot be deducted, I assume because that is not an actual "expense" since presumably you get some or part of a security deposit back. Also have read that "expenses related to entering into a new lease" are not deductible, but none of the expenses listed above are directly related to the lease.

                  Any thoughts you might have are greatly appreciated!
                  IRS Publication 521 explains in great detail exactly what is and is not deductible. There are some things deductible for international moves that are not allowed domestically, by the way.

                  http://www.irs.gov/uac/Publication-521,-Moving-Expenses

                  Financially,
                  A.

                  Comment


                  • #10
                    Originally posted by kabunushi View Post
                    To take the exemption if you are eligible all you need to do is file your return and claim it. AFAIK there is not even any form needed for the basic exemption, just claim it on the right line of your 1040 and subtract it out of your taxable income.
                    If the 'basic exemption' you are referring to is the Foreign Earned Income Exclusion, then have to file either Form 2555-EZ or Form 2555 with your US 1040 in order to claim the FEIE. You do enter the amount of your FEIE on your 1040, but that number is pretty much meaningless without attaching the proper supporting documents to your 1040. Not sure if you can claim the FEIE retroactively; you may have to file an amended 1040, etc. for each year you want to try and claim the FEIE.

                    FWIW, All US citizens (including those living or working overseas) are required to file a US 1040, 1040A, 1040-EZ if their income is above a certain level. Minimum income levels are determined by age and filing status. For example, a single person who is under 65 years of age and who has a gross income (which includes income earned from foreign sources) of USD 9,750 or more was supposed to file an federal income tax return for 2012. This has nothing to do with the FEIE.

                    In addition, depending upon your state of residence, you may also have to file a state income tax return. Some states require all residents who file a federal income tax return to file a state income tax return while others do things differently. This also has nothing to do with the FEIE.

                    @OP
                    Claiming the FEIE makes you unable to claim certain other deductions. Likewise, claiming certain other deductions means you can't claim the FEIE. Best thing to do is check with a tax accountant who has experience with this kind of thing. If your gross income comes only from foreign sources and you use the FEIE to exclude it all, then your taxable income will be essentially 0 (so, your tax is also 0). Can you even claim a deduction for moving expenses, etc. if your income is 0 and you pay no taxes at all?
                    Last edited by Shimi; 2013-08-14, 05:38 PM.

                    Comment


                    • #11
                      What i was addressing was this statement: "From what I've heard, the exclusion is relatively easy to get, so long as your employer helps with the paperwork." Yes in the simplest case it's very simple and straightforward and there is not need for getting any paperwork or help from you employer. You just claim the basic deduction, and deduct $90,000 from you earned income and if you're no high paid, that's it for the federal return. As you say, you still usually have to do a state return too.

                      OK you have to fill in a form 2555. The EZ form only has a few lines and is essentially the same as just filling one line on the 1040, in the simplest case. In most cases there is no need to document your claim that you were a foreign resident. Where it gets really complicated is where you have gone back to the US during the year. You have to account for all your periods of presence and absence. What I mean is that this is not something hard and in most cases, there is no need for any paperwork from your employer, because there is no 'supporting documents other than the form 2555 - definitely not if you can file the 2555-EZ.

                      WRT the OP, of course taking the moving deduction implies that the OP made more than the exclusion, otherwise as you say his taxable income would be zero simply by subtracting the foreign earned income. In that case there are extras like the possible housing allowance deduction, moving, also you have choices between taking deductions and credits. In that case, esp if you qualify for the housing exclusion or credit, it's damn complicated and your employer has to provide info or papers to back it up. But if you're here on a high paying job, as an expat your company will be paying for tax assistance, otherwise you are certainly making enough for it to be worth paying an expert to help you minimize your tax bill.

                      Comment


                      • #12
                        Actually the wording I've read seems to imply that if you don't file timely, you can't file the exclusion after the fact and end up getting taxed on the whole shebang.

                        Comment


                        • #13
                          Originally posted by kabunushi View Post
                          What i was addressing was this statement: "From what I've heard, the exclusion is relatively easy to get, so long as your employer helps with the paperwork." Yes in the simplest case it's very simple and straightforward and there is not need for getting any paperwork or help from you employer. You just claim the basic deduction, and deduct $90,000 from you earned income and if you're no high paid, that's it for the federal return. As you say, you still usually have to do a state return too.
                          What I was addressing was this statement:
                          Originally posted by kabunushi View Post
                          AFAIK there is not even any form needed for the basic exemption, just claim it on the right line of your 1040 and subtract it out of your taxable income.
                          No biggie. I just misinterpreted "not any form needed for the basic exemption" to mean that you did not even need Form 2555 or Form 2555-EZ.


                          Just for the record, the amount you can exclude is not fixed at USD 90,000 per year. If varies per year: for eaxmple, it is USD 97,600 for 2013, but it was only USD 76,000 for 2000.

                          If I remember correctly, there was also some talk of eliminating the FEIE all together a few years back as part of a comprehensive tax reform plan proposed by Senators Gregg and Wyden. Haven't heard much about this since then, but it kind of makes you wonder really just how long the FEIE is going to be around. I think they tried to get rid of it back in '78 too, but the fallout was so bad that it was fairly quickly reinstated.

                          Back to the OP, he/she hasn't posted anything else on this thread. Maybe we'll get an update soon.
                          Last edited by Shimi; 2013-08-15, 10:14 AM.

                          Comment


                          • #14
                            Originally posted by Shimi View Post

                            If I remember correctly, there was also some talk of eliminating the FEIE all together a few years back as part of a comprehensive tax reform plan proposed by Senators Gregg and Wyden. Haven't heard much about this since then, but it kind of makes you wonder really just how long the FEIE is going to be around. I think they tried to get rid of it back in '78 too, but the fallout was so bad that it was fairly quickly reinstated.
                            You could still take the foreign tax credit (with no taxes paid disallowed because they are charged against excluded income). So you probably still would not have to pay any American tax if you were a taxpayer of a high-rate jurisdiction like Japan.

                            Numerically,
                            A.

                            Comment


                            • #15
                              Originally posted by Shimi View Post

                              In addition, depending upon your state of residence, you may also have to file a state income tax return. Some states require all residents who file a federal income tax return to file a state income tax return while others do things differently. This also has nothing to do with the FEIE.
                              If you are living overseas, you don't have a state of residence. You might have been a part-year resident, but otherwise, I would not anticipate any state returns unless you are obligated to file a nonresident state tax return on the basis of having income in the state, such as rental property.

                              Politically,
                              A.

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