Employer Tells Me to Work from Home Due to COVID-19

[Anon-e-Mouse]

Jurisdiction

Wisconsin

I have a home office and have worked from home frequently in the past. But I never took a tax deduction for my home office because it was not for my employer's convenience; it was for mine.

As of a hasty conference call earlier today, my employer now wants me (and others) to work from home "for the foreseeable future" as part of its COVID-19 response.

Does that mean I can now take a tax deduction for my home office?

 

[Highwayman]

Home Office Deduction | Internal Revenue Service

 

[army judge]

Does that mean I can now take a tax deduction for my home office?

You might be able to take such a tax deduction, but trust me when I tell you it is far more trouble than it is worth.

It also adds another "red" flag beside your name that very often gains the attention of the those intrusive folk whose duty is to terrorize taxpayers.

If the tax deduction is so attractive, shiny, and jingly that you MUST pursue it, talk to a CPA about it.

Choose wisely taxpayer, choose wisely.

 

[justblue]

It also adds another "red" flag beside your name that very often gains the attention of the those intrusive folk whose duty is to terrorize taxpayers.

.

psst! Your Texas is showing!

 

[Tax Counsel]

You might be able to take such a tax deduction, but trust me when I tell you it is far more trouble than it is worth.

Actually, in this case I suspect the OP cannot take the deduction because, while the employer is asking the OP to work from home, it is still not his/her principal place of business, and that is one of the requirements for the deduction.

And trust me, a tax attorney, when I tell you that not taking this particular deduction when you qualify for it may cost you twice — first you lose the immediate deduction that reduces your tax for the current year. And then when you sell your home, the basis of the home is reduced by the depreciation you took OR COULD HAVE TAKEN. So if you don't take the deduction you will still get dinged for the depreciation you could have taken but didn't. So no, it is not more trouble than it is worth.

It also adds another "red" flag beside your name that very often gains the attention of the those intrusive folk whose duty is to terrorize taxpayers.

You have your views of the "govmint" as you sometimes put it, and you are entitled to them even though I don't particularly share them. But it is certainly not the duty of the IRS to terrorize taxpayers and the fear of an audit is generally much worse than an audit itself. You can come out of an audit just fine as long you keep the records to support what you put on your return. The people who have trouble are the ones who don't have the records. Taxpayers shoud take all the deductions and credits that they qualify to take and for which they have the records to support. It makes no sense to leave money on the table (and thus give more to that "govmint" you dread so much) when you don't have to.

 

[army judge]

But it is certainly not the duty of the IRS to terrorize taxpayers and the fear of an audit is generally much worse than an audit itself.

Actually I use the word "gubmint".

Sigh...

You can come out of an audit just fine as long you keep the records to support what you put on your return. The people who have trouble are the ones who don't have the records.

Due process is often overlooked.
Due process ensures there is no abuse or "hanky panky".

This is but ONE of several abuses of taxpayers by those wonderful folk at the IRS, the ones that DON'T abuse or terrorize taxpayers.

IRS Apologizes For Aggressive Scrutiny Of Conservative Groups

It makes no sense to leave money on the table (and thus give more to that "govmint" you dread so much) when you don't have to.

It makes no sense to me that we even have a personal income tax, which only arrived during the second decade of the 20th century.

Our country operated on tariffs and customs duties from it's founding, until the IRS scam somehow became the 16th amendment.

Prior to that our ancestors went to war over the same shenanigans originally deployed by King George.

 

[Tax Counsel]

Actually I use the word "gubmint".
Due process is often overlooked.
Due process ensures there is no abuse or "hanky panky".

Due process is sometimes overlooked by any government agency. But the vast majority of the time it is followed. I've seen and been involved in many IRS collection and audit proceedings, and guess what, in pretty much all of them the IRS agent or officer followed the rules. And should there be a problem, there is a resort to the courts. Indeed, for income, estate, and gift taxes we have a specialized court that handles just those matters, so there is a remedy when you disagree with a decision with the IRS, just like with a dispute with any agency. As a judge, you surely know that.

This is but ONE of several abuses of taxpayers by those wonderful folk at the IRS, the ones that DON'T abuse or terrorize taxpayers.

IRS Apologizes For Aggressive Scrutiny Of Conservative Groups

The IRS is not perfect. Neither is the Army, the organization for which you supposedly worked for a number of years. Shall we talk about the abuses of the Army, too?

It makes no sense to me that we even have a personal income tax, which only arrived during the second decade of the 20th century.

Not true. Let's take a little walk down the history of income tax. The income tax first arrived in this fine country during the Civil War. Good old Abe Lincoln used it to help finance the war by getting Congress to include it as part of the Revenue Act of 1861. This income tax ended in 1872. Congress again imposed an income tax in the Income Tax Act of 1894. This time, a taxpayer challenged the income tax as unconstitutional. The Supreme Court agreed, holding that the portion of the Act that taxed capital gains was a direct tax and thus violated the rule in the Constitution that direct taxes must be apportioned among the states by population, something that is impossible to do with an income tax. See Pollock v. Farmers' Loan & Trust Co., 157 U.S. 429 (1895).

That decision put an end to the income tax until the Constitution could be amended to allow for it. That took some time, but finally the 16th Amendment to the Constitution was ratified in 1913 allowing an income tax without the need for apportionment. The reason the income tax was needed was that as the country was getting bigger and more industrialized in the last half of the 19th century, the role of the federal government was growing more tax revenue was needed to support it. The need didn't suddenly arise in 1913 as a lot of people seem to think. It had been something that was needed periodically from 1861 onward. That need, which was sporadic at first (paying for our wars and other temporary spikes in spending) gradually grew more pressing. It was that growing need that sparked the states (and the people living in them) to approve of the amendment.

The income tax originally only taxed the very highest earners in the U.S. Most people didn't need to worry about it or file a return. (Fun fact: the number of taxpayers in 1914, the first year of the tax, was so small that 100% of the filers were audited.)

So what happened to greatly expand the tax? World War II happened. The amount of money the government had to raise to pay for that war far outstripped what could be raised on tariffs, excise taxes, customs duties, and just taxing the income of the rich. So the reach of the tax was expanded to include most Americans. And as we have maintained a huge military ever since, and expanded the role of the government with various programs like Social Security, Medicare, food stamps, programs for protecting health, expansion of federal law enforcement to tackle problems like terrorism, etc, there is no way we could today finance the government on tariffs, customs duties, and excise taxes.

Our country operated on tariffs and customs duties from it's founding, until the IRS scam somehow became the 16th amendment.

As you can see from our little walk down history, your statement above is not true. Though a lot of people seem to believe that, as you do. A lot of people also seem to think that customs, tariffs (which are essentially customs duties), and excise taxes raise a lot more money than they really do. You may be among them. So let's address that.

In 2018, the amount collected by in excise taxes and customs duties (including tariffs) was $139.5 billion, broken down as follows:

Customs duties (collected by U.S. Customs): $41.6 billion
Excise taxes on Alcohol, Tobacco, and Firearms (collected by TTB): $24.2 billion
All other excise taxes (collected by IRS): $73.7 billion

Total budget outlay for the federal government in 2018: $4.1 trillion. Thus, the amount raised by customs duties/tariffs & excise taxes accounted for only 3.4% of the total federal budget. The Department of Defense budget alone was nearly $700 billion, or nearly 10 times what is collected by customs duties and excise taxes. The Army alone got $182 billion in 2018, so the branch for which you worked couldn't even operate on what we collect in customs and excise taxes.

What does pay for the bulk of the government spending:
Corporate income tax: $202.6 billion
Individual income tax: $1.57 trillion
Employment taxes: $1.13 trillion
Estate and gift taxes: $22.9 billion

As you can see, individual income tax and employment taxes provided the bulk of the tax revenue. And even with that, the government had to borrow $779 billion dollars to cover the gap between the revenues it had from taxes (and some other miscellaneous sources like fees and sales, fines collected, etc., which didn't amount to a whole lot).

So why do we need an income tax and the related payroll taxes? Because those two taxes account for about 96% of the government's total revenues, and pay for about 75% of the total budget. Without those taxes, we couldn't come close to paying for even our military, let alone the other things we ask the federal government to do. The days are long past the time when the government was small enough to run on excise and customs duties. Those taxes would come close to funding just the Departments of Education and Veterans Affairs. That's not much.

We could run the country without those taxes if we reduced the federal government down to the size of those two agencies. That would mean no army, no navy, no air force, (at least nothing like what we have today) and very little if any federal law enforcement. It would mean no federal benefits for those in need — no Social Security, Medicaid, food assistance. It would likely mean a scaled down court system and minimal immigration controls. We might lose food and drug inspection and approval. No more federal highway system — let the states do all that (but then state taxes go up). Turn over traffic control, national parks, etc to private industry, too. That's just for starters. I think you get the idea.

So just how much would you really be willing to give up to run the country on just $140 billion? Think we can do with about 4% of the current federal government to run it on just that (that means no borrowing, too, of course). I know some people still somehow think that's realistic, but those people have never really looked into the facts I just provided. I'm no fan of big government myself, but when I look at the numbers, I can clearly see that we certainly can't do it on excise and customs taxes alone, even the smaller government a lot of conservatives have in mind couldn't be done for $140 billion.