I am self-employed and have been in a consulting business for over 10 years. I have a small home office for the consulting business. I am using the TurboTax Home&Biz desktop edition for my tax returns.
This year, the MTM trader business was added. I gained about $4k in this trader business. The gains/losses were entered in the 4797 Form by following the official guide of the TurboTax site.
Initially, I didn't share the home office. That means there are almost no expenses for the MTM trader business. Everything is fine. The audit risk result is LOW.
Then I think it may make more sense to share the home office to make the IRS think I am serious about the trading business.
I shared the home office by splitting the sq ft. The trader business received a $265 deduction. Then things changed.
1. The total home office sq ft is the same. But after sharing I need to pay more tax.
2. After claiming the home office expense, the MTM trader business' Net Income changed from 0 to -$265.
3. The Audit Risk Result changed from LOW to MEDIUM.
The MTM trader business has about $4k (Gains - homeOfficeExpenses) profit. Why was it treated as a loss business? or Is the profit not good enough to claim a $265 expense?
It looks like sharing the home office is not beneficial to trader businesses using the 4749 Form. I am thinking of not claiming home office expenses to avoid the audit risk. Is there any disadvantage to doing so?
Any suggestion? please advise.
