Home Office Question

Submitted by hoffgroup on Sat, 05/17/2008 - 15:00.

I hope this is the right place to ask this question........

I plan on creating an LLC or S Corp for my businesses. Still have to talk with the financial advisor. After I do I want to look into saving some home expenses by creating a home office. If I do this, it is my understanding that I have to deprecate the space that I claim. And if this is the case I would have to claim a profit on the sale of that part of the house when I sell it. I'm not sure if this is a good idea or not. I would hate to have to worry about having the money to pay for the taxed profit later in life.

I once was told by someone that he rented the space in his house to his company, that way he would not have to claim this profit and the company could claim the expense of the rental. This confuses me because he would have to claim the income form the rental of the space anyway, sounds like a wash to me?????

Thanks in advance for the info!
BRYAN

I was advised to STOP

Submitted by Bobby on Sat, 05/17/2008 - 17:29.

I was advised to *STOP* claiming home office deductions. My CPA told me there wasn't a bigger trigger for an audit. This was later confirmed by another source although I don't remember what it was.

I should probably state that this was a few years ago but I still don't claim any home office deductions (I've been self-employed and working out of my home over a decade now).

Anyway, while I've never been audited, I watched my parents fight through one that initially went against them (IRS caimed they owed a lot of back taxes and penalties, etc.) and the fight went on for 5 years.

Even though my parents eventually WON, I will gladly pay a few dollars more in taxes to stay below the IRS's radar.

But I certainly wouldn't blame anybody for ignoring this advice either :)

I was told the same thing as

Submitted by Barry_G on Sat, 05/17/2008 - 18:53.

I was told the same thing as Bobby, less than 2 years ago.

The way it was explained to me was that the home office deduction is one of the most widely ABUSED deductions there is, and one of the easiest challenges, via audit, for the IRS to win.

Lets not forget, if a dispute drags out, as Bobby mentions , and you LOSE, penalties and BACK interest interest on money owed can be assessed by the IRS.

Just what I have been told.

Barry

$%$%$%$%$%$%$%$

Go'in Deep This Time Up!!

I was told the same thing too.

Submitted by danlifeisfun on Sat, 05/17/2008 - 23:45.

I received the same advice as Bobby and Barry.

I think the best idea is to find an office outside the home. Less distractions and more productivity.

Again, consult your tax accountant or tax attorney.

Dan

Follow me on Twitter.

http://twitter.com/dschuyler

I was advised claiming home

Submitted by kuproverto on Sun, 05/18/2008 - 02:57.

I was advised claiming home office deductions was OK as long as you were conservative in what you claimed. Basically, don't raise any red flags with the IRS.

My CPA Let's Me Claim It

Submitted by rayd8 on Sun, 05/18/2008 - 03:34.

My CPA let's me take the home office deduction. As long as it is used only for business (you don't have a hide-a bed or personal items, etc. in there) you can prove that the deduction is legitimate. I think at one time it was an IRS red flag but so many people work from home or telecommute now that it is considered OK if you comply with the guidelines.

Thanks ALL

Submitted by hoffgroup on Sun, 05/18/2008 - 17:26.

Turbo Tax adviser states that the problem is no longer with the IRS audit, it is with having to pay tax OR on the office part of the house when it was sold.
BRYAN

You'd think so.

Submitted by BradleyD.Haslam on Wed, 05/21/2008 - 02:10.

By now, I bet it's easing up a bit.
There are SO many home offices cropping up,
that they would have to have a whole department to deal with just that! LOL!!

I'm not worried anyway.
First, I don't plan on being sneaky in any way.
Second, from what I understand,
the accountant is the one that actually GOES to the audits.

I may be mistaken, but that's my understanding.
Wonder if Johnathan will chime in about that.
Because, I'm telling you what, that's a reason to have an accountant!
;-)
Brad.

Getting better

Submitted by datageekgal on Wed, 06/04/2008 - 02:13.

Yes, home office deductions are much more common these days. You just have to make sure it's a pure-business area.

If you do claim the deduction make sure you keep good records for utilities, housekeeping, insurance, etc. Your accountant (or a copy of TurboTax) can guide you on the specifics.

Do keep depreciation recapture in mind as a factor though. When you sell your home, a portion of the profits is definitely taxable (been there, done that).