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Here’s What Taxpayers Need to Know About the Home Office Deduction
Admin • Aug 11, 2020
Here are some things to help taxpayers understand the home office deduction and whether they can claim it:
- Employees are not eligible to claim the home office deduction.
- The home office deduction Form 8829 is available to both homeowners and renters.
- There are certain expenses taxpayers can deduct. They include mortgage interest, insurance, utilities, repairs, maintenance, depreciation and rent.
- Taxpayers must meet specific requirements to claim home expenses as a deduction. Even then, the deductible amount of these types of expenses may be limited.
- The term "home" for purposes of this deduction:
- Includes a house, apartment, condominium, mobile home, boat or similar property.
- Also includes structures on the property. These are places like an unattached garage, studio, barn or greenhouse.
- Doesn't include any part of the taxpayer's property used exclusively as a hotel, motel, inn or similar business.
- There are two basic requirements for the taxpayer's home to qualify as a deduction:
- There must be exclusive use of a portion of the home for conducting business on a regular basis. For example, a taxpayer who uses an extra room to run their business can take a home office deduction only for that extra room so long as it is used both regularly and exclusively in the business.
- The home must be the taxpayer's principal place of business. A taxpayer can also meet this requirement if administrative or management activities are conducted at the home and there is no other location to perform these duties. Therefore, someone who conducts business outside of their home but also uses their home to conduct business may still qualify for a home office deduction.
- Expenses that relate to a separate structure not attached to the home will qualify for a home office deduction. It will qualify only if the structure is used exclusively and regularly for business.
- Taxpayers who qualify may choose one of two methods to calculate their home office expense deduction:
- The simplified option has a rate of $5 a square foot for business use of the home. The maximum size for this option is 300 square feet. The maximum deduction under this method is $1,500.
- When using the regular method, deductions for a home office are based on the percentage of the home devoted to business use. Taxpayers who use a whole room or part of a room for conducting their business need to figure out the percentage of the home used for business activities to deduct indirect expenses. Direct expenses are deducted in full.
1) The SBA has released a new form ( 3508S ) for borrowers seeking forgiveness if the amount of the loan was less than $50,000. 2) Loan forgiveness is not automatic. 3) Borrowers who use this form are not subject to forgiveness reduction because there were reductions in the pay of an employee. 4) Borrowers who use this form are not subject to forgiveness reductionif there was a reduction in FTE (full time equivalents). This basically means if the number of employees decreased during the covered period the amount of forgiveness does not decrease just because of it. 5) The borrower does not have to show the calculations used to determine their loan forgiveness amount. 6) The borrower is still responsible to calculate the loan forgiveness amount and to be prepared to provide this information if requested. 7) The new form may be simpler but it is still complicated and it is advisable to consult a professional for its preparation.
"We took this step to provide more time for those who have not yet received a payment to register to get their money, including those in low-income and underserved communities," said IRS Commissioner Chuck Rettig. "The IRS is deeply involved in processing and programming that overlaps filing seasons. Any further extension beyond November would adversely impact our work on the 2020 and 2021 filing seasons. The Non-Filers portal has been available since the spring and has been used successfully by many millions of Americans."
Even though time before the extension deadline is dwindling, there’s still time for taxpayers to file a complete and accurate return. Taxpayers should remember they don’t have to wait until October 15 to file. They can file whenever they are ready.
First Consulting professional advice is an important step . Your business structure affects how much you pay in taxes , your ability to raise money, the paperwork you need to file, and your personal liability. You'll need to choose a business structure before you register your business with the state. Most businesses will also need to get a tax ID number and file for the appropriate licenses and permits . Choose carefully. While you may convert to a different business structure in the future, there may be restrictions based on your location. This could also result in tax consequences and unintended dissolution, among other complications. Here are the Main Business Structures
By law, these benefits are taxable and must be reported on a federal income tax return for the tax year it was received. Taxable benefits include any of the special unemployment compensation authorized under the Coronavirus Aid, Relief, and Economic Security Act.
Federal benefit recipients can use the Non-Filers: Enter Payment Info Here tool to get a catch-up payment for a qualifying child if they have NOT done one of the following: already used the Non-Filers tool to provide information about their qualifying child filed their 2019 or 2018 tax return
A business operates to make a profit. People engage in a hobby for sport or recreation, not to make a profit.
Create a Backup Set of Records Electronically Taxpayers should keep a set of backup records in a safe place. The backup should be stored away from the original set. Keeping a backup set of records –– including,
The Paycheck Protection Program resumed accepting applications July 6, 2020, at 9:00 AM EDT in response to President signing the program's extension legislation. The new deadline to apply for a Paycheck Protection Program loan is August 8, 2020.
The Internal Revenue Service has announced its annual "Dirty Dozen" list of tax scams with a special emphasis on aggressive and evolving schemes related to coronavirus tax relief, including Economic Impact Payments. This year, the Dirty Dozen focuses on scams that target taxpayers . The criminals behind these bogus schemes view everyone as potentially easy prey. The IRS urges everyone to be on guard all the time and look out for others in their lives. "Tax scams tend to rise during tax season or during times of crisis, and scam artists are using pandemic to try stealing money and information from honest taxpayers," said IRS Commissioner Chuck Rettig. "The IRS provides the Dirty Dozen list to help raise awareness about common scams that fraudsters use to target people. We urge people to watch out for these scams. The IRS is doing its part to protect Americans. We will relentlessly pursue criminals trying to steal your money or sensitive personal financial information." Taxpayers are encouraged to review the list in a special section on IRS.gov and be on the lookout for these scams throughout the year. Taxpayers should also remember that they are legally responsible for what is on their tax return even if it is prepared by someone else. Consumers can help protect themselves by choosing a reputable tax preparer. The IRS urges taxpayers to refrain from engaging potential scammers online or on the phone. The IRS plans to unveil a similar list of enforcement and compliance priorities this year as well. An upcoming series of press releases will emphasize the illegal schemes and techniques businesses and individuals use to avoid paying their lawful tax liability. Topics will include such scams as abusive micro captives and fraudulent conservation easements.
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