Our Latest press release:
The “Home Office Gurus” Offer Advice
to Make April 15 Less Taxing
“The Home Office That Works!” Authors Talk
About the Home-Office Deduction and Other Issues
February 19, 2015 — Wake Forest, NC, and Saratoga Springs, NY — There are best and worst practices for coping with tax season, and those working from home offices often must be more careful than other taxpayers. They need to keep precise records of income and expenses via QuickBooks or another accounting program (a best practice) and avoid handing their accountant a plastic grocery bag full of hundreds of random receipts at 11:50 p.m. on April 15 (decidedly not a best practice).
The authors of The Home Office That Works! have coped with a combined total of 40 tax seasons, and have practical advice for making tax time as painless as possible, both in their new book and in personal presentations.
The Home Office That Works!, 2015 Edition, available from amazon.com, is an informative, entertaining, and indispensable guide to work-at-home life for novices and home office veterans alike. We asked authors Dr. Joe Webb and Richard Romano questions about their tax advice.
What is your number one piece of advice for home-based business owners?
First of all, neither of us is an accountant or tax expert. We speak from practical experience about tax preparation, deductions, and other matters, but our top recommendation is to get good advice from an experienced tax preparer or certified public accountant. Ideally, you’ll have an ongoing relationship with them over the course of the year; if your income fluctuates from month to month—or your third quarter ends up being far better than you had expected, for example—they can help adjust your quarterly estimated tax payments so you’re not overpaying and potentially running into cashflow issues during the year, or underpaying which can create tax penalties which always seem to come at the worst possible time.
What deductions are available for home-based workers?
The most important is the home office deduction. If you use some portion of your home for business purposes, you can deduct some amount from your taxes. In 2013 (2014 tax year), the IRS introduced the so-called “Simplified Option” which features a flat rate per square foot of your home rather than a rate based on overall percentage of your home; simplified reporting of other business deductions; no depreciation deduction; and more (details are at www.irs.gov). Equipment, computers, office supplies, utilities (like electric), phone/Internet, and other business “essentials” are deductible to varying degrees, depending how much is for personal and how much is for business use. Workers should thus keep track of their space and their time.
How much latitude do home office workers have in deducting expenses?
Common sense should prevail. If you use a computer mostly for Facebook or streaming movies on Amazon Prime or Netflix, and only once in a while for checking work email, it’s not a deductible expense. (Neither is your Amazon Prime or Netflix account.) But there are gray areas. This is why having a good tax accountant is a must; guessing what is deductible, stretching or double-dipping deductions, and so on, may come back to bite you in the end years later. On the other hand, we’ve found that many home office workers overlook some items that are deductible.
What about telecommuters? Or do home office deductions only apply to home-based businesses?
If you are a full-time employee of a company and telecommute part- or full-time, you can still take the home-office deduction, and some other deductions related to your work. However, if you get reimbursed for any of these expenses by your company, they are not deductible. For things that are not reimbursed, workers should ask their tax advisor about IRS Form 2106, unreimbursed business expenses.
Not everyone I worked for gave me a tax form. Does that mean I don’t have to report that income?
Companies you contract with are required by law to send independent contractors a 1099 form (nonemployer compensation, it’s called), in lieu of the W-2 form you receive from HR when you are a full-time employee. That said, not all companies are diligent about sending 1099s, which is why you need to carefully keep track of whatever income you receive and from whom, because you are still responsible for declaring it. It’s also in your best interest to doublecheck the amount on the 1099 form(s) against your own records. Companies can make mistakes but they need to be corrected promptly.
Any other advice?
Be organized, and don’t put off tax prep until the last minute. Companies have until January 31 (or the following Monday if the 31st falls on a weekend) after the end of the relevant tax year to send all tax forms, so set aside some time the first week of February to start pulling everything together. It’s a good idea to prepare a rough return in November and have a quick chat with your accountant so you can make tax time a lot easier. Accountants are less likely to give you their full attention when they are busiest during the March/April tax season.
Advice about tax planning and preparation, and virtually every other aspect of running a home office, can be found in The Home Office That Works! Make Working at Home a Success—A Guide for Entrepreneurs and Telecommuters.
The Home Office That Works! Make Working at Home a Success—A Guide for Entrepreneurs and Telecommuters is available in paperback at http://amzn.to/17Axu01, or an Amazon Kindle e-book available at http://amzn.to/17AxBss. Visit the authors’ website at homeofficethatworks.com.
About Dr. Joe Webb
A home office worker since 1987, Dr. Webb is a consultant, entrepreneur, and economics commentator. He is a doctoral graduate in industrial and corporate education from New York University, holds an MBA in Management Information Systems , and a degree in managerial sciences and marketing. He has taught in graduate and undergraduate business programs and resides in North Carolina.
About Richard Romano
Richard Romano has been a professional writer since 1990 and officially launched his home office in 2000. He has also authored or co-authored a many books about graphics hardware and software, and is a freelance writer of ads, e-newsletters, magazine features and news stories, and research reports. A graduate of Syracuse University’s Newhouse School of Public Communications, he lives in Saratoga Springs, New York.
Additional information is available for editorial purposes. Please make inquiries directly to the authors at authors@homeofficethat works.com.
Speaking Events and Business Contact:
The authors are available for speaking at events, webinars, and business meetings. The book is an excellent promotional vehicle for retailers and service providers targeting the needs of small and home businesses. The authors can also create custom versions of the book. Dr. Webb and Mr. Romano also offer coaching services for teleworkers/telecommuters, either one-on-one or in small groups; advisement for veteran teleworkers; consulting services for businesses considering hiring teleworkers/telecommuters; and more. For more information about these services, contact the authors at firstname.lastname@example.org.