Speaking of office in the home...

[kathyc2]

Has anyone ran across changes regarding phone deduction changes? More and more people who are not in business are cancelling land lines and having only cell phones. Is IRS holding firm on no deduction if only one land line in home, or are they allowing deduction if land line is business line and cell phone is not deducted and counted as personal phone?

[ATSMAN]

Has anyone ran across changes regarding phone deduction changes? More and more people who are not in business are cancelling land lines and having only cell phones. Is IRS holding firm on no deduction if only one land line in home, or are they allowing deduction if land line is business line and cell phone is not deducted and counted as personal phone?

Most of my small business clients who operate a OIH have a separate phone # as part of their communication and entertainment package. For example Verizon in our area offers a separate # for $19 monthly additional with their package (Internet and Voice, TV). Same with additional cell #s.

The challenge is to separate out the components from the flat bill.

[FEDUKE404]

First telephone line considerations

Most of my small business clients who operate a OIH have a separate phone # as part of their communication and entertainment package. For example Verizon in our area offers a separate # for $19 monthly additional with their package (Internet and Voice, TV). Same with additional cell #s.

The challenge is to separate out the components from the flat bill.

And then, in my case, my cell phone charges are the same each month whether I make one "business" telephone call during a month or several hundred "business" telephone calls during a month.

It's only a clear issue when a separate telephone line is dedicated to "Joe's Tax Services."

There is a similar issue to internet access charges. . ."But I use the internet in my business." If a client wants to push things, I'll say give me a business use % and we move onward. It's not worth arguing over.

Of course, I remember the good old days when the conversation went something like this: "I'm a registered nurse and frequently on call, so I think I can deduct half of my monthly phone bill on my taxes."

The IRS pretty well shut down that logic with their rules that the first telephone (land)line to a residence can never be deducted in any way, shape, or form.

Who knows where they now stand on the slightly more slippery issue of cell phones? And internet access? . . .especially since there is now little difference between the two.


One other item of note: A careful reading of IRS Publication 587 (excerpt below) would tend to indicate that telephone/internet charges do **NOT** go to Form 8829 as "utility" expenses for OIH, but rather should appear on line 25 of Schedule C. That adds yet another wrinkle to the original question about cell phone/internet charges.

Utilities and services. Expenses for utilities and services, such as electricity, gas, trash removal, and cleaning services, are primarily personal expenses. However, if you use part of your home for business, you can deduct the business part of these expenses. Generally, the business percentage for utilities is the same as the percentage of your home used for business.

Telephone. The basic local telephone service charge, including taxes, for the first telephone landline into your home is a nondeductible personal expense. However, charges for business long-distance phone calls on that line, as well as the cost of a second line into your home used exclusively for business, are deductible business expenses. Do not include these expenses as a cost of using your home for business. Deduct these charges separately on the appropriate form or schedule. For example, if you file Schedule C (Form 1040), deduct these expenses on line 25, Utilities (instead of line 30, Expenses for business use of your home).


FE

[kathyc2]

Correct that it should be included in line 28 rather than 30. It's not part of the HO deduction, but rather comes into play because there is a HO. If office is at remote location separate than home, the deduction would not be questioned. Interesting the dropping of the word "land" in this from IRS site.

"Example: The basic local telephone service charge, including taxes, for the first telephone line into a home is a nondeductible personal expense. However, charges for business long-distance phone calls on that line, as well as the cost of a second line into a home used exclusively for business, are deductible business expenses." http://www.irs.gov/uac/Home-Office-Deduction-Reminders

Even though cell line is not a hard line, it could be construed to be a "line into a home". Before anyone gets technical, yes I realize things on IRS site are not authoritative....

[TAXNJ]

Makes sense

And then, in my case, my cell phone charges are the same each month whether I make one "business" telephone call during a month or several hundred "business" telephone calls during a


Utilities and services. Expenses for utilities and services, such as electricity, gas, trash removal, and cleaning services, are primarily personal expenses. However, if you use part of your home for business, you can deduct the business part of these expenses. Generally, the business percentage for utilities is the same as the percentage of your home used for business.

Telephone. The basic local telephone service charge, including taxes, for the first telephone landline into your home is a nondeductible personal expense. However, charges for business long-distance phone calls on that line, as well as the cost of a second line into your home used exclusively for business, are deductible business expenses. Do not include these expenses as a cost of using your home for business. Deduct these charges separately on the appropriate form or schedule. For example, if you file Schedule C (Form 1040), deduct these expenses on line 25, Utilities (instead of line 30, Expenses for business use of your home).


FE

Makes sense.
Old days telephone bills showed every local call and if went over certain amount then would be charged extra For those calls. Then pricing changed.

Always smart to have separate business line.

[kathyc2]

Makes sense.
Old days telephone bills showed every local call and if went over certain amount then would be charged extra For those calls. Then pricing changed.

Always smart to have separate business line.

Right. I have several home based business clients where their only land line is a business line, listed under the business name. Years ago it would have been unusual for a person to not have a landline coming into their home, so the non-deduction of the basic charges for business line made sense. Things have changed and it's not at all unusual for a person not in business to not have a landline. My position is that a person w/ a home office should be able be able to choose to use their cell line as their personal line (no deduction) and take full deduction for business land line whether or not they have another personal "land" line.

[jsamans]

Right. I have several home based business clients where their only land line is a business line, listed under the business name. Years ago it would have been unusual for a person to not have a landline coming into their home, so the non-deduction of the basic charges for business line made sense. Things have changed and it's not at all unusual for a person not in business to not have a landline. My position is that a person w/ a home office should be able be able to choose to use their cell line as their personal line (no deduction) and take full deduction for business land line whether or not they have another personal "land" line.

It gets even more vague when one considers that "landline" typically refers to copper phone service, which is being replaced in many instances with Voice-over-Internet Protocol (VoIP) telephony. Is a VoIP phone offered through Verizon FiOS a "landline?" Is a VoIP phone from Comcast, which traverses coaxial cable? If the answer to those is "yes," what about someone using a computer-based phone system such as Skype, which gets its service from the same switched-packet IP network traveling over terrestrial circuits (i.e. "land")?

To my knowledge, this issue hasn't been challenged or clarified since the phone companies' removal of copper and transition to fiber IP telephony got underway. Given the elimination of strict substantiation requirements for cell phones in 2010 in favor of the "primary use" standard, this becomes significant if the only reason why a small-business owner has a VoIP system in place is to provide fax service -- something that would not have been likely when the rules for primary landline phone service were envisioned.