Did a quick search and I don't think this has been started yet, so here we go...

So at the beginning of 2011 I left a small office working with an attorney and opened up a "home law office." Basically I was taking a break while I searched for some good office space and saved up money bartending.

But I did buy some home office furniture, some electronics (fax/printer/copier), and got a home land line. Made some business cards with my home address and dabbled in the legal field but didn't really make any money. I did, however, keep track of all the bills I paid while I was in my "home office" and kept all the receipts. Come summer time I found some office space downtown and really started practicing again, making some money, incurring some bills, blah blah blah.

So now I'm doing my taxes. I've entered in all the bills/expenses/deductions EXCEPT for the bills I had while at the "home office." I'm already getting back a ridiculous sum of money from the turbotax calculator (in my terms at least, I've never gotten back this much except for the first time home buyer's credit...it's around $3,500). Do I go ahead and enter in all my bills and expenses from my home office (power, water, internet, land line) and see if I can get back even more money? Or should I be happy with what I'm already getting back and try not to raise any red flags?

Also, for the people who run their own small business....do you include your cell phone bill in expenses? I'd say that about 15% of my business calls are used with my cell phone.

1/14/2012 10:26:29 AM

A few things:

-Make sure those expenses dont exceed your gross income (doubt it applies to you)
-when you are talking about deducting regular expenses, you are implying only a percentage of your utility bill, etc will be applicable right? Did you make sure your home office met the exclusivity guidelines?
-do you own your home? Then you can depreciate the home office portion
-business use of your cell is deductible
-depending on what sort of financial position you are in you could look to depreciate your costs over several years. Though if you've already quit the small bus game younger just wanna cash out.


[Edited on January 14, 2012 at 10:41 AM. Reason : .]

1/14/2012 10:36:36 AM

be careful with what you deduct, "home office" deduction is apparently one of the biggest red flags for IRS audit.

1/14/2012 10:38:53 AM

^ Sounds like I'm just going to leave it blank then. I don't want to fuck this nice return up.

Quote :

"Make sure those expenses dont exceed your gross income (doubt it applies to you)"

Overall, it does. Since I was at the "home office" for a good 6/7 months...if I add up all those bills and the bills that I've accrued since I got to my actual office, my bills exceed my legal income for 2011.

Quote :

"-when you are talking about deducting regular expenses, you are implying only a percentage of your utility bill, etc will be applicable right? Did you make sure your home office met the exclusivity guidelines?"

Haven't really gone through the home office deductions yet, so I don't know about any of these things.

I do own my home though.

1/14/2012 10:42:38 AM

^^agreed. his chance of being audited will increase ten-fold. Make sure you keep all your records

^never give the IRS free money

Did you designate a room to the sole purpose of running your business? You didn't put a bow flex in there? You didn't have the wife/so surfing the net in there? Your kids didn't play in there or sit at your desk doing hw?

If it was exclusive, take that sq footage and divide it by your house's sq footage to get the percent of bills you can deduct

[Edited on January 14, 2012 at 10:48 AM. Reason : .]

1/14/2012 10:42:59 AM

If I bought something for $100, and ended up getting $1747.50($1800, but paypal takes out 42.50 for fees), whats my tax bill roughly going to be on this?

1/14/2012 10:46:31 AM

Quote :

"^agreed. his chance of being audited will increase ten-fold. Make sure you keep all your records"

I've kept records of everything on the attorney side. I'm just always worried about being audited on the bartending side. Our manager puts in our claimed tips at the end of every week and I know it's a fraction of what we really make. I know he puts in enough to not raise any red flags, but I'm sure an actual audit will uncover some discrepancies.

1/14/2012 10:46:56 AM

^^confused by what you mean? What is the $1800 coming from?

1/14/2012 10:49:58 AM

the thing with IRS audit is, even if you did nothing wrong, it's such a pain in the ass. That's why I would try to avoid it as much as possible. (captain obvious)

Quote :

"If I bought something for $100, and ended up getting $1747.50($1800, but paypal takes out 42.50 for fees), whats my tax bill roughly going to be on this?"

Wouldn't your taxable income be $1647.50?

[Edited on January 14, 2012 at 10:51 AM. Reason : .]

1/14/2012 10:50:27 AM

^^I bought something cheap locally for $100, and sold it to someone online for $1800. My housemate said paypal reports to the government, so I was just curious about what my tax bill would be on this.

I was basically wondering if my taxes would go up say 50, or closer to $200? more? I'm in the tax bracket that makes less than 35k a year.

^thanks

[Edited on January 14, 2012 at 10:57 AM. Reason : ^]

1/14/2012 10:51:49 AM

Quote :

"Did you designate a room to the sole purpose of running your business? You didn't put a bow flex in there? You didn't have the wife/so surfing the net in there? Your kids didn't play in there or sit at your desk doing hw? If it was exclusive, take that sq footage and divide it by your house's sq footage to get the percent of bills you can deduct"

Ahhh...gotcha. No wife and kiddies...I live by myself. But I put my office stuff in my bedroom.

I'm just going to avoid the worry and not put in any home office stuff. Thanks for the info guys!

1/14/2012 10:55:46 AM

^^it depends on the rest of your return but ballpark would be 200-250 added tax. Was this your only sale in the year? Might have to look at sales tax reporting implications for your state. Did you not incur any other costs? Having it delivered when you bought local? Any advertising fees? Shipping fees?

1/14/2012 1:10:40 PM

Some of this advice is a little off but most of it is really good.

Quote :

"Make sure those expenses dont exceed your gross income (doubt it applies to you)"

Why?? A business is only considered a hobby if it doesn't have net profit in 3 out of 5 years. This means they are 2 years you can have a loss and it will not be classified as a hobby. How many businesses produce a net profit in the first year of operation?

Quote :

"do you own your home? Then you can depreciate the home office portion"

Most CPAs encourage you not to depreciate your home office (they are wrong though). If you have a net profit in the business its best to depreciate it.

Quote :

"agreed. his chance of being audited will increase ten-fold. Make sure you keep all your records"

Myth. While your chances may slightly increase it is not any where near ten fold. I have never had a client audited for the home office deduction. High unreimbursed employee business expenses is a much more common audit.

1/15/2012 12:56:29 AM

so, who are some good, reasonably cheap people who can do my taxes this year? I'll probably try and do my taxes via turbotax again this year, but I have a feeling that I would be better off getting a pro to do it

1/16/2012 1:53:59 PM

why do you think that?

1/16/2012 1:54:57 PM

I dunno, I've got a bunch of medical bills for my daughter, we bought our first house, I worked a 2nd job as a private contractor and have to claim those taxes since I didn't get taxed as I got paid, I moved my IRA into my companies 401k. I'm probably over complicating things and can do it all in turbotax, but don't want to miss anything.

1/16/2012 6:34:27 PM

So I just got married and my first time filing as such, thinking about getting a pro instead of turbotax. Wife had 2 jobs this year, one single and one married.

Can a tax professional help me calculate my new withholdings amounts for my wife and I?

1/17/2012 2:29:23 PM

Just finished filing mine! Earliest I've ever done it. Going to take some of my refund and get a new laptop for the office...pumped!

1/17/2012 2:35:53 PM

^^ Under the tax code, no matter when you got married you are considered married for the whole year, so your wife's different jobs don't make a difference. All income is lumped together if you choose to file jointly.

1/19/2012 10:26:26 AM

^this.

1/19/2012 10:34:07 AM

TurboTax said I was medium risk (although it looked "medium-high" risk on the scale) for being audited.

Fingers crossed!

1/19/2012 10:35:33 AM

Ahhh...Just got a 1099 G/INT in the mail after I already e-filed.

It says:

Quote :

"NOTE You do not need to report this amount as income if, in the year you paid the tax, you either (a) claimed the standard deduction, or (b) elected to deduct state and local general sales taxes instead of state and local income taxes. You will need to keep this form with your tax records for information purposes only."

How the fuck do I know if I did either of those things?

and it lists

- State Income Tax Return: $361.00

- Interest Amount: $.00


Do I need to amend??

1/20/2012 10:03:50 AM

^what do you mean how do you know? you look at last year's returns

if you wrote off the state income taxes you paid last year, you need to amend to subtract the refund you received...If not, don't worry about it.

1/20/2012 10:10:23 AM

Claiming the standard deduction means that you didn't have enough interest, property taxes, etc. summed up to claim a deduction higher than the standard. With you being single and owning a home you probably did have enough and if you used software to do your taxes it should have automatically figured out whether you took the standard or a calculated amount greater than the standard amount.

1/20/2012 10:11:15 AM

[Edited on January 20, 2012 at 10:14 AM. Reason : ^,^^ what they said]

1/20/2012 10:12:54 AM

My taxes are going to suck this year. I've got four W-2s to deal with and buying a house and crap on top of that. I'll be curious to see what my annual take home was last year between stints of under and unemployment before landing a steady job.

1/20/2012 10:15:02 AM

Quote :

"With you being single and owning a home you probably did have enough and if you used software to do your taxes it should have automatically figured out whether you took the standard or a calculated amount greater than the standard amount."

Thank you sir.

1/20/2012 10:27:25 AM

The fact that turbotax didn't pick this up is interesting. Did you switch softwares? I wouldn't amend the return anyway. Let the IRS figure it out and send you a bill. The interest and penalties will be so minimal you will be happy you got to hold onto the money for that amount of time.

1/20/2012 7:07:31 PM

the normal IRS red flags in a booming economy have been so much more regular over the last few years in a shit economy, especially with small businesses, that i dont think certain deductions are nearly the red flag they used to be

1/20/2012 7:54:58 PM

TurboTax tells you that it has calculated your taxes with deductions and oddly enough actually asks you if you still want to take the standard deduction...why it does this I don't know, but it will tell you if you were paying attention to everything you clicked on whether you selected standard or itemized.

1/20/2012 8:35:46 PM

^ive never used turbo tax, etc but I presume it's for 1 of 3 reasons:

1). If you file as married filing separately the software won't know if your spouse itemizes (can't double itemize stuff).

2). You are paranoid, don't keep good records, and value your time more than the money saved by itemizing so you just go with the standard deduction to avoid increasing your audit risk.

3). Either The IRC or turbo tax's legal counsel requires individuals to conscientiously determine which deduction they take

[Edited on January 20, 2012 at 9:22 PM. Reason : .]

1/20/2012 9:20:35 PM

My taxes are going to be complicated this year. .. I live in a different country this year, but I get my salary/benefits in the US.

1/20/2012 9:26:21 PM

^meh...depends on how much of the year you lived in the other country. hopefully you can avoid most of that double taxation. rents got taxed out the ass for their house sale when we moved to the states

1/20/2012 9:38:56 PM

As long as your total annual income earned overseas is under $80k and you're paying taxes in the country you're based in, it shouldn't be an issue.

If your paychecks are all being issued Stateside, I would think you would just be filing the standard 1040 and wouldn't need the 2555.

[Edited on January 21, 2012 at 12:33 AM. Reason : g]

1/21/2012 12:32:57 AM

Just got to know that my employer will hook me up with a professional tax firm which specializes in tax filings for people who work as expats....problem solved .

1/21/2012 5:00:04 AM

Quote :

"be careful with what you deduct, "home office" deduction is apparently one of the biggest red flags for IRS audit."

QFT

Just make a mileage log and take whatever they would owe you back off in mileage, the home office thing means you are going to get audited for sure.

I have two different tax advisers tell me its not worth putting down and I have been working from home for at least 2.5 years.

1/23/2012 8:11:03 PM

Those "professionals" have no clue. After 7 years in the business and thousands of returns filed I have never had one audited that had the home office deduction on schedule C or the 2106. Its a myth.

1/23/2012 11:36:32 PM

http://www.irs.gov/taxtopics/tc509.html

Quote :

"Topic 509 - Business Use of Home Whether you are self-employed or are an employee, you may be able to deduct certain expenses for the part of your home you use for business despite the general denial of business expense deductions for the home. To deduct expenses for business use of the home, part of your home must be used regularly and exclusively as one of the following: 1)The principal place of business for your trade or business 2)The place where you meet and deal with your patients, clients, or customers in the normal course of your trade or business; or 3)A separate structure used in connection with your trade or business that is not attached to your home When the exclusive-use requirement applies, you cannot deduct business expenses for any part of your home that you use for both personal and business purposes. For example, if you are an attorney and use the den of your home to write legal briefs and also for personal purposes, you may not deduct any business-use-of-your-home expenses."

I'm no tax expert, but my guess is its one of those things that your intent is interpreted by your actions


[Edited on January 24, 2012 at 7:27 AM. Reason : 509]

1/24/2012 7:25:41 AM

I've debated claiming the home office thing, but I've heard it's annoying once you try to sell.

1/24/2012 9:59:50 AM

Quote :

"For example, if you are an attorney and use the den of your home to write legal briefs and also for personal purposes, you may not deduct any business-use-of-your-home expenses.""

In my scenario, my office WAS in my bedroom. I did all of my work there.

However, it's a moot point since I'm not fucking around with it.

1/24/2012 10:19:59 AM

If i pay someone to help me move to a new state for a new job, can i deduct that as a job hunting expense like i would postage, interview mileage, etc.??

1/25/2012 12:03:38 AM

As long as you qualify under the 'move closely related to work', distance, and time test you should be fine deducting them as moving expenses on form 3903.


Also see:

http://www.irs.gov/publications/p521/ar02.html#en_US_2010_publink1000203446

[Edited on January 25, 2012 at 8:39 AM. Reason : .]

1/25/2012 8:37:44 AM

so i spent $100 on the item i sold for 1800...paypal got 52.50, so all in all a 1647 profit. well i put all that in, and it went from me owing 129 to me owing 587. this is by far the most i've ever owed. here i am living meager as fuck and the government is still trying to milk me for almost 600.

[Edited on January 27, 2012 at 4:53 PM. Reason : -]

1/27/2012 4:52:50 PM

Why the hell are you even reporting that?

1/28/2012 9:28:35 AM

because paypal may have reported it to the IRS though it looks like it probably wasn't unless he's a high volume seller.

"Starting in 2011, Internal Revenue Code (IRC) Section 6050W states that all US payment processors, including PayPal, are required by the Internal Revenue Service (IRS) to provide information to the IRS about certain customers who receive payments for the sale of goods or services through PayPal. These new rules apply to sellers who receive over $20,000 in gross payment volume AND over 200 separate payments in a calendar year."
https://cms.paypal.com/us/cgi-bin/marketingweb?cmd=_render-content&content_ID=marketing_us/IRS6050W

1/28/2012 9:57:10 AM

yeah you just fucked yourself out of $600

1/28/2012 11:49:55 AM

Quote :

"so i spent $100 on the item"

says who?

1/28/2012 12:17:38 PM

^^^^because of the thing Halo put, but the thing halo put makes it sound like i don't have to report it. i just don't want to get in trouble

^i thought about that but my roommate says if i get audited, they will want me to prove it(i even asked him, i say, whats to say i spent 1799 to get something i sold for 1800)

[Edited on January 28, 2012 at 1:19 PM. Reason : goes down to owing a combined of 329 if i take it off completely]

1/28/2012 1:13:39 PM

I don't think PayPal is going to report unless they have to.

Just think about how many more 1099-K's they'd have to issue if they sent one to everyone that's used their service. With the 20 transactions & $20k revenue, they will eliminate 90% of the people who use PayPal for the odd transfer.

1/29/2012 9:33:39 AM

So with Turbo tax, you get 5 federal e files, and you can hypothetically print out 5 state refunds and mail it to the state? And do most of you all download the new version every year?

[Edited on January 29, 2012 at 9:50 AM. Reason : .]

1/29/2012 9:44:22 AM