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COMMENTARY: GIVE TELEWORKERS A TAX BREAKIn Southern California, the Internal Revenue Service encourages its agents to stay off the freeways and telecommute. With computers, E-mail, and IRS-provided secure file cabinets, agents can track cases and prepare for audits from home. But these telecommuting enforcers can't even think about claiming a home-office deduction on their Form 1040s. To deduct work-related expenses at home, they--and you--have to show that telecommuting is for an employer's convenience. And since those IRS agents could find desk space downtown if they chose, their home offices don't meet the deduction test. Keep that in mind if you're looking for a tax break for expenses you rack up working from home. Sure, many employers see the value of telecommuting and will underwrite equipment to turn your guest room into a corporate outpost. But for the many telecommuters who cough up cash for their own computers, fax machines, and workspace, the tax code offers little relief. That's not right. A basic principle of the income tax is that business costs shouldn't be taxed. Big companies deduct most of their expenses. But for home workers--be they telecommuting employees or the self-employed--the bar is higher. NIX THE KIDS. To prove you're working at home for your employer's sake, a letter from the boss should do the trick. But the IRS can demand more, including a corporate policy guaranteeing the same deal to all similar employees. Mixed-use equipment poses another problem. No one tracks how many hours office workers spend playing games on the Internet. But share your home PC with your kids, and you're expected to log your keyboard hours vs. theirs and claim only your share of computer costs on your tax return. And if your kids play in your office, the IRS will question whether it's a separate space used exclusively for work. If it's not, forget about deducting utilities, rent, or depreciation. Even if a telecommuter can claim deductions, they're not worth much. Unreimbursed employee expenses fall into a catch-all category of ''miscellaneous deductions.'' The two-thirds of taxpayers who take the standard deduction can't claim those expenses at all. Even itemizers can deduct only those costs that exceed 2% of adjusted gross income. Unless you have lots of other miscellaneous deductions, employee expenses aren't likely to add up to a tax break. How could Washington level the playing field? First, recognizing the environmental and social costs of commuting, Congress could give employers a small tax credit for wages earned at home. Then, it could move telecommuters' unreimbursed expenses to the front of the tax form, as an income adjustment fully available to itemizers and non- itemizers. The IRS could help by devising common-sense tests for expensing equipment and home-office space used predominantly for business for employees and the self-employed. RELIEF. Self-employed home workers have it better--in some ways. Most of their expenses reduce pretax income dollar-for-dollar. They'll also benefit from a 1997 tax law that, starting next year, will let them deduct a home office used for managing work performed elsewhere. That reverses a 1993 court ruling that barred, say, a plumber from claiming a home office because his actual job was repairing pipes at clients' houses. But the self-employed still have plenty of tax gripes. The biggest--a cap that lets them deduct only 45% of their health-insurance premiums--will be fixed if the Republican tax bill now in Congress escapes a threatened Presidential veto. Stay-at-home workers will never have the resources big companies use to shrink their tax tab. But as their numbers proliferate, they deserve the benefit of the doubt. Lots of work is going on in home offices. Congress and the IRS should make allowances for this economic reality.
By Mike McNamee RELATED ITEMS
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Updated Oct. 1, 1998 by bwwebmaster
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