IRS Announces Simplified Option for Claiming Home Office Deduction

Interesting new option for writers working out of a home office. Directly from the IRS:

The Internal Revenue Service announced a simplified option that many owners of home-based businesses and some home-based workers may use to figure their deductions for the business use of their homes.

In tax year 2010, the most recent year for which figures are available, nearly 3.4 million taxpayers claimed deductions for business use of a home (commonly referred to as the home office deduction).

The new optional deduction, capped at $1,500 per year based on $5 a square foot for up to 300 square feet, will reduce the paperwork and recordkeeping burden on small businesses by an estimated 1.6 million hours annually.

"This is a common-sense rule to provide taxpayers an easier way to calculate and claim the home office deduction," said Acting IRS Commissioner Steven T. Miller. "The IRS continues to look for similar ways to combat complexity and encourages people to look at this option as they consider tax planning in 2013."

The new option provides eligible taxpayers an easier path to claiming the home office deduction. Currently, they are generally required to fill out a 43-line form (Form 8829) often with complex calculations of allocated expenses, depreciation and carryovers of unused deductions. Taxpayers claiming the optional deduction will complete a significantly simplified form.

Though homeowners using the new option cannot depreciate the portion of their home used in a trade or business, they can claim allowable mortgage interest, real estate taxes and casualty losses on the home as itemized deductions on Schedule A. These deductions need not be allocated between personal and business use, as is required under the regular method.

Business expenses unrelated to the home, such as advertising, supplies and wages paid to employees are still fully deductible.

Current restrictions on the home office deduction, such as the requirement that a home office must be used regularly and exclusively for business and the limit tied to the income derived from the particular business, still apply under the new option. The new simplified option is available starting with the 2013 return most taxpayers file early in 2014.

Further details on the new option can be found in Revenue Procedure 2013-13, posted today on IRS.gov. Revenue Procedure 2013-13 is effective for taxable years beginning on or after Jan. 1, 2013, and the IRS welcomes public comment on this new option to improve it for tax year 2014 and later years. There are three ways to submit comments.

E-mail to: Notice.Comments@irscounsel.treas.gov. Include “Rev. Proc. 2013-13” in the subject line.

Mail to: Internal Revenue Service, CC:PA:LPD:PR (Rev. Proc. 2013-13), Room 5203, P.O. Box 7604, Ben Franklin Station, Washington, DC 20044.

Hand deliver to: CC:PA:LPD:PR (Rev. Proc. 2013-13), Courier’s Desk, Internal Revenue Service, 1111 Constitution Avenue NW, Washington, DC, between 8 a.m. and 4 p.m., Monday through Friday.

The deadline for comment is April 15, 2013.

Employee or Independent Contractor?

As your writing business grows, there may be times when you need to hire help. You also may be providing writing services and wonder if you are working for a company as an employee or if you are really self-employed.

The Internal Revenue Service has strict definitions they use when determining if someone is an employee or a subcontractor. You can learn all about it on their web site using this link:Employee vs Independent Contractor

Marketing Your Writing Business by Brigitte Thompson

There is a lot involved in establishing your business and getting that first customer, but it is only the beginning. You will need to build a solid client base for your writing business to succeed.

Consider hanging signs advertising your business on public bulletin boards with tear off phone number strips. Contact local newspapers to ask about writing a short column for readers where you can share tips on a specific topic in exchange for the publicity. For example, you may be able to write a column and instead of being paid by the newspaper, you are allowed to include your contact information and web site which acts as an advertisement for your business.

Local radio stations may be interested in your tips for their listeners as well. If you are a sport fishing writer who can offer their listeners tips on great places to fish, pitch it to the station. You can record the tips and the station can air them with your name and contact information.

A web site provides an affordable means to reach your customers 24 hours a day. Domain names are affordable and several low cost hosting sites are now available online. Business cards and signs are a great way to let people know about your business. Hanging flyers at local colleges is a great way to attract professors looking for help writing their next article or book. Be sure to include all the benefits your service will provide and how it will make a positive difference in their lives. Keep your business cards handy so you can share them with people you meet who may have an interest in your services.

Networking is very important for any new business. Look into your local Chamber of Commerce or national writing organizations for additional people you can connect with or advertise through.
The Internet offers a multitude of ways to publicize, market, and promote your services as well as being a fantastic resource for learning more about the field of writing. Connecting with organizations and other writers through the Internet is a productive way to spend a few hours each day. Many discussion groups are available to writers through Yahoo.com. If you visit, just go to their Groups link then enter “writing,” “editing” or be even more specific and search for “moms who write comedy” or “science fiction screen play writers.” You will be amazed at what will turn up.

Brigitte is an accountant and the author of several business recordkeeping books including Bookkeeping Basics for Freelance Writers available through Amazon.com. She is a freelance writer living in Vermont with her husband, three children, two cats and three dogs. You can visit her online at Datamaster Accounting Services, LLC and Bookkeeping for Writers .

The Internal Revenue Service (IRS) requires that our writing expenses be ordinary and necessary in order for them to be acceptable. An ordinary expense is defined as common and accepted in our profession. A necessary expense means we need to spend this money in order to operate the business. The expenses must not be considered extravagant. They must be an essential part of doing business as a writer. It is important to differentiate between personal expenses and business expenses.

Writers are able to realize some unique deductions which may be considered personal for other taxpayers. For example, a book on the history of New Mexico used for researching my fiction manuscript based in that state could be deductible as a writer.

Other potentially deductible expenses include tickets to a ballet used to build the character of a ballerina I am writing about and an instructional DVD used to improve my public speaking skills. Most writers will call these expenses research or professional development. We need to be able to justify each expense if audited, so be sure it is legitimate and has the supporting documents to back up the claim.

Check out my book, Bookkeeping Basics for Freelance Writers, to learn more about deductible expenses and how to reduce the income taxes you pay as a writer. You can read about it on my web site and on Amazon.com.