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All of us who have a home office, ask ourselves every year," Should  I take  the home office deduction?" Many accountants will tell you that by taking the home office deduction, you will be at a high risk for an audit. Thus , it is important to understand the IRS point of view and some of the precautions before taking the home office deduction. 

According to the IRS, those of us who can take a home office deduction are those who spend most of our working hours in the home office and conduct most of our important business there, such as meeting with customers on a regular basis. 

As of now, those of us who cannot take the home office deduction are those who spend most of our hours performing services in another place and who only use the home office for routine tasks such as record keeping. 

Although the home office deduction carries some precautions, that should not be a deterrent. When taking the deduction keep the following in mind: 

  • Maintain a separate telephone number for business purposes only.
  • Encourage customers to visit your home office on a regular basis.
  • Keep a separate log of all customer visits and the amount of time you spend in your home office.
  • Address business correspondence to your home office.
Those of us that take the home office deduction are familiar with form 8829. This form is the weapon the IRS uses to get a grip on taxpayers taking the home office deduction. This form is submitted with schedule C .Although the IRS denies it, Form 8829 represents a red flag that singles out your tax return for scrutiny.  

As you can see, a home office deduction is a complicated issue and should be discussed with your accountant, attorney or other professional.This article was written with the assistance of the book What The IRS Doesn't Want You To Know by Martin Kaplan.