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I run a home-based consulting business, and I've read some confusing things about what deductions are allowable with regard to internet and phone service.
Based on the size of my home office, I'm entitled to list 10.85% of my rent and utilities (water and electricity) as home office expenses. Does this also apply to my internet service and phone bill?
We have Time Warner Road Runner coming to the house, which is used for both personal and business needs. We do not have a fixed land line phone. My wife and I have a family cell phone plan with a shared number of minutes. My number is used for both personal and business needs. Can any of this be listed as a business expense? If so, what portion? Half? The same as my home office deduction (10.85%)?
I write down all of my expenses and let my accountant figure it out. Every state, as well as city, has their own tax laws. Home-based business is an easy way to flag an audit, but any professional CPA can keep you legal and up-to-date. Good luck!
The fact that you have one phone line and one account makes all of your phone and WWW usage 'shared' between home and business.
There are 'clear' guideline in the pubs, but auditors can usually rip through those easily.
I have seen many home offices dis-allowed if they do not have a separate store-front entrance, etc.
You would be better off if you had two separate accounts with your phone and WWW provider. That would give you 'business' listings for your phone number, which would help your business.
The fact that you have one phone line and one account makes all of your phone and WWW usage 'shared' between home and business.
There are 'clear' guideline in the pubs, but auditors can usually rip through those easily.
I have seen many home offices dis-allowed if they do not have a separate store-front entrance, etc.
You would be better off if you had two separate accounts with your phone and WWW provider. That would give you 'business' listings for your phone number, which would help your business.
I played that game with the IRS at my 05/06 audit. I have one phone, use broadband for INTERNET and have four number ringing in on one line. I won.
After the comments here and some more research, I've basically decided that I can include the mobile internet on my cell phone as a business expense since I use it only for work email, all long-distance charges (including Skype phone) and 75% of the Road Runner bill as business.
Once revenues justify it, I will hire a CPA to do all of this for me, hopefully next year.
My CPA does not take deductions for my mobile phone and Internet. His position is that it would be difficult to convince the IRS that they are used strictly for business. I do deduct my one-rate landline service, since it is my business line and is listed as such on my letterhead. If I gave my mobile number to business clients, I wouldn't deduct it. Home office deductions, even legitimate ones, are a red flag, so I play it safe. These small deductions aren't worth triggering an audit.
My CPA does not take deductions for my mobile phone and Internet. His position is that it would be difficult to convince the IRS that they are used strictly for business. I do deduct my one-rate landline service, since it is my business line and is listed as such on my letterhead. If I gave my mobile number to business clients, I wouldn't deduct it. Home office deductions, even legitimate ones, are a red flag, so I play it safe. These small deductions aren't worth triggering an audit.
You need a new CAP. I drill water wells and won that with the IRS.
However, I don't want to win, because I don't want to play. I don't want the huge hassle and expense of being audited over small deductions that will save me $100. My time is worth a lot more than that.
My CPA does exactly what I pay him to do-- reduce my tax burden without getting me audited.
I've used a home office for years and in two states and always deducted the internet, cell and a portion of the home phone. I've also used four different accountants and they all said I can make those deductions.
I've used a home office for years and in two states and always deducted the internet, cell and a portion of the home phone. I've also used four different accountants and they all said I can make those deductions.
I deduct all of it.
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