My wife does freelance work a sole proprietor and receives 1099-misc for this work from her clients. Every year we do itemized deductions and apply a home office business expense.
When it comes to business income vs expenses, most years she breaks even or makes a slight profit.
This year however she received very little income from the 1099-miscs (around $2600) and when you subtract her home office expenses (around $5000), the result is a very large deficit on TT (minus $3600).
As a result of this loss, this is the first year TT puts our audit risk at medium instead of low ("Your business expenses are significantly higher than your income")
I'd like to understand if there is a way to still utilize the home office expense but reduce it to a more reasonable amount and reduce my risk of an audit.
It seems that even if I state that she only used the home office 2 months during the year for at least 15 days, I still receive the full year home office deduction.
