Independent Contractor Compliance Blog - by Collabrus™

Do you wish there was a simple way to claim a Home Office Tax Credit?

How many of you have a home office and do not claim any deductions on your taxes for its costs because one or more of the following reasons?

1. The forms and instructions are too complicated
2. It requires too much time and recordkeeping to document the deduction
3. You fear that claiming the deduction will trigger an IRS audit

In my opinion, all three of these are valid complaints and reasons for just skipping the Home Office Deduction on your tax return.

However, maybe all that will soon change.

Representatives John McHugh (R-NY) and Kurt Schrader (D-OR) recently introduced the “Home Office Deduction Simplification Act of 2009,” also known as HR 1509.  The bill, if passed into law as written, would create a $1500 standard deduction option, thus simplifying the process for taking the deduction.

What does HR 1509 do?

The bill would amend Section 280A of the Internal Revenue Code.  The new wording would allow a standard home office deduction for self employed individuals for either the lesser of

1. $1,500, or
2. The gross income derived from the individual’s trade or business for which such use occurs.

If passed the new law may lower your chance of an income tax audit.

Allowing a standard deduction would greatly simplify the procedure for claiming the home office deduction against your income taxes as an IC.  It would also take away one of the IRS’ excuses to schedule you for an income tax audit, because as long as you meet the standards for the home office deduction you would be entitled to it.  Therefore, the IRS would not be able to use the home office deduction as a reason to audit you.

The law would become effective for the tax year 2010 if it is passed in 2009.