Things Tax Preparers Say: Home Office Deductions

Sometimes I see things accountants say and do and I feel compelled to blog about those things in a segment called “Things Preparers Say.”

Normally I take a “but for the grace of God go I” attitude when I see mistakes preparers make on tax returns. Lord knows I’ve made mistakes too. The things I blog about in this segment are things that I feel rise beyond the level of “human error.”

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Things I’ve seen preparers do: allow an employee to take a deduction for home-office expenses on Line 12 (the line for self-employment income). This preparer did this for people who were not self-employed.

The preparer would fill out a Form 8829 showing business use of the home, and those expenses would go as a deduction on Line 12 of the taxpayer’s Form 1040, even though the taxpayer was an employee and was not self-employed.

Oh my.

Here’s how this is all wrong:

1. Any entries on Line 12 would be for people who are self-employed, not for employees
2. If you’re an employee (as in, you work for someone else) the home office deduction goes on Schedule A as an itemized deduction and is subject to the 2% of AGI rule

There are other issues to tackle.

Usage

Whether you’re self-employed or an employee, you can only take the home-office deduction if you use your office regularly and exclusively (as in 100%) for business.

Employee Issues

If you’re an employee, there’s another hurdle to clear: you must be working from home “for the convenience of your employer.” In other words, if you simply work from home because your employer allows it now and then but they have an office for you to work at normally, you don’t qualify for the deduction.

For more, check out IRS Publication 587.