My wife and I have a consulting business that is officed in our home. My wife is consulting as a receptionist for a salon about 18 miles away from our home. The salon is invoiced by our company and pays our company. Is the mileage deductible? Since we both own the business, I don't really care whether the business reimburses us and deducts it or whether we deduct it on ours, but I just want to know if it is deductible at all?
You two need to get a real accountant and throw away whatever scam literature you got suckered into before the IRS catches up with you. This is the silliest thing I've ever heard of, and I've been around a while. Your wife is working as an employee at the salon, and the salon owner needs to wise up also. As we say on the farm, pigs get fat, hogs get slaughtered
No, her commuting expense isn't deductible.
Please elaborate. Where is the scam? My wife is NOT an employee of the salon. She is an employee of our consulting company, and our company withholds state, federal and FICA and pays the company portion of FICA, unemployment, etcetra. The salon is happy with the arrangement, our company is happy with the arrangement, the IRS gets paid. Where's the problem?
I have a full time job as well. However, the company at which I work all day long is not my official employer for tax purposes. The official arrangement is that I work for another company B which handles all the payroll for company A (along with hundreds of other companies). Company B does all my withholding, FICA, unemployment insurance, 401k, and benefits which the smaller company A does not have the resources or the economy of scale to offer. This seems like the same deal, except on a much larger scale.
When I was working as a consultant for my own company, I did the same thing my wife now does, travel to different companies, sometimes spending a couple of months, and sometimes spending years. I was never "employed" by any of these companies. My consulting company handled all the payroll and benefits, just as it does now for my wife. So where exactly does the problem lie?
Tell us what sort of entity you own that issues you a W-2 form and issues your wife a W-2 form?
For example, it could be a general partnership, an S Corporation, a C Corporation, a Sole Proprietorship, ... At the state level it could be organized as an LLC.
And please explain to us if your wife works as a receptionist for a business why the employer requires that she maintain an office in the home and how she performs her receiptinist duties while in this home office. Ditto for your work.
Phil Marti is undoubtedly aware that the IRS has finally discoverd that many taxpayers are claiming office in the home when they do not meet important requirements of having an office, including the convenience of the employer rquirements, and the regularly and exclusively requirement. Which is a nice way to say many taxpayers are improperly claiming such a deduction, especially in an attempt to convert nondeductible commuting miles into supposedly business-related mileage.
But perhaps you have a legitimate OIH here and just haven't told us anything to demonstrate that.
So 1) what entity is your employer leasing arrangement, 2) do you meet the convenience of employer rule, 3) do you meet the regularly and exclusively rule, and 4) just how is the home office used and needed in her work and in your work?
I guess this has digressed a bit from the original question, sorry about that. I guess what I can't understand is, if my home office doesn't meet the requirement for a home office, then where is my office? Does it just travel around with me according to the IRS? Are all my trips to the rent houses, the post office, the bank all considered non-reimbursable?
If I work for XYZ corp and go to work every day, and might or might not have an office, should I be able to deduct my mileage?
I read into your message a belief in entitlement to mileage that the IRS has statd they know is out there and will be looking at carefully.
What you have stated here would not convince me you had an office in the home deduction.
But that's just my opinion and if anyone else has an opinion they are free to let us know.
Arthur Kamlet wrote: ...
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Not to mention it's hard to fathom how working as a receptionist in a salon can qualify as "consulting"...
I am admittedly out of my element here guys, but does the IRS still use the SS-8 form or pub. 1779 to determine if the wife is an employee or independent contractor. If so, wouldn't that settle it? If not, is there something similar?
I personally think this falls under the walks like a duck, quacks like a duck theory. I've personally never met a receptionist/consultant.
========================================= MODERATOR'S COMMENT: OP states both of them are employees of their S Corp, so employee vs SE is not the issue. The issue is whether either of the leased employees can claim an office in the home deduction.
Okay, well how about this? A receptionist working through a temp agency. The temp agency handles all the withholdings, unemployment taxes and so forth. Is mileage deductible for the excess (if any) miles driven to the salon versus if they drove to the temp agency? Maybe I am just using the wrong terminology.
If this was a Union Hall situation, where Union members report to their union hall every morning to receive their assignment, or sometimes no asignment at all, you might have a point.
But since the owners of the S Corp and the employees are one (or two) and the same, there is no necessary reason to report to the "union hall" to give yourselves assignments.
It isn't clear to me if you came up with this office in home notion yourself or if someone persuaded you to do it.
Being able to claim a home office and finding ways to deduct commuting expenses are amongst my favorite subjects.
Regardless of who is and who is not a independent contractor, the general rule is commuting expenses are not deductible. One exception is that the first trip of the day and the last trip of the day are commuting - during the day trips are business expenses.
Before you salivate, an IRS auditor will get a warm glow in her/his eyes if you claim your first trip and/or last trip was to walk into your home office, stop at post office, or to attend a professional association meeting.
If it is the first/last trip is not billable time, the glow in the auditor's eyes will be similar to the look in a lioness' eyes as she observes a herd of dinner moving into her territory.
Dick
The answer to almost all tax question is "It depends." You have found one of the clear exceptions. It doesn't matter what terminology you use, the answer is still no because the salon, not the temp agency, is the taxpayer's place of regular work hours.
Dick
That is an excellent example.
If Union member receives no assignment, travel is commuting and is not deductible.
If Union member receives an assignment, travel to that assignment is business travel amd other travel is commuting.
If Union member is assigned a multi-day assignment and is not required to be at the Union Hall until he is looking for another assignment, travel to the assignment is business travel only on the first day of the assignment.
A home office is NOT a Union Hall.
Dick
Good example. But I'd appreciate clarification of a nuance. In OP's case the home office is more a piece of paper than a reality, so going to where the real work is done is certainly commuting.
But what about the situation where the home office is the actual primary place of business, but the person goes out on occasion to meet clients for meetings that last just for an hour or two. It seems to me that wouldn't be commuting.
As I off base?
Stu
More than that.
OP states clearly that the exclusivity test is not met.
And states that it's impossible to meet that test and hints that everybody does it.
No need to read any more. Case closed.
Sure, but that's not what we have here.
I'm not recalling the name of the case of the anesthesiologist whose work was done at hospitals, and her OIH was used for scheduling, recording notes, and financial records. Court allowed this and gave us the regularly and exclusively tests, to which IRS concurred.
easy time of meeting the OIH test since the "convenience of the employer" -- pretty much meaning the employer requires it, and likely has to be in writing -- although in OP's case S Corp owners are the actual employees, so it is easier to meet the convenience test if there's a valid business purpose.
One more technical item: SE employees must file the OIH form while wage earning employees do not. Since OP seeks OIH in order to claim mileage, OP would have to generate a Form 2106, which is probably one of those red flag forms. And any OIH and mileage claims are subject to the 2% AGI reduction as well as being disallowed for anyone in AMT territory.
That just means that there is not a part of his house that is used exclusively for business. So no portion of mortgage interest, property tax, electricity bill is deductible. However, business travel miles are still allowed. From 280A(f)(4) -- quoted in a previous thread --
Nothing in this section shall be construed to disallow any deduction allowable under section 162(a)(2) (or any deduction which meets the tests of section 162(a)(2) but is allowable under another provision of this title) by reason of the taxpayer's being away from home in the pursuit of a trade or business (other than the trade or business of renting dwelling units).
Section 280A calls for exclusive use. But if that is not met, it should I think disallow the travel mileage allowed under section 162.
Then would an accountable plan work? The S Corp gets the deduction, the employee is reimbursed and does not have to pay taxes.
Two thoughts come to mind --
Sorry, I made a typo. I meant to say
Section 280A calls for exclusive use. But if that is not met, it should NOT I think disallow the travel mileage allowed under section
162.
That's what I figured (ok, hoped) you meant. ;-)
Stu
Noting that I haven't gotten a free copy of a current tax textbook in five years, it is my opinion that the home office would have to meet the Soliman test, i.e., it is the place of business from whence you generate your income.
I can imagine an attorney who has an office in the burbs, home or othewise, being able to deduct ocassional trips to the court house in center city. Similarly a tax pro could deduct ocassional trips to the IRS office.
Dick
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