tax home

[joanmcq]

taxpayer is 100% shareholder/employee of S-corp providing consulting services, living in NC. In 1st part of 2007 (Jan 4 to July?) she was independent contractor paid by a placement firm and worked in CT for a firm located in CT. Some of the time was spent training in NY, and occasionally she telecommuted from NC. In July, the CT company picked her up as a direct contractor for another 6 months, and she formed the S-corp. Still working in CT, and total has spent about 5 or 6 weeks telecommuting. Her current contract ends around Christmas, and she is not sure if the company will want to stretch the contract. She just learned about the concept of 'tax home' and what it means for her travel expenses. So far, she is flying just under the year provision for a temporary work site. I've explained the concept of 'realistically expected to last over/under a year'.

Question, if the CT company does want to renew her contract, is there any amount of time between contracts that would start the year clock ticking again for the 'temporary' designation? For example, if she is home for two weeks looking for another contract (she is actively searching now with other possible companies) and this company calls back and offers another gig as long as she doesn't expect it, would that fly in case of audit?

What if her next job is with another CT company? I know this is a fact and circumstances issue, but I can't find any guidance in the cases or rulings.

[TAX]

taxpayer is 100% shareholder/employee of S-corp providing consulting services, living in NC. In 1st part of 2007 (Jan 4 to July?) she was independent contractor paid by a placement firm and worked in CT for a firm located in CT. Some of the time was spent training in NY, and occasionally she telecommuted from NC. In July, the CT company picked her up as a direct contractor for another 6 months, and she formed the S-corp. Still working in CT, and total has spent about 5 or 6 weeks telecommuting. Her current contract ends around Christmas, and she is not sure if the company will want to stretch the contract. She just learned about the concept of 'tax home' and what it means for her travel expenses. So far, she is flying just under the year provision for a temporary work site. I've explained the concept of 'realistically expected to last over/under a year'. Question, if the CT company does want to renew her contract, is there any amount of time between contracts that would start the year clock ticking again for the 'temporary' designation? For example, if she is home for two weeks looking for another contract (she is actively searching now with other possible companies) and this company calls back and offers another gig as long as she doesn't expect it, would that fly in case of audit? What about another CT company? I know this is a fact and circumstances issue, but I can't find any guidance in the cases or rulings.

Can you break down your questions and number it. This seems like an essay. You may get reply much faster. Not criticizing you but trying to help you.

[joanmcq]

There are really only two questions; I just gave a lot of background info. So I did break up the paragraphs to make it read easier, and this post will put it back on top. Its a pretty convoluted case.

[Golden Rocket]

More Questions

Joan is her S corp domiciled in NC? This doesn't necessarily change her itinery for 2007, but may solidify her status as a NC citizen as well as show intent.

When you say telecommuting, does this mean she is working on her PC while in North Carolina, or does this mean that she occasionally makes lengthy telephone calls to CT?

If she is a recruiter, where is she recruiting? Nationwide? the Southeast? Northeast?

Subject to the factors questioned above, I'm inclined to say that her tax home is NC, and she has Connecticut source income until such time as she moved back, began her corp, and began telecommuting. During the time she has Connecticut source income, she has deductible travel expenses. The effect of having Connecticut source income is probably not as bad as it sounds, since NC will allow a credit for income earned in another state.

Sorry to come back at you with so many questions, but the old adage "facts and circumstances" tends to drag out all these things.

[joanmcq]

She's not a recruiter; she was originally recruited for the CT job by what seems to be a temp agency and then when the original contract was done, the CT firm picked her up and paid her directly. However, they required her to form an entity other than an SP; probably to avoid her being classified as an employee (my guess). She has never lived in CT; NC has always been her home. When she telecommutes, she is on her PC.

The trouble with tax home is if the next job she gets is in CT, or if the same company renews her contract. She is actively looking for her next contract, interviewing with a variety of companies.

When asked why, if all the work she could find in her field was in CT she didn't move to CT, she stated she would rather work at Target in NC, than move to CT (no offense to any CT preparers reading this!)

[cpadan]

Joan, your post deserves more discussion. The phrase “realistic expectation” is the key here. (Rev Rul 93-86.)

Here is what RIA says about “restarting the clock”: (sorry the reference #'s lost their format)

“IRS hasn't issued general guidance on how significant a break must be, after a period of temporary employment ( 290,507 ), for a reassignment to the same work location to be considered a separate period of employment that will “restart the clock” on the one-year limitation. 8 However, IRS has said that a break of three weeks or less isn't significant, 9 whether the break is for a training course 10 or for another assignment. 11 “

“The clock doesn't start running on the one-year limitation until the employee commences work at the location, even if preliminary work on the project began earlier at the employee's regular office. 40 “


[QUOTEif her next job is with another CT company? I know this is a fact and circumstances issue, but I can't find any guidance in the cases or rulings.[/QUOTE]

"Each work location is viewed separately, even if part of a larger project. 38 "

Hope this helps,
Dan