Business vs commute miles

[Kea]

New client for tomorrow is self employed horse shoe-er (not sure that's a word, or spelled right).

Anyway she's been a DIYer but found some issues with Turbo Tax & wanted help. She was explaining the expences she had - including mileage. So, we started discussing commute vs business miles. She was including all miles from her house as business miles, but does not have an OIH.

Her house would count as principal place of business as it is the only fixed location for administrative & managment activities. But in this case most of her actual work activities are at the fams of her clients. Does the admin test only apply with OIH?

I'm thinking in this case her miles from home are commute. But want to make sure I can't use the principal place of residence in place of the OIH - or if that even applies in this case.

Thanks!

[joanmcq]

If she has nowhere else to do management and admin duties, the regs were changed a while ago to allow a home office as principal place of business as long as the other requirements are met. I believe the example given is a plumber. The work is done at clients homes, but admin is done at home office.

[Kea]

Agree, and there was also the case with the surgeon. But in this case there is no designated office in her house.

Then it gets trickier because it won't turn all miles from home to business miles. But if she works @ home before and after, she can count those miles. At least I heard that scenario in a tax class a few years ago. But in that case the house was basically the only work location (little to no working at client location). But that class was a long time ago & not sure if it's even applicable here.

[kcjenkins]

Miles from home to clients farm and back should be business. Plumber example is perfect fit. She stores her supplies, etc at home, so no problem with OIH basis for the mileage.

And the correct term is Faiirer.

[Gail in Virginia]

And to correct KC's typo, it is spelled farrier.

[Guest Taxed]

Business miles from her "Office" to client's farm to do the actual work and I hope she is maintaining a log book incase she gets audited.

[Kea]

So just to wrap my head around this:

Miles from a farrier's "principal place of business" to her client's horses is business even WITHOUT OIH.

Thanks for confirming. I'm usually pretty good with busn/commute miles. But sometimes I can get lost in the details! I love getting clarifications from this board!

[Lion EA]

Tell you farrier to put a desk in a corner and measure the square footage! Or the square footage of where she stores her supplies. Why not get OIH if she has no other place to do her admin work?!

[jainen]

>>Does the admin test only apply with OIH?<<

Yes. "Principal place of business" has a specific meaning in this context. Pub 587 explains that not only must it be the only fixed location, it must be used "exclusively and regularly for administrative or management activities." You can not meet this test by storage (which does not apply to supplies and equipment anyway).

So in my opinion your client's travel from home to local jobs is non-deductible commute. You can help her plan for 2013 if she has a way to set up an EXCLUSIVE home office.

[Guest Taxed]

I disagree with jainen! If this woman maintains her books at her home office, makes calls from her home office for business purpose, balances her checjbook that includes her business income, prepares her records for getting her taxes done then she is in reality doing "administrative and management activities" related to her business. You seriously don't expect her to do all that sitting on a pile of you know what at a farm????

[Kea]

The caveat I'm remembering (somewhat) from class was if your house was your principal place of business, but you didn't have qualified OIH, you could turn commute miles into business miles if you were actually going between busn locations. So you had to do some work at home before you left to count those miles and after you got back to count the return miles. This was more complex than the rules with OIH. I think they said this was a court case? And maybe it was their ONLY place of busn?

This is stretching my memory back to the late 90s. So maybe I dreamt this convoluted rule?

[jainen]

>>stretching my memory back to the late 90s<<

No, Oldtimer, you didn't dream it. You may want to take an update class, though.

In 1990 Tax Court ruled that a home office was a "regular" place of business even if it was not a "qualified home office." IRS hit back four years later with Rev. Rul 94-47. They stated specifically that such commute was only deductible if "a taxpayer's residence is the taxpayer's principal place of business within the meaning of Section 280A©(1)(A)." That means it MUST meet all the requirements for a deductible office in home.

[Kea]

The time period when I learned about this was in the 1998-2000 time period. I started preparing taxes professionally in 1998 and it was shortly after that.

But it does turn out that she has a desk that she uses regularly and exclusively for her admin work. She had not been counting it as OIH because it seemed too small to bother with. So we did set it up for 2012.

[jainen]

>>it does turn out that she has a desk<<

No doubt some preparers would say this opens the door to everything, but in my opinion claiming an exclusive corner of an otherwise non-exclusive room is not a good faith position to take for de minimis usage. Are you saying she has a second desk that she uses for non-business bills and correspondence? The self-serving change in her story is just not credible to me.

I'm not going to belabor the point, but I know that at least one taxpayer lost in tax court because the room where her desk was located had closets for non-business use. You might make a distinction in that she had claimed the whole room, but I still think you are reaching too far.