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Tax-Scholar, CPA
Category: Tax
Satisfied Customers: 89
Experience:  Helping customers comply with and plan for income taxes
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If I have a home office in Chesapeake va and want to open a

Customer Question

If I have a home office in Chesapeake va and want to open a sattelite office towards the Richmond dc..area
If we purchase a residence or rent a residence to run the office and my employee will live there and my other employees can stay there when there traveling in the dc area can I take this as a entire deduction for the payment on the residence ?
Submitted: 1 year ago.
Category: Tax
Expert:  Tax-Scholar replied 1 year ago.
Hello and welcome to Just Answers. Yes this satellite office would be considered a business expense and any rent/depreciation could be taken as an expense (along with any other expenses such as utilities, insurance, taxes, interest, etc). Any employee traveling away from their tax home on a temporary assignment can lodge at the office with no tax implications. However any employee that has a tax home in Richmond would be receiving a taxable fringe benefit by the company. This would need to be reported in their W-2 unless an exception is met. The exception requires that (1) The lodging must be on the employer's business premises; (2) the employer must provide the lodging for the employer's convenience rather than for the employee's convenience; and (3) the employer must require the employee to accept the lodging as a condition of employment. The last requirement makes it necessary for the employee to be onsite to perform his job such as a property manager for a apartment complex. For the company this is still deductible but could cause a payroll issue for the employee. The fact that the house is a residence really has no bearing on whether it is used in a trade or business. Treat it like any other office which is deductible. Let me know what else I can clarify.
Customer: replied 1 year ago.
What,is the definition of a tax home in Richmond is there a distance requirement from our home office
Customer: replied 1 year ago.
Is there any rules against one of the employees being a family member
Customer: replied 1 year ago.
We are the owners of a sole propieiriship
My 27 year-old daughter will be running our satelite office she currently works with us now in our main office
Customer: replied 1 year ago.
Is this ok
Expert:  Tax-Scholar replied 1 year ago.
Generally, your tax home is the entire city or general area where your main place of business or work is located, regardless of where you maintain your family home - IRS Pub 511. There is no exception for your daughter as long as she is adequately compensated for the free rent in her W-2. The convenience of the employer test does not apply to partners (or related persons) so this exception would not be available to your daughter.
Expert:  Tax-Scholar replied 1 year ago.
The other option would be to treat the living quarters as personal non-business property and only take the allocable cost of running the office as an expense. This would work since your daughter lives there. Other employees would still need the W-2 or meet the exception.
Customer: replied 1 year ago.
Just to clearify my daughter will have to live in the residence we decide to open are sattelite office in why would she have to claim this as income on her taxes when in order for us to successfully run a sattelite office she has to be present almost most of the time I guess I am just trying to find out if we rent a residence in or near the Richmond Newport News area can we totally right off the rent we are paying the company that is
Customer: replied 1 year ago.
And also not have it effect my daughters income
Expert:  Tax-Scholar replied 1 year ago.
Hi Mitt - As much as I would like to tell you this is all a business expense I just can't get there. Instead I would treat it as an in-home office and only deduct the portion exclusively used for business. The convenience of the employer test would only be applicable to employees who are not related to you. Also the convenience of the employer test is best illustrated by a property manager living on-site. It is a moot point if it is your daughter living at the office but just for discussion. An office job would not normally meet this test unless it was required in order to take the job. But as I just said this exception is only for unrelated employees.