Questions for the Tax Lady: February 1st, 2010

Check out the following new Questions for the Tax Lady answers and feel free to ask me questions through one of the links below. You can send me an email, direct message or @ reply, and I will do my best to get an answer for you!

Question #1: How do I calculate my home office deduction?

The home office deduction is actually pretty simple to calculate. First find out the exact square footage of the room, then divide it by your home’s total square footage to determine what percent of your home is dedicated to your office. You can then deduct that percentage of your rent, and utility bills on your tax return. However, keep in mind that the IRS has very strict rules related to the home office deduction. For more information, check out this entry at the RDTC Tax Help Blog.

Question #2: What should I do if I still have not received a W-2 from my employer.

For now, I would say just wait. However, if you do not get your W-2 within a week or so then I would suggest contacting your employer to verify it has been mailed. If you have difficulty reaching your employer then you can contact the IRS (1-800-829-1040) for assistance.

However, before calling the IRS you should make sure to have the following information readily available:

• Your name, address, and social security number.
• An estimated of the wages you earned last year.
• The amount of federal taxes withheld from your wages.
• The dates you began (and possible ended) employment.

The Home Office Deduction

Yesterday’s Tax Deduction of the Week blog (Roni Deutch Tax Help Blog) explained the home office deduction. Over the past few weeks, topics have included alimony payment deductions, traditional IRA contributions, and the 2009 vehicle sales tax deduction. I have included a snippet of the home office deduction entry below, but you can find the full text – as well as dozens of informative articles – at the Roni Deutch Tax Help Blog.

Designated Room or Space

In order to qualify as a home office – in the eyes of the IRS – you need to have a separate room or designated space that is used exclusively for business purposes. If it is not a room, the space needs to be separated by a room divider of some sort. Additionally, the IRS is very strict about the exclusive use rule, so if your children play in the office or your spouse uses the room as a home gym then it will not qualify.

Principal Place of Business

According to the IRS, your office must either be the principal location of that business, or a space where you meet with clients regularly. If you work exclusively from home then you can easily prove that the office is your principal place of business. However, if you have an office away from home, you will need to show that you regularly meet with clients from your home office.

Calculating the Deduction

In calculating your home office deduction you need to know both the total square footage of both your home and your designated home office. This is because your home office deduction will be based off of the percentage of your house used for business. For example, if your home is 1500 square feet and your office is 150 square feet then your deduction would be calculated using 10%. Meaning, you can deduct 10% of your rent and indirect expenses.

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