Category: Deductions

Posted on by Jan Roberg

Claiming a Dog as a Medical Expense

There are only two places where you could claim a dog on your tax return. The first is as a medical expense and the second is as a business expense.   Most importantly, it has to be a legitimate expense.  Dog expenses claimed on a tax return are likely to get audited so you’ll want plenty of documentation.

You may never, NEVER, claim your dog as a dependent on your taxes.

Today I want to look at dogs as a medical expense.  According to the IRS medical expense publication:  You can include in medical expenses the costs of buying, training, and maintaining a guide dog or other service animal to assist a visually-impaired or hearing impaired person, or a person with other physical disabilities. 

A seeing eye dog is an easily proved legitimate medical expense that you can deduct.  The same goes for a hearing assist dog. Note that the IRS definition only discusses “physical” disabilities. Mental disabilities are conspicuously absent from this category.

If your service dog is meant to help with a mental disability, you may not win the deduction in the event of an audit.  That doesn’t mean shouldn’t claim a legitimate mental health service dog. You just need to recognize that the bar is going to be set higher in the event of an audit.

 Here’s a question to ask yourself—if you were to be audited for your dog expense, could you obtain written letters from your doctor that your dog is necessary for you to work or function?  This is important. 

I worked on an audit once where the man had claimed his dog as a medical expense.  The IRS auditor was willing to allow the expense if the man obtained a letter from his psychiatrist. All it needed to say was that yes, the dog was part of the man’s treatment.   Although the psychiatrist admitted that he had recommended that the man get a dog, he refused to issue a letter. He said the dog was a good idea, but not official treatment. We lost the case. 

If you are self-employed, you may be able to claim your service animal as an impairment related work expense.  To qualify here, you must have a physical or mental disability that functionally limits your being employed. Or, have a physical or mental impairment that substantially limits one or more of your major life activities such as performing manual tasks, walking, speaking, breathing, learning, or working.  If you’re able to claim your service dog as a business expense in this way, it’s usually a better deduction for you than the medical expense deduction. (A business expense is a direct write-off, a medical expense has other hoops before you get any benefit.)

I cannot stress enough the importance of legitimacy here.   You can’t just go online and purchase a “service dog” vest for your pooch and take him to work with you.  The service your dog provides must be necessary for you to do your work in a satisfactory manner.

 If you intend to claim a dog as a medical expense (other than a seeing eye or hearing assist dog), it is absolutely essential that you have the support of your doctor.  I’d get the letter from your doctor before claiming the dog on your taxes. Keep it with your tax paperwork in case you need it later.  If your doctor refuses to give you a letter, it’s a good hint that you shouldn’t try to claim your dog as a medical deduction.

Posted on by Jan Roberg

A Dog as a Business Tax Deduction

Welsh corgi Pembroke red white color with a long tail grazing sheep. Sports standard for dogs on the presence of herding instinct. A beautiful and intelligent little shepherd dog.

The first thing you need to know is that you can’t claim your dog as a dependent on your tax return.  Never!   Don’t even think about it.  There are no special rules for St. Bernard’s or Great Danes.  It doesn’t matter how much your dog depends on you or that he’s a regular member of the family.  A dog can never be claimed as a dependent on your U.S. income tax return.

There are two places you can claim a dog on a tax return, as a medical expense, such as a service dog, or as a business expense.  This post is about claiming your dog as a business expense. 

If you intend to claim your dog as a business expense, you have to remember the two most important words for business expenses:  regular and necessary.  Is the dog a regular and necessary expense for your business?  For example:  my dog likes to help me when I work from my home office.   She guards my door and barks at the UPS truck. As you might have guessed, I cannot claim my dog as a business expense.  Her service to my company is neither regular, nor necessary.  

Real working dogs, on the other hand, are a legitimate business expense.  Sheep herders, guard dogs, bomb sniffers and rescue dogs all are legitimate working dogs.  I know a dog that used to star in the dog program at Busch Gardens, that’s a legitimate working dog.

Breeding dogs can be a little trickier.  A real dog breeder is a legitimate business.  Where it gets a little tricky is that fine line between dog breeding as a hobby versus breeding as a business.  If you purchase a puppy—with the intent of breeding it when it grows up, you can’t write it off yet. You can’t breed a puppy so it’s not working yet.

If you are claiming a dog as a business expense, you really need to make sure you’re on the up and up.  A dog on your return is going to be a red flag so you start out with the assumption that you will be audited.  Document everything.  Have receipts for your expenses, and proof that your dog is a necessary and regular expense for your business.  Dot your i’s and cross your t’s and you’ll be okay.

Don’t be greedy! Only claim legitimate business expenses. If you own 4 dogs and 2 of them are pets, you can’t write off the dog food and vet expenses for the non-working dogs.

Obey your state and city laws! If you’re claiming a dog breeding business on your federal tax return, and you live in a city that doesn’t allow dog breeding, you’re going to have some explaining to do. That’s one of the rules for owning a business – know your state and local business laws. So do your homework.

Remember, if your dog is a pet, let it be a pet and don’t try to write it off on your tax return.

For more information check out this article from the AKC web-site: Tax Tips for Dog Breeders

Posted on by Jan Roberg

Can I Deduct My Closing Costs On My Tax Return?

Rome House

Photo by @Doug88888 at Flickr.com

 

Now that the housing market is starting to buck up again, I’m getting that question more and more.  I figured it was time to spell it out in a blog post.

 

In general, the big tax deductions that go with home ownership are going to be your mortgage interest expense and your real estate taxes.  Now, if you’re a first time homebuyer and you buy your home late in the year, you might not have paid enough interest or taxes to exceed your standard deduction for the first year.  Don’t worry, you’ll see the benefits of home ownership on your taxes the next year.

 

When you’re looking at your closing costs, those figures are going to be on your HUD settlement statement.  Here’s a link to a blank one so that you can see what that paperwork looks like: http://www.hud.gov/offices/adm/hudclips/forms/files/1.pdf

 

Here’s the deductibility status of closing costs:

 

Real estate taxes: Deductible beginning on the date of sale (lines 106 and 107.)

 

Assessments: Condo fees and Homeowner’s association fees: Not Deductible.

 

Commission: Increases the basis (so when you sell the home, your profit is reduced.) This probably doesn’t affect most people, but it’s still good to know. Increasing the basis comes in handy for when you’re claiming a home office, converting a property to a rental, or if you sell it for more than homeowner‘s gain exclusion.  Currently you can sell your home for a $250,000 ($500,000 if married filing jointly) profit and pay no capital gain on it.  Bottom line, you can’t deduct the commission you pay to your realtor, but you do want to know that number because it can come in handy later.

 

Loan origination fee, loan discount (points):  Deductible (including the amount paid by the seller—if any.)

 

Items payable in connection with loan: appraisal fee, credit report, inspections, etc.: Not Deductible.

 

Interest: Deductible beginning on the date of sale—but that’s usually included on the Form 1098 that you get from your bank so you usually don’t have to take it off of the settlement statement.

 

Items required by lender to be paid in advance like mortgage insurance premium, hazard insurance, flood insurance: Not Deductible.

 

Reserves deposited with the lender such as hazard insurance, real estate taxes etc: Not Deductible.   These are the items on lines 1002 – 1004.  These real estate taxes are your escrow and not an actual tax paid, that’s why it isn’t deductible.  Later, when the real estate tax is actually paid, then it will become deductible.  This is probably the most confusing one on the list.  Although you’re paying a real estate tax—the real estate tax isn’t actually getting paid—it’s just going into escrow.  The tax usually gets paid once or twice a year.  When the bank sends the money to the taxing agency—that’s when it’s considered to be paid.  So, taxes with a line number in the hundreds—you deduct, taxes with a line number in the thousands, you don’t deduct.

 

Items payable in connection with title charges (Settlement or closing fee, abstract or title search, title examination, notary fees, attorney’s fees, etc): Increase Basis but Not Deductible.

 

Government recording and transfer charges, recording fees, tax stamps: Increase Basis


Additional settlement charges (survey, pest and other inspections): Increase basis but not deductible.

 

The bottom line is you might not receive any benefit from your closing costs on your tax return.  (Remember, your itemized deductions need to be more than your standard deduction for itemizing to be worth your while.)  But, if you do get to itemize, you need to know what to look for.  There’s no sense in wasting a deduction that you’re entitled to if it’s going to help.

Posted on by Jan Roberg

Maximizing Your Medical Expense Deduction

Medical/Surgical Operative Photography

Photo by phalinn at Flickr.com

Updated for 2013

First things first, the vast majority of people won’t qualify for a medical expense deduction.  You’ve got three big things in the way.  The first is that your medical expenses have to be over 10% of your Adjusted Gross Income before you can start to claim them.  (7.5% if you are 65 or over.) That means if you make $50,000 a year, your medical expenses have to be over $5,000 before any of it can be deducted.  (Over $3,750 if you are 65 or over.)  Second, even if your medical expenses are high enough to be deductible, you’ve got to have enough other deductible expenses to exceed the standard deduction to make claiming your medical expenses worthwhile.  And third, for most people, their biggest medical expense is their health insurance—which, if you get it through work, it’s already been exempted from your income tax so you can’t use it on your Schedule A.

 

But even though you might not meet the criteria I mentioned above, you might still qualify for some type of medical expense deduction, so please bear with me a little longer.

 

Do you live in a state that has a medical deduction?  Here in Missouri, there’s a deduction for health insurance.  Many people don’t even know about the deduction so they don’t bother with it.  Here’s the thing—if you list your health insurance, your prescriptions, and other medical expenses in the right boxes when you fill out your federal tax return—if you have a state deduction, it will flow through to your state tax return.

 

Why is it important to separate out your expenses and list them in the right boxes?  Recently, I was reviewing a tax return prepared somewhere else.  The taxpayer had several thousand dollars worth of medical expenses, including paying for his own health insurance.  The preparer had totaled up all the expenses and put them all on the “other medical expenses” box.  Now doing this made no difference on the taxpayer’s federal tax return.  But when I separated out the man’s health insurance premiums, it saved him over $200 on his state tax return.

 

This was a Missouri tax return.  Not all states have medical deductions.  But if you don’t take shortcuts when you’re putting the numbers into your federal return, the numbers will flow to the proper spots on the state return.

 

Are you self employed?  If yes, and you pay for your own health insurance, then you don’t have to claim it on the Schedule A—you can claim it on the front of your 1040 form on line 29.  While this isn’t as good as being able to claim it as a business expense where you get to deduct it from self employment tax, placing a deduction on the front of the 1040 is still better than putting it on the Schedule A.  The best part, you don’t even have to file a Schedule A in order to claim it.

 

But suppose you do have enough medical expenses to claim on your schedule A.  You still want to put your self employed health insurance on line 29 first instead of on the Schedule for the best deduction.  Let me explain with an example.  This is going to have a lot of math but the math is just to prove my point.  When you’re preparing your own tax return, all you have to remember is to put your deductions on the right line in the tax software–your software program will do the math for you.

 

A taxpayer aged 65 had medical expenses of about $10,000 of which $4,000 were for his self employed medical insurance.  Let’s assume he had an AGI (adjusted gross income) of $50,000.  If you lump all the medical expenses together, you take 50,000 and mulitply that by 7.5%–that becomes the floor amount;  $3,750.  All of the expenses over the $3,750 are deductible.  $10,000 minuse the $3,750 equals $6,250.  So if you’re in the 25% tax bracket, you’ve saved $1,563–sweet right?

 

But, if you took the $4,000 as your self employed medical insurance deduction first, that $4,000 would come off of your AGI.  So your AGI would be $46,000.  To compute the rest of your medical expense deduction you’d take 46,000 x .075 = $3450–that’s the new floor for claiming your medical expenses.  But now, since you’ve used the 4000 someplace else, you have to take that out of the calculation so now your medical expenses on Schedule A are only 6000.  With me so far?  You take that 6,000 and subtract the 3,450 floor and you still have $2,550 in medical expenses on your Schedule A.  So now, instead of writing off $6,250 you’re writing off $6,550 (the 2,550 plus the 4,000).  Now your tax savings are $1,638–that’s $75 more than before.   All you’ve done here is just move the number to the correct line.

$75 isn’t a lot of money, but wouldn’t you rather have that money in your pocket than give it to the IRS? I thought so.

Posted on by Jan Roberg

Time to Get Your Mileage Log Ready

 

Claiming mileage on your taxes requires a good mileage log.

                                  If you claim mileage for your business, your mileage log is your most important tax document!

 

 

Do you claim auto expenses for your business on your taxes?  If the answer is no, you should probably skip this blog post.  If the answer is yes, this is exactly the post you want to be reading.

 

I do a lot of audit work.  Lots of audit work.  Every audit that I’ve ever worked on where the taxpayer claimed mileage the IRS asked to look at the mileage log.  Every single one!  Small business owners are more likely to get audited than wage earners and most small business owners claim mileage.  So—if you’re a small business owner, you need a mileage log.

 

So here is your new mileage log.

mileage log

 

All you have to do is fill it in with the miles and the appointments.  It’s all set up and formatted as an Excel spreadsheet.  There’s even room for other auto expenses in case you’re using your actual costs instead of mileage.

 

 

Did you know that you have to keep track of your miles even if you are claiming your actual expenses?  It’s true.  Often, people come to me with their auto receipts and I can’t do anything for them without their mileage.  Whether you claim mileage or actual expenses, you must have a mileage log.

 

In order to do your mileage log correctly, you’ll need your odometer reading from the beginning of the year and from the end of the year.  I like to take my readings on New Year’s Day during the Rose Bowl Parade.  I started 2012 out with 81 miles on my car (I got a new car at the end of 2011.)  Now I’m up to 8903.  I should reach 9700 by the end of the year.    Of those miles, about 5,000 of them are for business.

 

If I’m claiming straight mileage, I would take the 5000 miles times the 55.5 cents per mile that I’m allowed to claim for a deduction of $2,775.   (The mileage rate for 2018 is 54.5 cents per mile.)

 

If I’m claiming actual expenses, then I’d take the 5,000 business miles I drove and divide that by the  9610 actual miles I drove during the year  to get the percentage of my expenses that I could deduct.  5,000 divided by 9610 = 51.98%.  So I’d total up all my gas and maintenance expenses and figure the depreciation and multiply that all by 51.98% to get the right dollar amount.

 

So you see, you can’t claim your actual expenses without having the mileage to figure the percentage.

 

 

Feel free to use it.  Copy it.  Give it to friends.  It’s okay.   We left the year off so that you can use it for multiple years if necessary.  We’d like you to use it when you have us do your taxes, but if you use someone else’s, that’s okay.  You can always use our mileage log.  The point is that it is very important to have a mileage log for your taxes that we don’t care who uses it.  It’s free.  We’re not even asking you to sign up for anything.

 

If you’re claiming auto expenses on your tax return this year, you need to use a mileage log.  If you don’t already have one, here’s one for you.

 

mileage log

 

Posted on by Jan Roberg

Can I Claim My RV as a Business Expense?

Modern Senior On Vacation With Wifi

 

I had a client that owned his own business and he wanted to buy an RV so he could go on vacation with his family.  He wanted to know if he could write off the cost of the RV as a business expense if he put a sign about his business on the RV while he traveled around the country.  The answer to that is a flat out no.  The IRS is all over that idea and they don’t like it.

 

But, it may be possible to write of an RV as a business expense if you really do use the RV for business.  For example, let’s say you have clients in another city that you regularly visit.  When you are visiting those clients, you normally need to spend time in a hotel.  So, maybe the RV might be a good choice for you.  You could travel to the location in the RV and sleep in the RV instead of a hotel.

 

So I said you might be able to claim it—this isn’t a rock solid deduction.  You’ve got to be able to prove it’s truly a business expense.  There are a couple of things you must absolutely do.

 

  1. You must have a log of all of your miles you drive in the RV.  Not one of those, oh I drove some business miles and write it down later—a very serious, a very real mileage log.  Over 50% of the miles you drive must be used for business to try to take the RV as a deduction.
  2. You must also keep a log of all the nights that you sleep in the RV.  Same rule—over 50% of your nights sleeping in the RV must be for business.
  3. You must also keep your business trips shorter than 30 days so that the RV counts as transient lodging.   That means I can’t buy an RV and drive down to Florida for the entire tax season and spend my summers in Missouri.  (Well I could, but I wouldn’t be able to write off the RV as a business expense.)

 

And the main point you must absolutely keep in mind—do not use the RV for entertainment.  No business parties on the RV.  The IRS is pretty strict about that.  Entertainment facilities are not tax deductible (things like swimming pools, hunting lodges, and bowling alleys.)  Make sure that your RV is for lodging or travel—not for entertainment.

 

So although my client with the sign idea couldn’t claim the RV as a business expense just for putting a sign on it, if he chose to drive the RV on his business trips and stayed in the RV overnight instead of a hotel—he might be able to claim part of the RV expenses for his business, as long as his business use was more than his personal use.

 

Remember, trying to claim an RV as a business deduction is kind of “out there” and highly likely to be audited by the IRS.  You’re going to want to have really good documentation and a good accountant to back you up on this one.

Posted on by Jan Roberg

Claiming Meals as a Business Expense

Photo by loop_oh on Flickr.com

I was working on a client’s tax return and he had a whole lot receipts for business meals.  A whole lot.  I do a lot of tax returns and I’m pretty familiar with claiming meal expenses.  This guy wasn’t in one of the jobs that I normally associate with lots of meal expenses – so I had to ask him about it.

 

He told me, “Well yeah, I own my own company and my wife helps me and so we go out to dinner together all the time and we talk about work so I write it off as a business expense.”

 

Here’s the problem – that’s not going to fly with the IRS.  If you are just going out to dinner with your spouse, even if you do nothing but talk about business – well then, it’s not a deductible business expense.

 

I deal with this issue all the time.  Heck, my own husband will say, “Hey we talked about business, you can deduct our dinner!”  And yes, my husband often gives me excellent business advice during dinner (he’ll read this blog post so I have to say that) but I still can’t deduct having dinner with him for business purposes.  (As smart as he is at business, he stinks at taxes.)

 

Here’s the IRS rule:  “Generally you cannot deduct the cost of entertainment for your spouse or for the spouse of a customer.  However, you can deduct these costs if you can show you had a clear business purpose, rather than a personal or social purpose for providing the entertainment.”

 

So, I can bring my husband, Mark, along if I’m entertaining a client who needed to bring her husband along as well.  For example, someone is in from out of town and wouldn‘t want to leave her husband all alone in the hotel.  But if I’m just having dinner with my husband alone – no deduction.

 

There are lots of other rules about claiming meals as well.  You’re supposed to record the expense “contemporaneously”.  That’s a fancy way of saying you should write down on the receipt who and why.  For example, Helene is one of my advertising people.  We both like the grand slam breakfast so I’ll meet her at Denny’s.  On the receipt I would write, “Helene, advertising.”  Quite frankly, Helene is the only person I meet at Denny’s so if I’ve got a Denny’s receipt, I know who I was meeting and what we were talking about.  But a Bread Company receipt?  Well I probably meet someone there once a week.  If I don’t write that down that might not survive an audit.  It’s just a good business practice to write who and what on the receipt every time.

 

Here’s a silly little tip that makes the IRS happy:  when you’re paying for a business meal with your credit card, write the name and reason for the meeting on the slip that you sign and give to your waitress.   That way, your “contemporaneous reporting requirement” is proved on your receipt carbon.  Your waitress might think you’re a little weird but chances are she won’t even notice.

 

If you want more information about entertainment meal expenses, you can check out the IRS publication 463:  http://www.irs.gov/pub/irs-pdf/p463.pdf

 

And now, I’m headed off to a non-deductible dinner with my husband!

Posted on by Jan Roberg

Personal Bad Debt

Empty Pockets

Photo by danielmoyle on Flickr.com

In my last post I wrote about how to write off a business bad debt on your tax return.  Today, I’m going to explain writing off a personal bad debt.  For example, say you loaned your brother-in-law $5,000 to buy a house and he never paid you back.  That’s considered to be a “non-business bad debt.”

 

The key to claiming a personal bad debt is being able to prove that you tried to get your money.  For example, I paid a boatload of money to send my son to college.  He’s not paying me back.  To be honest, I don’t expect him to – that college money was never meant to be a loan so I can’t claim a deduction for money that I was never supposed to get back in the first place.

 

If you’re claiming a personal debt, you’ll need to show that the money really was a loan, that you were supposed to receive payment, and that the payment was not and will not be received.


Evidence such as a signed loan agreement and copies of collection letters are going to be necessary.  You don’t have to take the person to court – especially if you know that even if you win the court case you won’t get your money – but you do have to show that you tried to get paid.   So, using the brother-in-law example, first you’d want a signed agreement showing that he intends to pay back the $5,000.  Your agreement should show how he’s paying it back, and when.  When he doesn’t pay you, you’ll want to send him a signed letter stating that you expect him to pay you.  You will want to send that correspondence via certified mail, return receipt requested.  This gives you evidence of trying to extract a payment from him.

 

Remember: Without some sort of evidence that the money really was a loan, and that you tried to get paid – you can’t claim the bad debt.


As far as the actual reporting goes, it gets reported as short-term capital losses on Form 8949 part 1 line 1.  (Back in the old days that would be schedule D.  It will still show up on your Schedule D when you’re done, but you’ll be inputting the information onto Form 8949.)

 

You’d write your brother-in-law’s name in column a.  You’d put $5,000 in column f (that’s your basis), and you’d enter zero in column e (because it’s worthless now since he ain’t payin’ ya.)  Make sure you check the box “C” because you’re not getting a 1099B form for this debt.

 

When you write off a personal bad debt like that, you’ll need to attach a statement to your tax return that has the following: a description of the debt, including the amount and when it became due, the name of the debtor and any business or family relationship that you have with him, the efforts that you made to collect the debt, and why you decided the debt was worthless. (For example – maybe your brother-in-law declared bankruptcy or may you know that legal action to collect the debt would probably not result in payment.)

 

Because it’s being claimed as a capital loss – you’re going to be limited to the same rules as other capital losses as far as the amount of the debt that can be used to offset your other income.  So if the loan is the only thing that’s going to wind up on your Schedule D – then you’ll only be able to claim $3000 of the loss.  The rest will carry over to the next year.

 

If you only take away one point of this blog post it should be that you must try to collect the payment before you try to claim the bad debt as a tax deduction.  If you don’t try to collect, then the IRS can treat the debt as a gift and you lose out.

Posted on by Jan Roberg

Sole Proprietor: You Gotta Have a Home Office

Home Office

Photo by f.x.l. at flickr.com.

Right now, I’m sitting in my comfy chair in the corner by the window of my home office and drinking a freshly brewed cup of coffee from my favorite mug.  The dog has done her security patrol of the perimeter, deemed me to be safe from the local deer and bunny rabbits, and has settled in for her morning nap. I’m having one of those, “This is why I’m doing this,” kind of moments and it’s nice.

As a tax person who specializes in small businesses, I get asked a lot of questions about different business practices–Should I set up an LLC?  I always answer, “That depends.”  Should I lease a car or buy it?  That depends.  Should I set up as a sub-chapter S corporation?  That depends.  You get the picture.  But when people ask me about a home office I always say, “Yes!  Every small business owner who files a schedule C should have a home office.”  My answer has nothing to do with the comfy chair and coffee either.  As usual with me–it’s all about the money.

 

A home office is good for your tax return.  First, you get to use a portion of your living expenses (that you would already be paying anyway) to offset your self employment income.  Remember–your self employment income is taxed at 13.2% more than your regular income tax so even something like your mortgage interest-which is already deductible, is a better deduction when it goes against your self employment income.  Kaching!

a home office is foThe other reason you want r your mileage.  Yes, you read that right–you want the home office deduction to claim mileage.  Here’s the deal–let’s say you’re a contractor, you drive to jobs all over town.  You probably put close to 20,000 miles on your truck a year for business.   You claim that on your tax return and get audited.  (Side note:  claiming exactly 20,000 business miles on your tax return will get you audited it’s a red flag.)  Anyway, you go through the audit process and the IRS disallows all 20,000 miles because you’re commuting to those job sites from your home and commuting miles are not tax deductible.  That’s over $3800 worth of tax money that you just lost right there.  Add the fines and penalties and you’re well over 5 grand in tax debt.

But if you had a home office–all of that mileage becomes deductible because ou’re traveling from your office to a job site.

But what if I don’t really have a home office? Seriously, you need to set something up.  It doesn’t have to be a whole room–it can be a corner of a room (like my comfy chair spot although most people have a desk or table.)  You can’t just say you have a home office on your tax return and not really have one.  (You’ve heard of fraud, right?)  Be be realistic.  If you have a small business–you’ve got something–files, or a computer, or make up, or something–and it needs to be put someplace.  You need a spot to make phone calls from, pay the business bills, do your adminsitrative work–that’s your home office.

Aren’t I more likely to get audited if I claim a home office? To be honest, I keep hearing that, but my experience says no.  The only time I’ve seen home office expenses audited was when they really were wrong and it was part of a broader audit.  (Oh yeah, and when I redid those numbers correctly the taxpayer got a bigger home office deduction.)  Be honest about it and you’ve got nothing to worry about.

But what if I have a real office in a business building that I go to every day? Can I still have a home office?  Yes you can.  You make your home office your administrative office.  Like I said, pay bills, balance the business check book.  I never meet clients in my home office, they always come to my “business office” location.  My business office doesn’t prevent me from having an “administrative” office at home.

If you’d like more information about claiming a home office, try this link:  http://robergtaxsolutions.com/2010/09/can-you-claim-a-home-office-deduction/ It has more information about the rules and what the IRS is looking for.  But seriously, if you’re a sole proprietor, you need a home office.