Carryover of unallowed expenses

[DTS]

I have a client that used OIH for her Sch. C last year. There was a carryover of unallowed expenses. However, she closed this business and is now employed in the same field, but is still required to use this OIH.

Can I assign this carryover from the C to the 2106?

Thank you,
Dennis

[S T]

Not sure

D-
Not for sure, but I did find the following:

If your operating expenses for the business use of your home are limited, you can carry over the nondeductible portion to the following year. The carryover amount will be subject to the deduction limit for the next year, whether or not you are still living and working in the same home next year. You are also allowed to carry over excess casualty losses and depreciation. These carryover amounts are reported in Part IV of Form 8829 or the worksheet

If you can use the carryover in the next year if you change homes, I would think it would be feasible to use the carryover if you change from Schedule C to form 2106, providing t/p meets all of the requirements for OIH.

Maybe some one else can help on this one!

Sandy

[RLymanC]

Carryover

I agree with Sandy, I can find nothing that disallows business use of home just because you go from Sch.C to 2106. Like the form say's,,,,business use of home. I would include the carryover.

[jainen]

How can this be?

How can this be? If the expenses are incurred in activity A, how can you deduct them in activity B? ESPECIALLY office in home, because those expenses are only deductible if they are incurred for the convenience of the employer. Obviously anything from before you were hired -- when you were actually a competitor -- wasn't for the employer's benefit!

[S T]

Possibly

What if the Schedule C t/p went from independent contractor to employee on W-2, same employer?

S

[jainen]

That's not possible

>>t/p went from independent contractor to employee on W-2, same employer?<<

That's not possible. Either you're self-employed or you're not. As self-employed, you might contract with someone who later hires you, but the business relationship is fundamentally different.

Operational expenses in business use of home are limited by the income from the business. That's different from Section 179, for which you can combine all your business earnings including W-2 wages. It's different from rental losses that can be offset by income from any other different passive activity.

OIH expenses can only be taken against the net earnings of the specific business. This is spelled out in Section 280A(c)(5)(B)(ii). The limitation is calculated by subtracting from gross income, taxes and interest that are deductible even if it isn't business use, and "the deductions allocable to the trade or business (or rental activity) IN WHICH SUCH USE OCCURS (but which are not allocable to such use) for such taxable year." (emphasis added).

In other words you can carry it forward but only to another year which also has net earnings from the same business.

[Unregistrd]

Statatory Employee

On the W2 have the box Statatory Employee "X"ed then the w2 goes onto the schedule C, if she is still working the same way out of her home she should meet all the requirements as a Statatory Employee!! The short version of being a statatory employee is that you are in control of your schedule (though I would ad meeting the demands of your customers schedule shoud apply)

[Uncle Sam]

Carryover of Unallowed Expenses

The "statutory employee" status only pertains to certain restricted circumstances and working conditions. It's not a "catch-all" for everyone. Statutory employees include full-time life insurance salespersons, certain agent or commission drivers, traveling salespersons, and certain homeworkers.

[jainen]

that's unreasonable

Uncle Sam is right. Statutory Employee is a widely misunderstood and misused term, but for tax purposes it ONLY applies to those specific jobs he lists.

Even so, it wouldn't solve the problem of expenses incurred in a different business. If you have a carryforward from one business, you can't deduct them later from income in a totally different business just because it uses the former office. For that matter, suppose you have two businesses in one home office, and one is losing money. You can't deduct the expenses allocated to it from the income of the other.

Does anybody think that's unreasonable?

[DTS]

Not unreasonable

Jainen,

After reading a couple of other discussions on this matter, it does seem to make much more sense, as you just explained.

At first glance, it seemed a little unfair being that it was the same t/p, same business type, same use of the OIH, etc., but thinking it out, it's just not.

Thank you for your help!
Dennis

[Kram BergGold]

Home Office Business Specific

It has always been my understanding that the home office carryover was specific to the business. So if you close down a busienss, the home office carryover is held in limbo until you resurect the business. I don't know when or where I learned this but I follow this rule.