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khutch
01-29-2011, 07:58 AM
I have two clients who are CPA's. They both at some point mentioned they don't like to give "free" advice, but I posed this question to them and said "just give me a thumbs up or thumbs down". Easy question, just figured they would probably agree and there would be my answer. Question is: Can I deduct the taxes, mortgage interest and utilities for the square footage of my garage which I use year round as storage and workshop? Oddly, one gave me the thumbs up, the other thumbs down...???? I was figuring on a thumbs up....
BTW, My company is an S Corp.
Anyone have advice on this???

billslawn89
01-29-2011, 08:19 AM
from the irs website...gives you and idea...and goto page 26 for the worksheet

http://www.irs.gov/pub/irs-pdf/p587.pdf

Fvstringpicker
01-29-2011, 08:44 AM
280A(c)(6) of the tax code which states that a rental of a dwelling unit by the taxpayer to his employer (your S corp) during any period in which the taxpayer uses the dwelling unit, then ∂1 and ∂3 can't be used to allow office-in-home expenses. ∂1 is the "principal place of business; used by patients, clients and the separate structure. ∂3 is the dwelling unit exception.

Hence, the only exception to the general rule about not allowing deductions for the office-in-the-home is for storage use and day care services.

Feldman v. Commissioner which caused the (c)(6) rule. I need to read case but I think at this point you will need a accountable plan where you rent the building to the S-Corp and claim rental income and expenses on a personal schedule E.

zturncutter
01-29-2011, 08:50 AM
My CPA's take is that while it is doable it is not usually advisable. It is one of those deductions the IRS usually will take a look at to audit. So I guess they are both right while giving two different answers.

JB1
01-29-2011, 09:04 AM
thats the trouble with the tax code, there's too much interpretation of it.

jc1
01-29-2011, 09:16 AM
The way my accountant explained it to me is this. You can claim it as an expense but is it worth it. If you claim the expense and then sell your house making a profit over your purchase price. You are then taxed on the percent of profit that was previuosly claimed as a deduction. Where if you dont claim the expense it would not be taxable income. It's more complex than a thumbs up or down question.

Fvstringpicker
01-29-2011, 10:29 AM
Your accountant is correct. In essence, you will have to recapture the amount previously claimed as depreciation. Additionally, the structure will have to be used exclusively for business. Hence, you cannot "openly" use it to work on your personal vehicles or store personal items. Many office in home deductions are lost when the IRS discovers the kids work on their homework (as an example) in the home office.

AI Inc
01-30-2011, 07:41 AM
So professor, is it worth it to take the write off as you then have a higher personal income if you are renting it to yourself?

khutch
02-01-2011, 08:03 AM
The way my accountant explained it to me is this. You can claim it as an expense but is it worth it. If you claim the expense and then sell your house making a profit over your purchase price. You are then taxed on the percent of profit that was previuosly claimed as a deduction. Where if you dont claim the expense it would not be taxable income. It's more complex than a thumbs up or down question.


Yea, that is why I said just give me a thumbs up or thumbs down - both of these guys made it clear they did not want to talk tax law with me - can't blame 'em really.
I guess it is true what one CPA told me, "Anything can be written off until you are audited."
Think I'm going to pass on this deduction, although it sure seems worth it granted they would have to come back after all those years later when you sell you house for profit, IF you sell your house for a profit.
BTW, isn't there a limitation on the number of years you can be audited?
Taking this deduction doesn't seem to fall under fraud or intentional non-payment of taxes which I thought were the only things that did not have a statue of limitations.

fl-landscapes
02-01-2011, 08:17 AM
The way my accountant explained it to me is this. You can claim it as an expense but is it worth it. If you claim the expense and then sell your house making a profit over your purchase price. You are then taxed on the percent of profit that was previuosly claimed as a deduction. Where if you dont claim the expense it would not be taxable income. It's more complex than a thumbs up or down question.

same thing my accountant told me.....zero sum game and not worth it. Oh and those customers who dont give "free advice"..be sure the next time they ask you why the azaleas arent blooming you tell them the pH is off.....and send an invoice for your expert advice. Dicks!

hoyboy
02-14-2011, 09:14 AM
If you are itemizing your deductions on schedule A (as opposed to taking the standard deduction), which I assume you are if you have a mortgage, then you are already deducting those expenses. Don't worry about deducting it on the business. Because you are an S Corp, all that income flows through to your personal return anyway.

Dan Norton
mylandscapeoffice.com

khutch
02-26-2012, 12:17 PM
If you are itemizing your deductions on schedule A (as opposed to taking the standard deduction), which I assume you are if you have a mortgage, then you are already deducting those expenses. Don't worry about deducting it on the business. Because you are an S Corp, all that income flows through to your personal return anyway.

Dan Norton
mylandscapeoffice.com

That kinda of makes sense to me - but in a way, aren't you saying an S-Corp cannot take ANY deductions because it all flows through the personal anyway. If there is a cost to running the business, and storage is one of them, seems like it should be legit. Goes back to the whole home office thing - as long as it is legit and you are not taking sole advantage of the code you are OK.
BTW, ANYTHING is deductible, it is only an audit that will disallow it. And if it is not fraud, only then would you have to pay any tax on it.

Dr.NewEarth
02-26-2012, 01:34 PM
My accountant insisted that the company pay a rent cheque to me and my personal bank account every month. Then she deducted that as company rent.

Roger
02-26-2012, 07:35 PM
....

Oh and those customers who dont give "free advice"..be sure the next time they ask you why the azaleas arent blooming you tell them the pH is off.....and send an invoice for your expert advice. Dicks!

Not the same situation at all. The "no advice" policy is the right one for them, regardless of what they ask you. This is apples and oranges.

A-Land
02-26-2012, 10:10 PM
At the end of the day, you should pick one accountant and work with them and do things how they tell you to. Some may have different experiences and may advise differently. The home office deduction, for instance, is one of the most common factors to cause the IRS to audit you. Some accountants then say it's not worth it to even bother, some may feel differently. Pick an accountant by checking out some of their references and see what their experiences have been. Then you don't have to "fear" an audit... Just do what they tell you. You have some money on the line at most - Your accountant has their entire livelihood on the line every time they sign off on a tax return. Find a good one with a good track record and follow their advice.

Roger
02-26-2012, 10:16 PM
.... Find a good one with a good track record, be willing to pay them for their professional services, and follow their advice.

Adding a very important part of the equation.

WI-SALT
03-01-2012, 09:03 AM
Yea, that is why I said just give me a thumbs up or thumbs down - both of these guys made it clear they did not want to talk tax law with me - can't blame 'em really.
I guess it is true what one CPA told me, "Anything can be written off until you are audited."
Think I'm going to pass on this deduction, although it sure seems worth it granted they would have to come back after all those years later when you sell you house for profit, IF you sell your house for a profit.
BTW, isn't there a limitation on the number of years you can be audited?
Taking this deduction doesn't seem to fall under fraud or intentional non-payment of taxes which I thought were the only things that did not have a statue of limitations.
In general, the IRS has a three year statute of limitations to adjust your income tax return. However, the IRS also sends their audit reports and assessments to the state you are located. Each state has different rules but many of them will make an automatic assessment using the IRS adjustments or perform their own audit. Most states have a four or three year statute of limitations under normal circumstances.

lawnkingforever
03-01-2012, 10:39 AM
At the end of the day, you should pick one accountant and work with them and do things how they tell you to. Some may have different experiences and may advise differently. The home office deduction, for instance, is one of the most common factors to cause the IRS to audit you. Some accountants then say it's not worth it to even bother, some may feel differently. Pick an accountant by checking out some of their references and see what their experiences have been. Then you don't have to "fear" an audit... Just do what they tell you. You have some money on the line at most - Your accountant has their entire livelihood on the line every time they sign off on a tax return. Find a good one with a good track record and follow their advice.

Spot on post. My accountant and I spoke extensively about the home deduction this year. I never wrote off anything related to my home in the past. This year after careful consideration, I have decided to do so. My problem is that I don't have a lot of deductions. I run a solo op out of my house. I am not an equipment junkie and hang on to what I do have for as long as possible. Deducting part of the house and garage did help a bit this year. My accountant did tell me that as a sole prop. I will be able to pay my kids 5k a year which will help lower my income. Unfortunately my kids are far too young to take advantage of that deduction.
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