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Article Date:
May 2007

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Putting the IRS Audit Manual’s Home-Office Section to Work for You

The IRS audit manual contains not only information on how to audit your tax returns but also boilerplate language for auditors to use when they disallow your deductions. The boilerplate disallowance explanations are instructive because they



help you focus on the rules,


highlight common mistakes your fellow taxpayers are making, and


help you develop an audit-proof plan.


With respect to the home office, the IRS audit force has 19 boilerplate paragraphs that explain why the IRS is not going to give you some or all of your claimed home-office deductions.1 We dissected those 19 paragraphs and built 11 audit-proofing tactics to ensure that you get every single deduction you deserve.


Remember, when you claim the home-office deduction, you achieve two valuable monetary results:



The home office produces tax benefits for money you would spend on your home, no matter what.


As an administrative office in your home, the home office becomes your principal office, which eliminates commuting to work. With no more commuting, you put more after-tax benefits from your vehicle in your bank account.


Benefit example 1. You make $10,000 worth of repairs that benefit your entire home. Without the home office, you can deduct nothing. Repairs to a home are not deductible. With an office that takes 20% of your home, you deduct $2,000 ($10,000 x 20%).


Benefit example 2. You drive a $50,000 vehicle that you will sell for $10,000 after you use it in your business. With no home office, you have 60% business use—deductions of $24,000 on the cost of this vehicle. With ... Log in to view full article.

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