Today TaxMama hears from Deb in NY whose husband is up to no good. “My husband insists that he can deduct the cost of his laptop and WiFi service as a part of ‘meals & entertainment’. Please tell me if this is true. I have no desire to get one of those ‘we’ve adjusted your tax return’ letters from the IRS.”
Dear Deb,
I’ll say one thing for him – he’s made one of the most original errors I’ve ever seen. And he is so far off base, that he’s almost guaranteed to get you an invitation to the dance.
First the good news: If your husband legitimately uses his computer and WiFi as exclusively for his job or business, he is entitled to deduct them as business expenses. If the family shares them, he’ll have to reduce the deductions.
Then the bad news: His unique choice of lines to use is costing him half his permitted deductions! The last place in the world you want to put those numbers is under meals and entertainment!
Those are the only expenses where only 50% of the amount is used as a deduction.
Here’s where he should put those deductions. If he’s in business, filing a Schedule C, he’d use Line 13, Depreciation for the computer, backed up by Form 4562 for the depreciation details. And he’d use Part V on the second page of the Schedule C for the WiFi expenses – probably as Telecommunications Costs.
https://www.irs.gov/pub/irs-pdf/f1040sc.pdf
Folks using Form 2106, would use Line 4, Business Expenses.
https://www.irs.gov/pub/irs-pdf/f2106.pdf
Of course, you’d need to add supporting schedules and a depreciation schedule to back up that line – and not all personal tax software can handle that. It may take a tax professional’s version of the software to do that.
No doubt he’s great at his own profession. But he’s dangerous when fiddling with mine.
Remember, you’ll find answers to questions about business expenses and all kinds of tax issues, free. Where? Where else? At TaxMama.com
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- Schedule C :: Business Profit and Loss
- Fom 2106 :: Employee Business Expenses.
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