Home Office - Simplified Method

Technical topics regarding tax preparation.
#1
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Per instructions, the election to use the simplified method for calculating home office deduction must be made on a timely filed original tax return. My new client, who will only have a home office in 2017 due to retirement, has filed his 2017 tax return with no home office deduction at all, as well as a lot of other things being incorrect on the return. Don't really want to go through getting cost basis, all of related expenses of home office, etc. due to client having dementia (spouse is not much help in these matters); and they agreed to using the simplified method.

However, in reading the instructions, I don't think we can take it on the amended return. Software is allowing it, so if I had not questioned it myself and looked at instructions, I would have sent it on through. Has there been any change on this that anyone is aware of?
 

#2
JR1  
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If he's self employed, it doesn't help SE tax, much anyway. Simple here means send more money. Guestimate the actuals.
Go Blackhawks! Go Pack Go!
Remembering our son, Ben Jan 22, 1992 to Aug 26, 2011.
For FB'ers: https://www.facebook.com/groups/BenRoberts/
 

#3
WEISSEA  
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Rev. Proc. 2013-13 A taxpayer elects the safe harbor method by using the method to compute the deduction for the qualified business use of a home on his or her timely filed, original federal income tax return for the taxable year.
 

#4
Jake  
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I never took a home office deduction before the simplified method was an option. Did so thereafter via the simplified method y because the simplified method eliminated any concern about an adjustment to basis when selling my home. In either case for most the tax savings is not that significant anyway. If the simplified method is not allowable on an=amended return, just low ball the depreciation amount.
 

#5
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I think you can still send a superseded return, even without an extension, until 10/15.
There's a "Filed under..." that allows it. I'm blanking on it at the moment. There's a good Tax Adviser article on superseded returns that might address it.
~Captcook
 

#6
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I forgot about a superseded return, as I never do them. Interesting article I found at wealthyaccountant.com:
"Superseding personal returns MUST be paper filed. Some tax professionals prefer filing a superseding personal return in the format of an original return and writing “SUPERSEDING RETURN” across the top of the first page. Because this will probably be flagged as a duplicate return another method is advised.

A superseding personal return should be prepared as an amended return on Form 1040X. (There is no superseding box to check.) All amended personal returns filed before the due date, including extensions, are automatically treated as superseding, incorporating the new data and modifying the original return. This means a forgotten irrevocable election CAN be made and is treated as if made on the originally filed return."

I have never heard that amended returns filed before the due date, including extensions, are automatically treated as superseding. This may be why my software is allowing me to now use the simplified method. Thanks to all!
 

#7
WEISSEA  
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" has filed his 2017 tax return with no home office deduction at all,"

Was your client on extension?
 

#8
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He said he prepared an extension, but I have not seen it. I assume he did indeed file it.
 

#9
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I disagree that superseding returns should be filed on form 1040X.

I've filed a number of 1040s with "Superseded" across the top without issue.
How can one submit items required to be on an original return on a 1040X?
~Captcook
 

#10
dave829  
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IRM 21.6.7.4.10(A) (https://www.irs.gov/irm/part21/irm_21-0 ... 5749538208):
An amended (Form 1040X) or corrected (duplicate) return filed on or before the due date or the extended due date is a superseding return.
 

#11
Jake  
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A good reason to always file an extension in returns with potential complications.
 

#12
Jake  
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This just landed in my in-box from the Bradford Tax Institute. The saying "Don't try this at home." comes to mind.

Do you operate your business as a sole proprietor?
If you do, you know that Uncle Sam helps himself to a big chunk of your profits in the form of self-employment taxes.
To be specific, he's taking a full 14.13-percent! (That's 92.35% of the published 15.3 percent because there's a reduction on Schedule SE.)
But hang on a second. There is something you can do to dramatically reduce your self-employment tax bill . . . Rent an office in your home or building from your spouse!
Want to find out more about how this totally legal strategy can save you a bundle? Read my new article titled Reduce Self-Employment Taxes By Renting From Your Spouse.
 

#13
WEISSEA  
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Rent an office in your home or building from your spouse

Self rental is non passive income and passive losses. Get a SE deduction for OIH. So I am missing why there is any advantage to renting office for a SE deduction and then reporting the rental income on Schedule E. E.g. assume OIH deduction $3000 vs rent for $3000 income less $3000 rental deduction. Comes out the same.
 

#14
Jake  
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I agree. To find out the advantage details I guess you have to subscribe to the Bradford Tax Institute. The problem I see is that the rental from the spouse would be above fair market value and somehow a rental expense might be less of an audit trigger than a HOE deduction.
 

#15
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The idea is that if taxpayer owns 100% of a business, and the spouse owns 100% of the building, then you're dealing with two different entities and the transaction would not be disregarded. The fair rental value of a building should (in theory) be higher than an allowed OIH deduction because in an arms-length rental agreement the landlord should be earning profit, so this setup should save SE tax.

It's been a while since I've thought of this, but in the back of my mind I seem to remember that it doesn't generally work in a community property state (because generally all assets are owned 50/50 between spouses) but there are possibilities in separate property states.
 

#16
dave829  
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WEISSEA wrote:Rent an office in your home or building from your spouse

Be careful with this strategy. If the taxpayer and spouse are both on title, or the taxpayer has an equity interest in the home, either by virtue of joint ownership with the spouse or by virtue of community property, then the rent paid to the spouse will be disallowed. See sec. 162(a)(3).
 

#17
JR1  
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I would not try that with married folk. The only time I did was after divorce, they still owned property jointly, so I was able to exclude 50%. Then we inc'd the biz and excluded all of it for SE purposes.
Go Blackhawks! Go Pack Go!
Remembering our son, Ben Jan 22, 1992 to Aug 26, 2011.
For FB'ers: https://www.facebook.com/groups/BenRoberts/
 


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