We are a full service accounting firm located in Spokane, WA.  For more than 18 years, we have been providing tax preparation and planning and many other accounting services to a wide range of clients, including both businesses and individuals, throughout the greater Spokane Area and across the nation.  We have developed a reputation for professional excellence through the high quality of services we perform for our clients.  

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Reinvested Dividends

Work at Home? You May Qualify for the Home Office Deduction

Home offices are one deduction that is often overlooked.  It applies to both self employed and employees.  It is also one area that is high on the audit radar.  Rule of thumb, if I or the IRS knocks on your door, what will we see?

If you use part of your home for business, you may be able to deduct expenses for the business use of your home. The IRS has the following six requirements to help you determine if you qualify for the home office deduction.

1.  Generally, in order to claim a business deduction for your home, you must use part of your home exclusively and regularly:

  • as your principal place of business, or
  • as a place to meet or deal with patients, clients or customers in the normal course of your business, or
  • in any connection with your trade or business where the business portion of your home is a separate structure not attached to your home.

2.  For certain storage use, rental use or daycare-facility use, you are required to use the property regularly but not exclusively.

3.  Generally, the amount you can deduct depends on the percentage of your home used for business. Your deduction for certain expenses will be limited if your gross income from your business is less than your total business expenses.

4.  There are special rules for qualified daycare providers and for persons storing business inventory or product samples.

5.  If you are self-employed, use Form 8829, Expenses for Business Use of Your Home to figure your home office deduction and report those deductions on Form 1040 Schedule C, Profit or Loss From Business.

6.  If you are an employee, additional rules apply for claiming the home office deduction. For example, the regular and exclusive business use must be for the convenience of your employer.  This is particularly important if your employer is across state lines.

Instructions: Form 8829, Expenses for Business Use of Your Home 

Increase the value of your investment.  When you receive them, and reinvest, you acknowledge and pay tax at that time.  Often, the fund has been held for many years or decades.  When selling the fund, too often the brokerage does not have the total cost.  The fund changes hands and the transactions are not carried to the new management or brokerage.

Forgetting to include the reinvested dividends in your basis results in double taxation once you have taken a distribution from the fund.  If you do not have all the information in your records, ask the fund manager for help.