Office in Home

[peggysioux]

Taxpayer who is an employee received rent payments from employer to use an office in taxpayer's home. Employee is not a shareholder. Employer, under an accountable plan, reimbursed employee for all expenses. Employer sent employee a 1099 for rent paid and now taxpayer is very UNHAPPY. Taxpayer said if she had known she would have received a 1099, she would have rather claimed the Office in Home deduction. My question is if employer reimbursed employee for all expenses would it not be better to claim the rental income on schedule E rather than claim an Office in Home deduction? Taxpayer received an additional $4000 for the year and if she would have claimed employee deduction, there would be no $4000 and little to deduct. There is only $4,000 in rent so I would think that with the 2% threshhold for employee deductions on schedule A would make it difficult to exceed. Please advise what the advantages would be to claim the office in home deduction.

Thanks!

[BHoffman]

Taxpayer who is an employee received rent payments from employer to use an office in taxpayer's home. Employee is not a shareholder. Employer, under an accountable plan, reimbursed employee for all expenses. Employer sent employee a 1099 for rent paid and now taxpayer is very UNHAPPY. Taxpayer said if she had known she would have received a 1099, she would have rather claimed the Office in Home deduction. My question is if employer reimbursed employee for all expenses would it not be better to claim the rental income on schedule E rather than claim an Office in Home deduction? Taxpayer received an additional $4000 for the year and if she would have claimed employee deduction, there would be no $4000 and little to deduct. There is only $4,000 in rent so I would think that with the 2% threshhold for employee deductions on schedule A would make it difficult to exceed. Please advise what the advantages would be to claim the office in home deduction.

Thanks!

Since an accountable reimburses for actual expenses, your client should be able to net to zero with the $4000 in reimbursement and $4000 in expenses.

If it is actually a nonaccountable plan, then the $4000 should have been reported on her W2 and she would be filing a 2106 to report the actual expenses.

I don't think employers are supposed to issue 1099s to employees for either accountable or nonaccountable plans.

Maybe she needs to print out the instructions regarding accountable and nonaccountable payments made to employees, show it to her employer, ask for a corrected 1099 and/or corrected W2.

[peggysioux]

Office In Home

The $4000 was strictly for rent and then employer additionally reimbursed taxpayer for utilties and phone lines from expense report. The 1099 only reflected the rent portion. So, with this additional info, are you saying an employer is not to supply 1099 to employees for rent?

[DaveO]

I would say the 1099 is okay since while related to employment is seperate. What's her problem? She works from home is paid the expense plus $4000 not subject to FICA tax. Some people would complain if you beat them with a new stick.

[barzillai]

TTB p. 5-15 shows that not all expenses are deductible in such a situation, only mortgage interest, real estate taxes, and personal casualty losses are. Other expenses are not deductible.