Home Office Deduction

[uptickk]

Quote from silver914:

The homeowner (you) would be required to file a schedule C to report the rental income from the entity and depreciate the part of the home being rented. So on top of being taxed twice you still deal with the depreciation aspect when you sell the house. The short answer is there is no tax benefit. As your tax preparer I would refuse to do it. Your use of the same address as your home and the business address would attract questions from the IRS, but maybe not an audit. Most audits are informational anyway. That first letter they send you is just a request for more information so that they better understand what you are doing if it doesn't immediately make sense to them. It usually doesn't turn into an audit even though when a client gets one of those we prepare for one anyway. By the time the second letter arrives it's too late. Best to head them off at the pass.

Sorry, to clarify I meant what if your LLC or Corp paid for housing costs for its employees (you being the only one)? Essentially the LLC or Corp would be on the lease agreement / mortgage depending on if the entity rented the place or owned it (think executives that get apartments paid for by their companies). In this instance there wouldn’t be any rental income as it was be an expense to the entity. If the entity owned it, yes the entity would depreciate it and end up paying taxes on the gains once sold but time value money right (maybe this is better for renters since you would not be selling it at the end of the lease)? I would imagine having your personal address being the same as your business address would raise red flags but is it illegal if the understanding is that the entity provides housing for all employees?

I don’t trade in an entity so I am only somewhat familiar with the IRS rules.

 

[icarus618]

Quote from silver914:

As to your first remark, perhaps you should research exactly what an Enrolled Agent is. I'm not the guy at the desk in the office. Better yet, go take the test to become one.

And as for the history of litigation? No, it doesn't because you don't know howthe respondents filled out the form. I know because I'm the one representing the respondent in court.

Perhaps you should realize that not all traders started out as such and that some were professionals in the field you think you know so much about. I took the SEE many years ago while in college and have a JD and an LL.M in taxation from NYU.

Also, I know where you are coming from as I worked two tax seasons and taught the Basic course for H&R Block, the cheapest company I have ever worked for in my life. Back then we prepared the returns using a pencil. Before the season we were given a blue plastic coffee mug with the H&R Block logo and a plastic bag containing a mechanical pencil, click eraser, and a staple remover. At the end of the season, they wanted the staple removers back. I recall the EZ return was $20 for federal and $15 for CA and I was paid $4.10 an hour. (I believe the state minimum wage at that time was $3.55.)

Also back then, the IRS still administered the SEE instead of subcontracting it out. If I remember correctly, the SEE was offered only four times a year. I took it over two days at a small convention center and the atmosphere wasn't that much different from the real estate license exam I took around that time.

The SEE is nothing special. To prepare, I took the Block course for it because it was free and just read the publications and circular 230 that came in the SEE package from the IRS. Compared to the New York State Bar Exam, it was like a quiz.

Let's just say I know a little about the field of tax.

 

[silver914]

Quote from uptickk:

what if your LLC or Corp paid for housing costs for its employees (you being the only one)? Essentially the LLC or Corp would be on the lease agreement / mortgage depending on if the entity rented the place or owned it (think executives that get apartments paid for by their companies) In this instance there wouldn’t be any rental income as it was be an expense to the entity.

Then you as an employee would have to pay income tax on the housing the entity provided to you. Still taxed twice.

If the entity owned it, yes the entity would depreciate it and end up paying taxes on the gains once sold but time value money right (maybe this is better for renters since you would not be selling it at the end of the lease)?

Not to put too fine a point on it, but an LLC or a corporation with all of one employee paying for that one employee's living accommodations would raise a flag.

I would imagine having your personal address being the same as your business address would raise red flags but is it illegal if the understanding is that the entity provides housing for all employees?

No it's not illegal. I think the fact that you would have to pay tax on the "income", the housing that is provided to you by the entity shoots down your idea, but I follow you. The notion of an entity such as you describe absorbing all or most of the tax liability of your profit was popular back in the eighties, but has been rectified by the IRS since.

 

[silver914]

Quote from icarus618:

I recall the EZ return was $20 for federal and $15 for CA and I was paid $4.10 an hour. (I believe the state minimum wage at that time was $3.55.)

Let's just say I know a little about the field of tax.

Like I said originally, compared to all the experts around here, what the fuck do I know. After all, the tax laws are the same now as they were then.

 

[uptickk]

Quote from silver914:

Then you as an employee would have to pay income tax on the housing the entity provided to you. Still taxed twice.





Not to put too fine a point on it, but an LLC or a corporation with all of one employee paying for that one employee's living accommodations would raise a flag.





No it's not illegal. I think the fact that you would have to pay tax on the "income", the housing that is provided to you by the entity shoots down your idea, but I follow you. The notion of an entity such as you describe absorbing all or most of the tax liability of your profit was popular back in the eighties, but has been rectified by the IRS since.

Having to pay income tax on the housing the entity provided you would definitely defeat the purpose of having the entity pay for it in the first place. Thanks for the constructive dialogue.

 

[silver914]

Quote from uptickk:

Having to pay income tax on the housing the entity provided you would definitely defeat the purpose of having the entity pay for it in the first place. Thanks for the constructive dialogue.

No prob. I'm not here to argue, just to help out with what little I know. If someone else wants to do it another way then by all means have at it.

 

[icarus618]

Quote from silver914:

Like I said originally, compared to all the experts around here, what the fuck do I know. After all, the tax laws are the same now as they were then.

You know how to fill out forms. That's about it.

There's a world out there in tax about which you have no idea. Stick to the Package X where you can't harm anybody.

I did get a chuckle out of the "representing the respondent in court" part. How did you get membership to the bar?

 

[silver914]

Quote from icarus618:

You know how to fill out forms. That's about it.

There's a world out there in tax about which you have no idea.

My God! How do you fit your head through the doorway? As your name implies you have nothing to add but hubris.

 

[the1]

And even if you do get audited and assuming you prevail, it's highly unlikely you'll get audited on the same issue again unless your deductions increase by a significant amount. The deduction is well worth looking into as long as you have your ducks lined up.

Quote from silver914:

I am an Enrolled Agent with H&R Block. Filing an 8829 is no more audit fodder than a schedule C. How you fill it out is.

The only amount you have to recapture upon the sale of the home is the depreciation, which should be small in comparison to your other deductible home office expenses. Besides your real estate taxes and home mortgage interest, which may be deductible if you itemize, you can also deduct utilities, insurance, repairs and maintenance, operating expenses, rent, and many other unforeseen expenses.

Can you deduct your utilities any other way? Rent? Home owner's insurance? Repairs, maintenance, or "cleaning"? How else are you going to deduct the $500 in electricity those six monitors eat up in a year?

Fuck, what do I know compared to all the other experts around here?

 

[icarus618]

Quote from silver914:

My God! How do you fit your head through the doorway? As your name implies you have nothing to add but hubris.

To borrow the words of a famous giant: Tell me how my ass tastes.

Seriously, I just busted your balls a bit because of the way you came out with the "enrolled agent from H&R Block" routine. You and I both know the EA designation means shit.

Are you guys still sticking it to the poor with the "Rapid Refund" loan-sharking program or has that been outlawed yet?