Eight Dollar Blog

Here’s an example of just how sneaky IRS agents can be. When Sandy was working as an attorney with the IRS, one of his agent colleagues audited a person claiming the home office deduction. Everything appeared to be in order in this taxpayer’s home office. But then the agent ran a directory of the taxpayer’s hard drive and discovered a game called “King’s Quest” on it. Naturally, a person can have games loaded on their office computer; he just can’t play them in his home office. The problem was that the taxpayer played the game and then saved it onto his hard drive in the same year that he was claiming the home office deduction. Even though he may
have played the game only once during the year, by keeping the computer in the area he claimed for his home office, this taxpayer lost his deduction.

In another instance involving an audit, an IRS agent visited the home of the taxpayer and noticed a sofa bed in the home office area. Of course it was perfectly acceptable for this taxpayer to have a sofa bed in his office, as long as nobody slept on it! The IRS agent knew what would happen if he just flat out asked the taxpayer if anybody ever slept on the sofa bed; of course his answer would be no! Instead, after completing the audit, the agent sat on the sofa and said, “Gee, you know, I’m thinking of buying something like this for my parents to use when they come to visit me. My dad has a bad back. Do you have any experience with this? About somebody
who might have hurt his back?” Obviously, the taxpayer was taken off guard and said, “Yeah, my brother and dad come to visit me and they don’t have any problem. My mom doesn’t have any problem.” The agent then nailed him because he now had proof that the individual used the sofa bed in his home office for personal reasons and disallowed the deduction.

So how can you absolutely, with confidence, prove a home office deduction?

Follow these tips and you will be totally secure:
1. Photograph Your Office. A photo can be a very important piece
of documentation. Take pictures of the bookshelves, the file cabinets, the desk, and the general workspace. Make sure you have
all your personal items out of the area before you do so. You don’t want the IRS to see “Crossword Puzzle Secrets” in the photograph. Date the photos, but don’t send them to the IRS. Simply hold onto them in case you ever do get audited. They will come in very handy. Photographs establish exclusivity.

Taken from : Money Mastery “10 Principles That Will Change
Your Financial Life Forever