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Home Office Deductions: What Can You Deduct From Home Office Expenses

Home Office Deductions: What Can You Deduct From Home Office Expenses

Home Office Deductions in the Age of Covid-19

With so many taxpayers working from home–some indefinitely–do to Covid-19, many are likely wondering whether they can deduct their home office expenses. In short, traditional W-2 employees cannot deduct their home office expenses regardless of whether they would otherwise qualify for the deduction. The 2017 tax reform legislation eliminated this deduction for 2018-2025. Self-employed taxpayers can deduct expenses associated with maintaining a home office if the office is used regularly and exclusively as the taxpayer’s principal place of business (if the office is within the dwelling unit). A home office deduction is permitted for self-employed taxpayers with separate structures if the office/workspace is used “in connection with” the trade or business. For more information on the home office deduction, visit Tax Facts Online.

When is a taxpayer entitled to deduct expenses incurred in maintaining a home office?

A taxpayer is only entitled to deduct expenses for a home office if the taxpayer is able to meet the restrictive requirements imposed by the IRC and the courts with regard to this business deduction. A deduction for use of a part of the taxpayer’s residence as an office will not be allowed unless a portion of the dwelling is used exclusively and on a regular basis as (a) the principal place of business for any trade or business of the taxpayer; or (b) the place of business used by the taxpayer for meeting patients, clients or customers in the normal course of the taxpayer’s business.1 If the taxpayer uses a separate structure as a home office, the use requirements are less restrictive and the use must only be “in connection with” the taxpayer’s trade or business.2 A home office will qualify as a taxpayer’s principal place of business if both of the following are true:

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Are Travel Tax Subsidies A Good Idea?

Are Travel Tax Subsidies A Good Idea?

On May 18, 2020, President Trump met with some restaurant execs and suggested a few tax law changes to help the industry. This included “restore the restaurant deduction to help jobless restaurant workers” He also suggested: “Create an “Explore America” — that’s “Explore,” right? Explore America tax credit that Americans can use for domestic travel, including visits to restaurants.”

On June 22, 2020, Senator McSally (R-AZ) introduced S. 4031, American Tax Rebate and Incentive Program Act (the American TRIP Act). This bill would add new IRC §25E, Travel, Hospitality, and Entertainment Expenses. This bill does the following:

-Provide a 100% nonrefundable credit on up to $4,000 of expenses for travel and restaurant usage ($8,000 MFJ) + $500 x # qualifying children (under age 17).
-The credit is for qualifying travel in the U.S. and its territories that is over 49 miles from the taxpayer’s home for food, lodging, transportation, live entertainment (including sporting events), expenses related to attending conference or business meeting).
-For use of a personal vehicle, the amount considered spent is measured using the standard mileage rate in effect under §162(a), with is 57.5 cents/mile for 2020 (this is the rate that includes depreciation so too high for personal travel).
-The credit is based on travel after 12/31/19 and before 1/1/22 per the text of S. 4031 (so 2020 and 2021). However the sponsor’s press release says the credit applies for 2020, 2021 and 2022.
-Travel to the taxpayer’s vacation home is okay if 50 miles or more away, but expenses of the home don’t qualify.
-S. 4031 also allocates $50 million of grant funds to promote tourism and travel in the U.S.
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Social Security Benefits May Be Taxable: Don’t Forget

Taxable Social Security Benefits

Taxpayers receiving Social Security benefits may have to pay federal income tax on a portion of those benefits.

Social Security benefits include monthly retirement, survivor and disability benefits. They don’t include supplemental security income payments, which aren’t taxable.

The portion of benefits that are taxable depends on the taxpayer’s income and filing status.

To find out if their benefits are taxable, taxpayers should:
• Take one half of the Social Security money they collected during the year and add it to their other income. Other income includes pensions, wages, interest, dividends and capital gains.
o If they are single and that total comes to more than $25,000, then part of their Social Security benefits may be taxable.
o If they are married filing jointly, they should take half of their Social Security, plus half of their spouse’s Social Security, and add that to all their combined income. If that total is more than $32,000, then part of their Social Security may be taxable.
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Senior Tax Manager- International (San Jose, CA)

Senior Tax Manager- International (San Jose, CA)

TaxConnections has been retained to conduct a search for a Senior Tax Manager – International for a global technology company headquartered in Silicon Valley, CA. .This position is responsible for providing international tax guidance for U.S. compliance and reporting; managing Americas region income tax compliance and related issues.

Responsibilities include:Review/provide technical guidance for international portion of company’s income tax return including Forms 8858, 5471, and 1118, GILTI, FDII, Subpart F and FTCs, as needed; Prepare/provide technical guidance for §861/other expense allocations for FDII benefit and foreign tax credits; Co-ordinate and manage review and approval of the international portion of Company’s U.S. tax return by external service providers, including technical analysis and discussion of issues raised; Research relevant international tax matters, new proposed and final regulations, tax law updates, and provide guidance for tax compliance and reporting; Prepare and manage U.S. tax return disclosures for international issues and transactions; Provide technical guidance to international compliance team for quarterly and year-end reporting. Review calculations for technical accuracy; Manage, supervise and train team member supporting international provision in direct tax hub offshore; Coordinate with Finance shared services centers, GL accounting, revenue and other teams on various international tax issues and more.

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Tax Manager – Investments (San Francisco, CA)

Tax Manager - Research And Planning (San Francisco, CA)

The top driver that keeps tax professionals in an organization longer is how they are treated by management. Our client has an extraordinary retention rate due to the fact they treat their tax team with a high degree of respect and support you in ways you rarely experience in companies.

TaxConnections has been retained by an investment group to locate a Tax Manager in San Francisco, CA. It is an opportunity of a lifetime for a tax professional with the requisite skills.

The Tax Manger will be responsible for assisting senior tax management with tax research and planning and all aspects of the tax compliance and forecasting for a very significant investment partnership and the related investment management entity. Individual must have a solid understanding of current tax laws including knowledge of investment partnership structures. Researching and communicating the tax consequences of current and proposed investments will be a part of the responsibilities of the successful candidate.

In addition, the position will require both the preparation and review of highly detailed complex Federal, California and multi-state income tax returns, foreign investment reporting implications, preparation of tax forecasts and researching complex tax issues.
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Tax Specialist – Hedge Fund (San Francisco, CA)

Tax Specialist (San Francisco, CA)

TaxConnections is representing a high net worth family office in San Francisco, CA to locate a Tax Specialist with 2-3 years of experience. The opportunity to work in this family office is a once in a lifetime career opportunity. It is ideal for anyone wanting to leave public accounting and go in-house and work with a highly supportive family office with a stellar reputation.The Tax Specialist is responsible for performing tax compliance and planning functions as well as providing tax support for various company entities, which include Partnerships, Limited Liability Companies and Corporate entities. The financial and team support they have given all of their employees during this time is extraordinary.

Significant emphasis will be on tax work related to Partnerships and Limited Liability Companies. Prepare federal and state income tax returns and forecasts and perform various tax planning and research projects that involve a high degree of complexity.  Respond to audits by and information requests from various government authorities. Responsibilities include the following:
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Gig Economy Tips Taxpayers Should Remember

IRS On Gig Economy

The gig economy, also called sharing or access economy, is activity where taxpayers earn income providing on-demand work, services or goods. Often, it’s through a digital platform like an app or website. While there are many types of sharing economy businesses, ride-sharing and home rentals are two of the most popular.
Here are some things taxpayers should remember:

• Income from these sources is taxable, regardless of whether an individual receives information returns. This is true even if the work is full-time, part-time or if an individual is
paid in cash.
• Taxpayers may also be required to make quarterly estimated income tax payments and pay their share of Social Security, Medicare or Medicaid taxes.
While providing gig economy services, it is important that the taxpayer is correctly classified.
• This means the business or the taxpayer must determine whether the individual providing the services is an employee or independent contractor.
• Taxpayers can use the worker classification page on IRS.gov to see how they are classified.
• Independent contractors may be able to deduct business expenses, depending on tax limits and rules. It is important for taxpayers to keep records of their business expenses.
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Assets Of A Foreign Individual (Nonresident Alien) Subject To U.S. Estate Tax

Assets Of A Foreign Individual (Nonresident Alien) Subject To U.S. Estate Tax

Unlike a U.S. citizen, who is subject to estate taxation on worldwide assets, the gross estate of a nonresident alien (meaning, a foreign individual who is not a U.S. citizen or resident alien) only includes property that is situated in the U.S. at the time of the nonresident alien’s death.1

For purposes of determining what property is situated in the U.S., any property which the decedent has transferred, by trust or otherwise, which would be taxable within the provisions of IRC Sections 2035 through 2038 (relating to termination of certain property interests within three years of death, transfers with a retained life estate or to take effect at death, and revocable transfers), is deemed situated in the United States if it was so situated either at the time of the transfer or at the time of death.2

For a decedent who was a nonresident alien at the time of death, property is considered located in the U.S. if it falls into any of the following categories:

(1)Real property located in the U.S.;

(2)Tangible personal property located in the U.S., including clothing, jewelry, automobiles, furniture or currency. Works of art imported into the U.S. solely for public exhibition purposes are not included;

(3)A debt obligation of a citizen or resident of the U.S., a domestic partnership or corporation or other entity, any domestic estate or trust, the U.S., a state or a political subdivision of a state or the District of Columbia; or

(4)Shares of stock issued by domestic corporations, regardless of the physical location of stock certificates.3

However, in the case of a nonresident alien who dies while in transit through the U.S., personal effects are not considered located in the U.S. Neither is merchandise that happens to be in transit through the U.S. when a nonresident alien owner dies.

Read More At Tax Facts

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How To Get A Bank Levy Released

How To Get a Bank Levy Released

When you owe the IRS money in back taxes, the federal agency can use a variety of ways to obtain the debt, including assessing a bank levy. This means the IRS can place a freeze on your accounts and seize the money until your tax debt us satisfied. To try to have the bank levy removed and to learn more about your options, you can work with a tax attorney. Learn more about how a tax attorney can help you negotiate with the IRS to try to have a bank levy removed.

If you owe the IRS money in back taxes, the federal agency may take action in several different ways to recoup the debt, including placing a bank levy on your accounts. This means the IRS will place a freeze on your bank account to seize the funds. This levy may stay on your account until your tax debt is paid in full.

Having a a bank levy placed on your accounts can put you in a hard spot, financially. To try to get a levy released, it is important to hire a tax attorney to represent you in your negotiations with the IRS. Some options an attorney can help you explore include:
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IRS Finalizes Guidance For Section 199A Deduction For Shareholders Of Regulated Investment Companies

IRS Finalizes Guidance For Section 199A Deduction For Shareholders Of Regulated Investment Companies

The Internal Revenue Service issued final regulations permitting a regulated investment company (RIC) that receives qualified real estate investment trust (REIT) dividends to report dividends the RIC pays to its shareholders as section 199A dividends.

Section 199A, enacted as part the Tax Cuts and Jobs Act (TCJA), allows individual taxpayers and certain trusts and estates to deduct up to 20 percent of certain income (section 199A deduction).

The section 199A deduction is available to eligible taxpayers with qualified business income (QBI) from qualified trades or businesses operated as sole proprietorships or through partnerships, S corporations, trusts, or estates, as well as for qualified REIT dividends and income from publicly traded partnerships. The section 199A deduction is not available for C corporations.
The regulations issued today provide that a shareholder in a RIC may, subject to limitations, treat a section 199A dividend received from a RIC as a qualified REIT dividend for purposes of determining the section 199A deduction.
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Wayfair Two Years Later: What We Have Learned

Monika Miles: Wayfair Two Years Later

It’s hard to believe that it has been two years since the landmark decision in South Dakota v. Wayfair (2018) that changed the sales tax landscape. The high court’s decision on June 21, 2018 was that South Dakota’s economic nexus law was constitutional and that the state could require companies who met certain sales thresholds to collect and remit sales tax on sales to South Dakota customers, even if the company had no physical presence. The decision effectively changed the way states define nexus for sales tax purposes.

The Supreme Court’s ruling did not automatically make this the law of the land for all 50 states. It was a South Dakota case, so the ruling just applied to South Dakota. However, in the last two years, states have been jumping on the economic nexus bandwagon and enacting laws similar to those of South Dakota. States have long been searching for new ways to bring revenue into their state and the Wayfair case gave them a long-awaited opportunity to do so.

What is Economic Nexus?
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New Foreign Earned Income Exclusion Rules

New Foreign Earned Income Exclusion Rules

The bona fide residence test and physical presence test generally provide specific time requirements that apply to individuals claiming a tax exclusion for foreign-earned income. An otherwise qualified individual may still exclude foreign earned income for the period in which the individual was actually present in the foreign country even if the individual fails to meet the time requirements.

What are the bona fide residence and physical presence tests that can allow a U.S. individual to qualify for the foreign earned income exclusion?

A U.S. individual with foreign earned income must satisfy either the bona fide residence test or the physical presence test in order to be eligible to exclude all or a portion of foreign earned income from U.S. income (see Q 964).
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