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Home Office Use Increases

          The percentage of American workers doing some or all of their work at home increased to 24% in 2015 from 19% in 2003 according to the Bureau of Labor Statistics.

          You may be eligible for deductions on your tax return if you are one of these individuals.  If you think you might be entitled to the tax benefit and are not currently taking advantage of the opportunity, please contact us.

What Illinois Budget Woes Mean For You

          Illinois is locked in a political stalemate, and is in danger of becoming the first U.S. State in modern times to have its debt downgraded to junk.

          Much of Illinois’ $25 billion is general obligation debt is held by individual investors seeking a stable source of income.  But also exposed are mutual funds, hedge funds, and insurance companies that purchased the state’s bonds.  Mutual funds have $4.5 billion of the debt with the Vanguard Group the leader with $1.2 billion spread across seven of its funds.

          A junk rating will not affect the state’s ability to pay bondholders; state officials have stated that is their number one priority.  A downgrade would likely cause a rise in borrowing costs to Illinois making less money available for other purposes.  Already, some in Illinois, like doctors looking to get paid by Medicaid, have been unpaid for several months.

          Illinois is not likely to become Puerto Rico, which is in the midst of a court-supervised restructuring.  Illinois’ problems are heavily political in addition to the large current pension obligations to its civil servants.

          A junk downgrade could affect other states such as New Jersey and Connecticut, which are the lowest rated states after Illinois.  Both are wrestling with budget problems and mounting liabilities.

          A note of caution, in the 1970s New York City “defaulted” on its debt by “passing” on paying interest on its debt.  Most notable at the time was the turndown from the federal government when NYC requested help.  It then was up to New York City, New York State and its municipal unions to put aside their differences, get together, and concoct a plan led by investment banker Felix Rohatyn of Lazard Freres to eventually solve the problem.  The plan largely consisted of not maintaining the infrastructure of the City and State, a problem we are starting to tackle today, 40 years later.

Can You Deduct The Full Costs of Business Meals On The Road?

          Most of us cannot but the Boston Bruins hockey team can.  Employer-provided meals are generally deductible up to 50% of their cost.  However, if served at an employer-operated, owned, or leased eating facility such as a cafeteria, they can be fully deductible as a de minimis fringe benefit.  On audit, the IRS claimed the 50% reduction applied to meals the Bruins provided to players and other staff at away games.

          The Tax Court disagreed and said hotels are part of the team’s business premises while on the road because they are vital for a successful hockey operation.  Hockey business is conducted in the hotels during the meals, and other activities, such as medical treatment and conditioning sessions, are done in hotel facilities.  Thus, the meals provided at away-city hotels constitute de minimis fringe benefits.  Jacobs 148 TC 24.

Will Above Average Deductions Cause An Audit?

          You will not automatically be audited for having above average deductions but if your write offs are excessively large, your audit risk can go up because that is a key factor in the Internal Revenue Service’s return selection process.

          Here is an example; a couple was audited after they claimed total charitable contributions of $145,250 for property donations to Goodwill.  Because they could not prove the value of the items donated, the Tax Court disallowed all but $250 of their deduction and slapped them with a 20% penalty for negligence.  Ohde TC Memo 2017-137.

Investigating A Parent’s Mysterious Death

           is a hobby according to the Appeals Court Costs incurred in the activity are not deductible.  A man paid millions of dollars to private investigators and other experts to help him find out whether his father who died when the taxpayer was a child, was murdered or committed suicide.  He had HOPES of turning the story into a book or movie at some point in the future.  But he had been doing this for 10 years without generating a profit.  Vest 5th Circuit.

           As always, if you have any questions about these or any other matters, do not hesitate to call us.

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