Multiple home offices in same tax year

[mwarney]

Client has an ongoing business run out of his home. He has a separate room (within the dwelling) used exclusively for the business, and has been taking form 8829 deduction starting in 2005. Here is the scenario:

His home was sold in May of 2007 (he will need to recapture depreciation on the office portion).

He began construction on a new home in the same month (May 2007). The new home will include a separate room in the basement to be used exclusively for business.

During construction, he rented a house and set up a temporary office in the dining room (again, dining room was used exclusively for business and qualifies for the home office deduction.

On September 1st 2007, he moves into his new home and transfers the business out of the rental and into the newly built home office.

I have never filed a return which included three 8829s, and my first inclination is that this would definitely raise some red flags with the IRS.

Has anyone ever had a similar situation? Any thoughts on the best way to handle this?

Thanks!

[mblatour]

I am curious about this as well.

I will have a similiar situation; with the exception that it will only be two h.o.'s I myself am building a new home and with plans to move in this fall. I'm sure 2 is much more common then 3, but am curious about the answer regardless. Thanks.

[ChEAr$]

Just do it

I will have a similiar situation; with the exception that it will only be two h.o.'s I myself am building a new home and with plans to move in this fall. I'm sure 2 is much more common then 3, but am curious about the answer regardless. Thanks.

Nothing wrong with either situation. Not sure of course if a return with multiple forms can be
efiled, though. Red flag? Nawww!

[erchess]

I suspect that it cannot or at one time could not be efiled

with more than one 8829 because of the rather elaborate procedure I was taught when I first entered the business.

What we did was to prepare two or three or whatever forms by hand and then on the computer use the address at which the taxpayer ended the year and just average the numbers for square feet and total the numbers for the expense items. It eventually sank in with me why no one would put the instructions in writing.

[mwarney]

Electronic filing is not an issue here... We will be filing a paper return.

[BOB W]

Electronic filing is not an issue here... We will be filing a paper return.

Presentation on a tax return is always better if kept simple. I would workup each house as Erchess discribed and enter totals on one form. Keep the worksheets if ever audited.

IRS would have problems if you submitted multiple 8829 as they might not be able to imput these into their computer. Whether paper or ELF it will still go into IRS computers just like elf. Submit one 8829 or it might get rejected.

[mwarney]

Presentation on a tax return is always better if kept simple. I would workup each house as Erchess discribed and enter totals on one form. Keep the worksheets if ever audited.

IRS would have problems if you submitted multiple 8829 as they might not be able to imput these into their computer. Whether paper or ELF it will still go into IRS computers just like elf. Submit one 8829 or it might get rejected.

I like this approach... It makes sense to me. I wonder about reporting both rent and depreciation on the same 8829 though?

[Kram BergGold]

Theoretical issue

Let's say your client was in the tax business. It is likely that in the last part of the year the business would have very little income. Let's be dramatic and say there was zero income. The way I understand the law all deductions from that office would be carried forward as there was no income to claim thme against . I vote to show 3 of Form 8829.

[BOB W]

I like this approach... It makes sense to me. I wonder about reporting both rent and depreciation on the same 8829 though?

Yup, that seems to be an issue. Not everything can be perfect but I would show it anyway. It is still better than filing 3 8829s.

Wait> how about writting the word "Summary" at the top of the 8829. And maybe attaching the 3 8829s and write "Worksheet" on each of the 8829s and include them with your paper filed return???????

[veritas]

I don't believe you

must file a form 8829 at all.

[taxea]

Multiple home offices in same tax year

One 8829 showing final totals for year after allocating calculations per time periods. Keep your calculations in your client's file for future reference. taxea

[taxxcpa]

I tested it on Drake software

Using Drake software, I was able to create two 8829s. I used my previous home until May, then moved to a new home. I rented the former home, so I will have recaptured depreciation for the OIH for several years, plus rental depreciation if I later sell it--and maybe some taxable profit if I don't sell it soon enough.

It was pretty easy, using Drake. I didn't think it could be done with ATX, but someone said they had come up with a way to do it with ATX although it seemed a little less straight forward.

[taxea]

Multiple home offices in same tax year

It's true you may be able to do it in the software you are using but I suspect that the IRS would question more than one 8829 per Sch C, 2106.
If one business form is prepared there should be only one 8829. If MFJ have separate Sch C's but use the same home office for their separate businesses, one joint (by statement) 8829 would be appropriate. One could even allocate the expenses to each spouse on the single 8829.
If one person has numerous related businesses, this can also be done on one SCH C with one 8829....why create more work? Unless, of course, the idea is to soak the client for separate fees.
I have one client that has five related businesses (sole proprietor) Yes, I could charge him separately for each business and allocate by income five separate 8829s...but that seems like over-kill on fees to me.
Since the Feds allow either spouse to combine gambling losses I don't see the complying of income/expenses wouldn't be acceptable as long as the motive, method and calculations to reach the final total are documented. taxea

[veritas]

Do the computations

keep the worksheets in your file and deduct the expenses where they go. Nothing more is required. So if you are worried about multiple 8829s don't send one in.

[mwarney]

must file a form 8829 at all.

That is an interesting take. Has anyone ever researched this? Can one take the position that the form (8829) is provided simply as a record keeping tool? There are limits on the home office deduction. I would be a bit wary of filing this way.