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Updates & tips

IRS Announces Simplified Option for Claiming Home Office Deduction

IRS Announces Simplified Option for Claiming Home Office Deduction Starting This Year; Eligible Home-Based Businesses May Deduct up to $1,500; Saves Taxpayers 1.6 Million Hours A Year WASHINGTON — The Internal Revenue Service today announced a simplified option that many owners of home-based businesses and some home-based workers may use to figure their deductions for the business use of their homes. In tax year 2010, the most recent year for which figures are available, nearly 3.4 million taxpayers claimed deductions for business use of a home (commonly referred to as the home office deduction). The new optional deduction, capped at $1,500 per year based on $5 a square foot for up to 300 square feet, will reduce the paperwork and recordkeeping burden on small businesses by an estimated 1.6 million hours annually.

By Gary L Hulett CPA

Weekly Tax Tips

Our Weekly Tax Tips are updated each Friday. To view the full tip, click on the title. You can review the most recent Tips or search through all tips by keyword. You can subscribe to our Weekly Tax Tips using the Tax Tips RSS Feed to receive updates as soon as new tips are published.Below are the two most recent tax tips. Click a tip to view the full tip and browse past tips. So You Think You Might Be Audited?Here are the chances your return will be selectedEach year the IRS publishes a Data Book. In this annual report the service tells all of us how many tax returns they review. What are the chances your tax return will be audited?Published: October 26 2012, 12:22:00Category:The Audit Social Security Benefits Announced for 2013The annual cost of living adjustments for 2013 based on the Consumer Price Index have been announced by the Social Security Administration. Here is what you need to know.Published: October 19 2012, 12:30:00Category:Retirement

By Gary L Hulett CPA

The Home Office Deduction

The Home Office Deduction Under the IRS rules, a taxpayer is allowed to deduct expenses related to business use of a home, but only if the space is used "exclusively" on a "regular basis". To qualify for a home office deduction you must meet one of the following requirements: 1. Exclusive and regular use as your principal place of business 2. A place for meeting with clients or customers in the ordinary course of business 3. A place for the taxpayer to perform administrative or management activities associated with the business, provided there is no other fixed location from which the taxpayer conducts a substantial amount of such administrative or management activities A separate structure not attached to your dwelling unit that is used regularly and exclusively for your trade or profession also qualifies as a home office under the IRS definition. The exclusive-use test is satisfied if a specific portion of the taxpayer's home is used solely for business purposes or inventory storage. The regular-basis test is satisfied if the space is used on a continuing basis for business purposes. Incidental business use does not qualify. In determining the principal place of business, the IRS considers two factors: Does the taxpayer spend more business-related time in the home office than anywhere else? Are the most significant revenue-generating activities performed in the home office? Both of these factors must be considered when determining the principal place of business.

By Gary L Hulett CPA