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The IRS goofs on the home-office deduction

July 19, 2021

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Does the IRS ever make a mistake?

Take a guess at the answer!

What concerns me in this issue of the Tax Reduction Letter is a specific IRS mistake that can cost you big money.

I’m talking about how the IRS made a serious error in its publication that dealt with the home-office gross-income limit.

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Two important definitions you need to know.

The IRS makes a distinction between…

  • A home office that you use as the administrative office for your business
  • A downtown office that you use as your sales or patient office. The place where you generate income. (The term “downtown office” shouldn’t be taken literally. It refers to an office in another location.)

Here’s where the IRS went wrong…

The two key mistakes relate to the gross-income limit. (That’s the limit that applies when you claim the home-office deduction.)

False IRS statement #1: The IRS requires that you divide your gross income between your home office and a downtown office.

WRONG! The law does NOT require this division.

False IRS statement #2: The IRS limits the home-office deduction to the income generated from the home-office income.

WRONG! The law does NOT impose this limit.

Yes. This subject is complex which is why this issue of the Tax Reduction Letter is so important to read.

We’ll make everything easy to understand when you…

CLICK HERE and read the full, fact-filled article titled:

“The IRS goofs on
the home-office deduction”

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with all the details…

Filed Under: Audits, Filing tips, Home Office, Tax Planning

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