Did you know that you can deduct "commuting" expenses between your home and temporary job locations? Daily transportation costs between your home and a regular work location are nondeductible commuting expenses. However, you may be able to deduct costs of going to and from your home and a temporary (not regular) job location if your work fits one of the following descriptions:

(1) You have one or more regular places of business outside your home, but sometimes travel to temporary work locations in the same trade or business.

(2) Your home is your principal place of business. That is, you meet the tests for deducting expenses of a home office. (Contact us if you aren't familiar with those tests.) And, you travel to other work locations. These may be other regular or temporary work locations.

(3) You sometimes travel to a temporary work location outside the metropolitan area in which you live and normally work.

In addition, there is some authority for your being able to deduct daily transportation expenses of going from your home to temporary job locations even if your home isn't your principal place of business, and even if you don't have a regular place of business elsewhere.

For example, say you have a workshop or office in your home, but it isn't your principal place of business because all of your services are performed in other people's homes. Although IRS disagrees, the Tax Court has allowed a deduction for travelling between the home and the temporary job sites in a similar situation.

If you wish to pursue whether you are entitled to deduct your job-related travel expenses, please contact us at Tax Tech Support.

Like many other enterprises, your business may pay club dues to one or several types of organizations. These dues may or may not be deductible, depending on the type of organization and its purpose.

Your business generally cannot deduct dues paid to a club organized for business, pleasure, recreation or other social purposes. This disallowance rule takes in country clubs, golf clubs, business luncheon clubs, athletic clubs, and even airline and hotel clubs. However, you can deduct 50% of the cost of otherwise allowable business entertainment at a club, even if the dues you pay to the club are nondeductible. For example, if you have dinner with a client at your country club after a substantial and bona fide business discussion, 50% of the cost of the dinner is deductible as a business expense.

The club-dues disallowance rule generally doesn't affect dues paid to professional organizations including bar associations and medical associations, or civic or public-service-type organizations, such as the Lions, Kiwanis or Rotary clubs. The dues paid to local business leagues, chambers of commerce and boards of trade also aren't affected. However, an organization isn't exempt from the disallowance rule if its principal purpose is to provide entertainment facilities to its members, or to conduct entertainment activities for them.

Finally, keep in mind that even if the general club-dues disallowance rule doesn't apply, there is no deduction for dues unless you can show that the amount you pay is an ordinary and necessary business expense.

For more details on the club dues question, or on the status of your other business expenses, please contact us at Tax Tech Support.   We look forward to hearing from you.

If you're self-employed and work out of an office in your home, you should know about an IRS ruling that explains when you can deduct your office-at-home expenses. The ruling shows how an increase in the time spent in your office at home can mean the difference between deducting your office expenses and getting no deduction.

The tax code allows you to deduct expenses of your office at home only if you qualify under strict tests. One test allows a deduction if your office at home is the principal place of business for the business you conduct there. The meaning of "principal place of business" has been the source of many disputes between IRS and taxpayers. Taxpayers have tended to interpret the term expansively, while IRS has opted for a narrower reading.

In its January 1993 decision in Soliman, the Supreme Court tried to define "principal place of business." It said that the principal place of business is the place where (1) the most important activities are performed and (2) the most time is spent. The Soliman decision, which was widely reported in the media, was supposed to resolve once and for all the nagging question of when an office at home is the taxpayer's principal place of business. But IRS is still sorting out the consequences of the Supreme Court's decision.

The IRS ruling deals with the relationship between the Supreme Court's two tests, namely the "relative importance" test and the "time" test. IRS says that it will first apply the "relative importance" test by comparing the activities performed at home with those carried on elsewhere. If this comparison clearly shows where the principal place of business is, there's no need to look further.

For example, consider a self-employed plumber who spends about 40 hours per week doing plumbing work in customers' homes and offices, and about 10 hours a week in an office in his home talking with customers by phone, deciding what supplies to order, and reviewing the books of the business.

IRS won't allow the plumber to deduct expenses for his office at home. The essence of the plumber's business is the work he does at his customers' homes or offices. The activities he performs at home are less important. Or take the case of a self-employed author who spends 30 to 35 hours a week writing in her office at home, and another 10 to 15 hours a week at other locations doing research, meeting with her publishers, and attending promotional events. Here, IRS concedes that the office at home is the author's principal place of business, since writing is the essence of her trade. Her other activities, while important, take second place to the actual writing.

In some cases, however, the "relative importance" test doesn't give a clear answer. Then, says IRS, the "time" test comes into play.