Working From Home? Consider the Tax Implications

Crazy year 2020!

Back when the World. Just. Stopped. a few months ago I was as stunned as everyone else. This was all new territory. Terra Incognita.

I was working part-time as a tax preparer when the pandemic was announced by the WHO, and just just before I resigned from my position (I’m an “at risk” individual), I mentioned to my co-workers that it would be an indication of just how serious this “new flu” was being considered if/when the IRS issued a delay of the filing deadline - which I thought would NEVER happen!

Wrong!

Now the company has reached out to me to ask if I would consider working from home.

The extra income would be nice, I’m currently living off an adequate, but not “generous” pension, but then my training kicked in and I am reconsidering.

If I consent to WFH, it would be for the convenience of my employer (they would not have to go to the effort and expense of providing a reliably safe and sanitized workplace). But I would have to provide for a workspace in my home; and, if I were to want to offset the expense and inconvenience of doing so by hoping to deduct the expenses incurred, I would need to establish a dedicated “home office”, as defined by the IRS, and probably keep a record of my expenses.

How many of you “First Time WFH’s” are following the IRS guidelines for a home office?

Be careful regarding what and how you deduct, something tells me that the IRS is going to be paying Very Close Attention to “home office” deductions on the 2020 returns!

Don’t let WFH turn into WTF!! next year!

a reply to: Bhadhidar

I've been doing that for years even though I was traveling most of the week. I spent enough time in my home office that I was able to write off some extra come tax time.

a reply to: Bhadhidar

I've had a side business with a home office for years. Never had a problem with the IRS. There's going to be so many people claiming it this year that they won't have the resources to check on them even if they wanted to.

How about writing off that internet connection each year. ISP’s charge extra once you go over the cap on data. I’ve literally been in online meetings for probably 25 total hours in the last 2 weeks.

originally posted by: JIMC5499
There's going to be so many people claiming it this year that they won't have the resources to check on them even if they wanted to.

Next year.

You can't claim it this year unless for some reason you file QBT. Most W-2 people will claim this expense next year on their personal income tax filings.

originally posted by: Middleoftheroad
How about writing off that internet connection each year. ISP’s charge extra once you go over the cap on data. I’ve literally been in online meetings for probably 25 total hours in the last 2 weeks.

My work reimburses for phone/internet data so I can't claim that.

a reply to: AugustusMasonicus

Mine doesn’t and I’m sure the majority are the same.

Looks like any W-2 employee is not eligible, so I guess I’m screwed and have to take it up with the company I work for.

The home office deduction was misused in the past, which made it an audit red flag. In light of the coronavirus pandemic, the IRS will most likely have a difficult time making the argument that a large number of Americans weren’t working from home for part of 2020. That’s assuming you keep good records and actually qualify for the deduction. I must repeat, if you are a W-2 employee, you will not be eligible for the home office deduction thanks to the Trump tax plan.

Forbes.com

If anyone knows where in Trumps tax plan it states this please link.

I've been working from home for months now. I have cable internet w/ unlimited data, so I'm good there, but my big problem is we have no place to put a home office. I spend the day camped out in my son's bedroom, because it's the only room in the house that has a desk. I'm not happy about, and neither is he, but we have no other solutions available right now.

originally posted by: JIMC5499
a reply to: Bhadhidar

I've had a side business with a home office for years. Never had a problem with the IRS. There's going to be so many people claiming it this year that they won't have the resources to check on them even if they wanted to.

IRS won’t really need too many resources, initially; they’ll just issue a blanket audit, called a “Request For Information” letter. They’ll require you to substantiate your deductible claims with documentation and receipts. Once you do, they can then decide over the next three years whether to audit you or not. If you fail to provide the request info, you deduction is denied and you’re billed, with penalties and interest.

Same thing happened a few years ago with folks who claimed the Head of Household filing status: claim came in, IRS sent the taxpayer a letter requesting the name and info of the taxpayer’s dependent.

No answer (or wrong answer!), claim denied, bill sent.

As a work from home- inhouse guy, ( so I work from home fulltime, but for a company still that has most employees before covid working in office )

I wasn't able to ever declare anything on taxes, which is funny, but I'm not the government, but am in my office for work and personal, because I don't have a Inn as a home, like most, so rooms are limited.

Would imagine that to change though...

Dropped easily 3k on office supplies of my own money, no one giving me a dime for, says it's all just mine, which I'm fine with, I work for mystuff, so this whole deal needs to be clearedup, like the rest of our Adhock system... Now that some aren't going to continue being a thing.

a reply to: Bhadhidar
I have worked from home for many years. It's cheaper than the overhead I had with a separate building. The IRS is unlikely to give you any problems as long as your deductions are consistent with what you do. Get extravagant or too far outside the norm and you are asking for attention you don't want.

originally posted by: Middleoftheroad
Looks like any W-2 employee is not eligible, so I guess I’m screwed and have to take it up with the company I work for.

The home office deduction was misused in the past, which made it an audit red flag. In light of the coronavirus pandemic, the IRS will most likely have a difficult time making the argument that a large number of Americans weren’t working from home for part of 2020. That’s assuming you keep good records and actually qualify for the deduction. I must repeat, if you are a W-2 employee, you will not be eligible for the home office deduction thanks to the Trump tax plan.

Forbes.com

If anyone knows where in Trumps tax plan it states this please link.

Off the top of my head, it’s not actually IN the plan, but instead because of the plan...Specifically, because under the plan most Itemized Deductions were eliminated in favor of an increased Standard Deduction.

Thing is, some States retained the lower standard deduction amounts they had previously, which make itemizing your deduction (including home office) possibly a better option in those States.

It promises to be one hell of a filing season!

a reply to: Bhadhidar

Good advice.

I've been WFH for years and the first year or 2 I did it, I bit myself in the tucchis when filing my returns.

I learn quickly though. Now I do it every year correctly and save a *lot* of money.

In your world what defines a “home office”? I’m not asking to be a smartass either I am just curious on how you define that.

originally posted by: Brotherman
In your world what defines a “home office”? I’m not asking to be a smartass either I am just curious on how you define that.

A home office would be a defined area within one’s own home, used exclusively for the purpose of conducting functions directly related to one’s employment. That exclusive space could be anything from dedicated work surface to an entire room set aside for business use only.

originally posted by: Bhadhidar

originally posted by: Brotherman
In your world what defines a “home office”? I’m not asking to be a smartass either I am just curious on how you define that.

A home office would be a defined area within one’s own home, used exclusively for the purpose of conducting functions directly related to one’s employment. That exclusive space could be anything from dedicated work surface to an entire room set aside for business use only.

“Exclusively” being defined as no exceptions. your kid can’t do his homework there, or print from your computer, and if someone were to sleep in one half of the home office, id assume you’d have to prorate the deduction based on sq footage use if were being technical lol. Gotta love the IRS

a reply to: Bhadhidar

Thanks man. I wasn’t trying to sound like a smartass, I have an “office” and I use it for all kinds of things directly effecting things I do in both my professional job as well as my artistic endeavors which I get paid for time to time as well as educating myself. What I do professionally I require certain machines but those machines also require certain types of programs “instructions” that’s why I asked

Save every receipt and all paper work*, deduct everything you can, do the math right and follow the tax codes. Depreciate all your work related equipment and write off everything possible. Just don't keep two books or have more than you should in your bank account(s).

You can deduct a percentage of your home expenses like utilities, property taxes, etc. and you only have to pay use tax on items you bought wholesale that you haven't sold.

Of course, you always pay the IRS something that works out correctly in the tax process. If you do that and have no red flags, they won't audit you, unless it is a random process used to audit you (very unlikely). The state did that to me once for claiming the homestead exemption on property taxes (completely unrelated to any business I conducted).

* Save Paper Work - I mean everything, birth certificate, expired driver's licenses and ID's, postal address changes, VIN on every vehicle you ever owned, bank records, you name it, keep those papers, they will want you to prove everything, even if they have that information already.