Home office

Comment

Comment by Pauline Harris on June 15, 2009 at 2:36am

Hi Marci,

I'm a freelance journalist researching a story on working from home. Would you be interested in answering a few questions by email and possibly having a chat over the phone about it? Let me know. Thanks!

paulinejharris@gmail.com

Comment by Marci Grossman on June 2, 2009 at 7:29am

Now that is a possibility that could work. Thank you. I will look into it.
It is too bad that the mileage would be lost because of the limitation due to the exclusive use limitation when it meets what I would consider the more important parameters of "principal place of business" and that it is used regularly in the normal course of business.

Comment by Stuart Sobel on June 2, 2009 at 7:04am

What if we subdivided the room - if it was large enough with possibly a decorative screen/s or some bookcases? The square footage enclosed within the room could be probably sustained as an office in home. There is no requirement in the IRS Code for drywall. Many office buildings have open concepts. I think an IRS auditor would deem it as a proper IRS 280 A deduction. We may not have a large office in home deduction but we would not lose the automobile biz deduction.

Comment by Marci Grossman on June 2, 2009 at 6:41am

I agree. My home office is in a large room that is used for many things, many hours, by the family. All of our desks are here, homework is done here. It is not the same as a room that a guest may use for sleeping a few times a year, or that I just use for balancing my checkbook. I find that frequently with others that I talk to, that the home office is a part of a family used room, where people come to just "hang out". While I could arrange to tuck my office into a remote part of the house and take the deduction, the money saved (which would not be significant in my situation) would not be worth the other hassles that it would create. It is solely my office for 6 hours a day, 5 days a week. The rest of the time it is available and frequently used as a family computer room. In my understanding of the law (please correct me if I am wrong) that would disallow the home office deduction based on exclusive use. A client who has their home office as a part of a family use room is not entitled to the deduction. The couches and the tv set (it is where the family sits to watch tv in the evenings), the crate for the dog go way beyond the pullout couch for a guest, despite it also being a place where clients are met and the sole location for the "business office". Their choice to not tuck their office into a room not used for other purposes limits their deduction, not me.

Comment by David L Hillary Jr on June 2, 2009 at 6:16am

I have to agree with Stuart on this one. If I did not make a legitimate deduction for one of my clients, I hope that they would fire me. If the deduction is legal and available, it is our duty as CPA's to make sure our clients know about the tax break. Why worry about an audit if the deductions are being taken legally. I always like to keep the words of Judge Learned Hand...Anyone may arrange his affairs so that his taxes shall be as low as possible; he is not bound to choose that pattern which best pays the treasury. There is not even a patriotic duty to increase one’s taxes. Over and over again the Courts have said that there is nothing sinister in so arranging affairs as to keep taxes as low as possible. Everyone does it, rich and poor alike and all do right, for nobody owes any public duty to pay more than the law demands: Taxes are enforced exactions, not voluntary contributions. To demand more in the name of morals is mere cant.”

Comment by Stuart Sobel on June 2, 2009 at 6:05am

As I responded previously, "if you are entitled to a home office deduction, claim it." If you had a home office in an extra bedroom and there was a fold-out couch in the room and it was used by family a few times a year, would the IRS disallow the deduction because of the exclusive use requirement? I doubt it. I worked for the IRS in high level management for 30 years and I never saw where one of my revenue agents would be that harsh in interpretation. The room should not be a family room or a kitchen. It should look an office, be used as an office, and properly disclosed on the return. If for some reason the client would feel more comfortable, A Form 8275 Disclosure Statement could explain the situation to justify the deduction. It is unquestionably your job to follow the law and you are demonstrating due diligence. I teach thousands of CPAs annually tax planning for Surgent McCoy CPE LLC and I have formulated the impression that the majority of CPAs will encourage clients not to claim the deduction even when they are entitled to the deduction. The reasons generally are the recapture and the "flag" that may cause the return to be audited. It is a choice and I advise to claim what they are entitled to. They have a better chance of getting hit by lightning than being audited for a legitimate home office deduction.

Comment by Marci Grossman on June 2, 2009 at 4:37am

The hang up is in the "exclusive use" parameter. I don't feel it is patriotic to pay more taxes. But I do feel it is my job to follow the law.

Comment by Stuart Sobel on June 1, 2009 at 6:43pm

A person leaves their personal residence and spends the full day with a client and drives home (50 miles). He or she works from home but does not want the aggravation of claiming a home office deduction. The aggravation would be the computation, substantiation, and the possible recapture of the depreciation when and if the home is sold. The person makes similar trips during the year. The travel is deductible, right? It is ordiinary and necessary busines expense, right? He could claim the optional mileage method or actual expenses, right? Wrong! The first trip of the day from your personal residence is commuting. Going from the first trip to the second client of the day is deductible. Like having 2 jobs - the travel expenses from the first job to the second would be deductible but not the first trip. OK, you say she will have an office but not claim depreciation only a portion of utilities. You are audited by the IRS. They will introduce you to "allowed or allowable" depreciation. Open years by statute, you can amend the returns. Closed years (more than 3 years) from the filing date - depreciation kaput for those years. I could spend time arguing the present value of a dollar and the basic premise of tax planning - defer income and accelerate deductions. If you are entitled to a home office deduction, claim it. If you don't want to claim it, fine. Feel patriotic that it is reducing the national debt and bailing out GM and AIG.......