Moving expenses or employee business expenses

[origun]

Client is in construction and his company sends him around to different projects, often out of his home area in different states (usually 2-6 mo. in duration). As they were temporary assignments, I have assumed his tax home to be his family home and deducted expenses when away from home on a 2106. His employer reimburses him well for his expenses and shows them on Box 1 of W-2. This year he had a memo that several thousands of dollars of expenses were reimbursed as "moving expenses" and included in Box 1 as taxable wages. My assumption is that his tax home hasn't changed so he hasn't "moved" according to IRS' definition and he should take these expenses on a 2106, not a 3903. Am I correct?

Also, the employer "grossed up" his expenses to cover taxes. [Expense reimbursement was about $30k of which about $12k was "gross up" for taxes.] Should I be doing anything other than deducting all legitimate expenses (he has good records) on a 2106?

Thanks.

[Dusty2004]

Thoughts

You said "Client is in construction and his company sends him around to different projects, often out of his home area in different states (usually 2-6 mo. in duration). As they were temporary assignments, I have assumed his tax home to be his family home and deducted expenses when away from home on a 2106."

I do agree that since it temporary (less than 1 year) assignments that the expenses would be deducted on 2106 and

"His employer reimburses him well for his expenses and shows them on Box 1 of W-2."

To me this solidifies his ability to deduct the expenses as the employer is considering them as income to the employee.

"This year he had a memo that several thousands of dollars of expenses were reimbursed as "moving expenses" and included in Box 1 as taxable wages. My assumption is that his tax home hasn't changed so he hasn't "moved" according to IRS' definition and he should take these expenses on a 2106, not a 3903. Am I correct? "

I agree with this statement. The fact that he did not move just means that the employer incorrectly coded these expenses and he should deduct them on 2106.

"Also, the employer "grossed up" his expenses to cover taxes. [Expense reimbursement was about $30k of which about $12k was "gross up" for taxes.] Should I be doing anything other than deducting all legitimate expenses (he has good records) on a 2106? "

No, Gross up pay is just like any other taxable income. They count it as income and cannot deduct anything for it.

Dusty

[Kram BergGold]

too many assumnptions

You need to ask more questions about the so called moving expense reimbursements. Maybe they were truely moving expense reimbursements because it was thought he would be moving but then he did not meet the test for deducting moving. Maybe it is an error on the W-2. Maybe something else we have not thought about.

[FEDUKE404]

In reality....

...sounds to me like the employer is compensating (well) the employee for the aggravation of having to work in different job locations.

Regardless of the "intent" of the employer, there appear to be zero Form 3903 issues at play here. The extra income is there and some of it may go away with proper use of Form 2106.

(I bet the associated state tax returns are a hoot!! )

FE

[origun]

States et al

Yes, the states are much fun! Oregon taxes on all income from anywhere for a full year resident. Then for some states, I can deduct taxes from there on OR but for CA, I have to deduct OR on the CA return because of different rules between states.
Attachments will be huge for state returns. Fortunately they deducted a lot of taxes from all states.

And 2106 expenses are huge...enough to create an AMT! Records are decent and numbers are reasonable...fortunately!