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Lev, Tax Advisor
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CALIFORNIA TAX DEDUCTION QUESTION: I have work for same company

Resolved Question:

CALIFORNIA TAX DEDUCTION QUESTION: I have work for same company for 24 years and for the last 5 years have worked out of my home approximately 85% of time to help downsize company cost of office space. I have never claimed home office expenses but am told I can. They provided my desk and computer and pay for my internet bill. My expenses are utilities I use when working and when no onne else home. What can I legally deduct as a home office expense? I ran it through turbo tax and it states I can deduct just the % of utilities allowable and homeowner's insurance. I made no improvements to my home to accomodate office space. When I go into main office I do not have designated office space for me, I just work in any available space. My home office is approx 120sq ft of my 2230 sq ft home. If I can deduct, should I go back and amend the last 4 years tax return or would that trigger audit?
Submitted: 2 years ago.
Category: Tax
Expert:  Lev replied 2 years ago.
Hi and welcome to Just Answer!
If you are an employee - you may deduct expenses of business use of your home. As an employee, you must itemize deductions on Form 1040, Schedule A to claim expenses for the business use of your home - subject to 2% floor limitation.
Basically - you could deduct a percentage of common expenses attributable to the home office area and depreciation.

When figuring the amount you can deduct for the business use of your home, you can use the entire amount of expenses attributable solely to the portion of the home used in your business. The amount you can deduct for expenses attributable to the whole house depends on the percentage of your home used for business. To figure this percentage, you may divide the number of square feet used for business by the total square feet in your home. Or, if the rooms are approximately the same size, divide the number of rooms used for business by the total number of rooms in your home. You figure the business portion of your expenses by applying this percentage to the total of each expense. If you are a qualified day-care provider who does not use any area exclusively for day care, your business portion is further limited by the ratio of the number of hours the area is used exclusively for business to the total number of hours the portion was available for any use.

 

Thus your office is 120sq ft / 2230 sq ft home = 5.4% - that means you may deduct 5.4% of your common utilities, insurance, etc.

 

use Form 8829 to figure your business-use-of-the-home deductions and.

Publication 587 has detailed information on rules for the business use of your home - www.irs.gov/pub/irs-pdf/p587.pdf

Use the worksheet in Publication 587, Business Use of Your Home, to figure your deduction.

You may amend your past tax returns and claim additional deductions.
While there is no limit how long ago you may go - there is a statute of limitation to claim a refund - which is three years.
Thus the statute of limitation for 2008 tax return started on Apr 15 2009 when that return was due and will run out on Apr 15, 2012.
In most situations - you may not claim a refund for 2007 and before.
Facts of amending tax returns and claiming home office deductions doesn't automatically trigger an audit.
However home office deductions are well known red "flags" - means the probability of the audit is higher.

et me know if you need any help.
Lev, Tax Advisor
Category: Tax
Satisfied Customers: 23194
Experience: Taxes, Immigration, Labor Relations
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