Deducting an Unpaid Moving Bill on a Tax Return

March 12, 2008 5:48 PM

Can I deduct moving expenses on an unpaid mover bill on my tax return? In March of 2007 I moved from New Jersey to Alaska, but am unable to pay the movers to deliver my property until my wife cashes out her stock from her former employer. The property is currently undelivered and unpaid for, but I did get billed for it in 2007. Can I deduct this as a "moving expense" for 2007?

Further information: the bill is for $10,000+ on an almost 4000 mile move. I moved specifically because I was hired for a job in Alaska and even started work the day after I came up. I also have $1,100 in storage rental cost (the moving company is holding the items locally while my wife and I wait on the money to be available), and roughly $1,500 in plane ticket costs. Can I deduct these as well?

Unfortunately due to bureaucracy nonsense and my hiring supervisor being new and making a mistake, my employer refused to cover my moving costs.

I'm willing to eat the costs because the job allows me to provide for my wife and child better than both of our retail jobs did in the past. But I would like to recoup as much as I can in tax deductions.

So basically I'm looking at 2007 job related moving costs that I can't pay for (and get delivered) until April 2008 . Do I have a hope of claiming these at all for 2007 or 2008 or does this opportunity fall into purgatory?

Thanks in advance for advice from any who have experience with moving expense deductions on tax returns.

posted by Stilus to law & government (5 comments total)

You can do either. The 'time test' dictates that full time employees stay in the general vicinity of the new job for 39 weeks following the move, but if you 'expect to meet the time test' you can deduct the taxes in the year you move. More info here.
posted by uaudio at 6:08 PM on March 12, 2008

And also, you can only deduct the first 30 days of storage costs.
posted by uaudio at 6:10 PM on March 12, 2008

I would read IRS Publication 521 if I were you.

Relevant bits:
"You can generally 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." So you incurred the expenses within that time-frame.

"If you were not reimbursed, deduct your moving expenses in the year you paid or incurred the expenses. " So you would deduct them in the year you paid.

OTOH, you could find a tax accountant, because you're talking about a lot of money in deductions here.
posted by smackfu at 6:35 PM on March 12, 2008

Talk to a tax accountant, because there are two accounting methods that can be used. I forget their names, but one measures actual cash flows for the year in question, and the other measures "accruals" for the year in question. I believe personal income tax generally uses the time basis one. You can choose either, but you have to use it consistently with all income/expenses for that year.

An example of the cash flow method is a case where you are paid on the first of the month for work done in previous month. So your check for 1/1/2008 counts on your 2008 taxes, even though you actually did the work in 2007.

In your case, while you incurred the debt in 2007, you didn't pay it in 2007, so you can't deduct it in 2007.

And I'm not sure that storage fees would be deductible if they are the result of non-payment. I'd guess that they would only be deductible if they were part of the move.
posted by gjc at 7:30 PM on March 12, 2008

I forget their names

You didn't, though! You're thinking of the "cash receipts and disbursements method" and the "accrual method." It's all discussed much more in Publication 538.

gjc's analysis sounds pretty correct to me. You're almost certainly a cash method taxpayer (based on your past returns), so if you didn't actually pay the expenses in 2007, you probably can't deduct them in 2007.

To change your method of accounting, you need IRS approval, and I don't know what all that entails.

(I am a tax lawyer, but I don't know anything about individual tax.)
posted by Mr. President Dr. Steve Elvis America at 9:08 PM on March 12, 2008