Self-employed Home Office Deduction: a "Red Flag?"
Updated: Jun 12
I know that some tax preparers claim that the home office deduction is a 'red flag' and can provoke an audit. I do not agree with their opinion. These tax preparers are not sufficiently educated regarding the specific provisions of the tax law, and the specific deductions allowed.
They are too lazy to educate themselves on this important and lucrative issue.
I have had a tax-deductible home office since the early 1980's. I have taken all the tax deductions allowed by current law, as it has changed over the years, and prepared tax returns for many self-employed clients doing the same. During this time, I have not been audited, nor have I had any clients audited on this issue.
The home office deduction can affect other deductions, such as the business mileage deduction, the on-premises athletic fringe benefit deduction, the tax-free gain on sale of a personal residence calculation, and others. The skillful accountant must be knowledgeable and able to manage these considerations.
I have made a study of all of the tax law relating to home office deductions, had brainstorming sessions in my office with three former IRS agents, and designed my own worksheet for home office deductions. My worksheet has helped me be very organized, focused, and systematic in collecting clients' home office deduction information, resulting in larger tax deductions, and therefore, lower taxes.
I believe it is proper and wise to take all the deductions legitimately allowed by the Internal Revenue Code. Congress passes laws giving tax deductions to taxpayers. It is the responsibility of taxpayers and their paid tax preparers to utilize all the tax deductions allowed by law, to properly minimize their tax burden.
There is no logical reason to pay more tax than necessary. We don't need Congress to pass a tax cut. We need to take advantage of all of the tax deductions allowed by law - now!