Entering utilities and other home expenses for home business.

[weaslebub]

I am using TT Home & Business and need to confirm a couple things for an home office used the entire year...

If I have utility costs for the entire home totaling $2,000 for the year and my home office is 20% of my total house, I need to enter the entire $2,000 in the Utility Expenses section, correct?

When it comes to entering Communication Expenses it's not as straight forward. If we spent $800 for a business cell phone last year and $1,200 for internet connectivity, it appears I should enter these expenses in the Communication Expenses section (according to what the examples say). Regarding the phone, before starting this business my wife and I each had a cell phone with our own phone number, but now one of those cell phone lines is shared between us and the other phone line was converted to our business line. Since the business line use to be a personal line, all of our friends, family, colleagues, and associates called and texted us at this number, so understandably we still receive some personal calls and texts on it. However, the lion's share of it's use is for business. So, would we enter the full $800 in this Communication Expenses section since we have another phone for personal use, or do we need to figure out what percentage is personal use even if it's just 8% or 5^ or 2% and reduce the total by that amount?

Regarding the $1,200 for internet, this expense is for the high speed internet that's used by our business and everyone else in the house, Do I enter the total internet expenses for the year in this section or do I calculate the business percent first ($1200 X 20%) and enter that amount here? 

Mainly I'm trying to understand or determine when TT calculates the business use amount automatically versus when I need to do it manually (by multiplying an expense by the business use of our house, or 20%).. It doesn't seem to be calculated automatically in this section, but that's why I needed some confirmation to find out when it is and when it's not.

Thanks!

[Critter · Accepted solution]

If I have utility costs for the entire home totaling $2,000 for the year and my home office is 20% of my total house, I need to enter the entire $2,000 in the Utility Expenses section, correct?  Yes ... enter the entire amount, the program will do the proration ... review the form 8829 when you are done.

When it comes to entering Communication Expenses it's not as straight forward. If we spent $800 for a business cell phone last year and $1,200 for internet connectivity, it appears I should enter these expenses in the Communication Expenses section (according to what the examples say). Regarding the phone, before starting this business my wife and I each had a cell phone with our own phone number, but now one of those cell phone lines is shared between us and the other phone line was converted to our business line. Since the business line use to be a personal line, all of our friends, family, colleagues, and associates called and texted us at this number, so understandably we still receive some personal calls and texts on it. However, the lion's share of it's use is for business. So, would we enter the full $800 in this Communication Expenses section since we have another phone for personal use, or do we need to figure out what percentage is personal use even if it's just 8% or 5^ or 2% and reduce the total by that amount?  This is where you need to prorate between business & personal usage.  And the internet (for the entire house)  should be entered with the other utilities on the 8829 and be just a % based on Square Footage like the power bill.

Regarding the $1,200 for internet, this expense is for the high speed internet that's used by our business and everyone else in the house, Do I enter the total internet expenses for the year in this section or do I calculate the business percent first ($1200 X 20%) and enter that amount here?  Again enter it with the electric bill and the program will do the % automatically. 

[bgin777]

we have a rental in our home.  where do we enter their share of utilities and internet charges

[Critter]

If you are new to being self employed and  acting as your own bookkeeper and tax preparer you need to get educated ....   

If you have net self employment income of $400 or more you have to file a schedule C in your personal 1040 return for self employment business income. You may get a 1099-Misc for some of your income but you need to report all your income.  So you need to keep your own good records. Here is some reading material……

IRS information on Self Employment….
http://www.irs.gov/Businesses/Small-Businesses-&-Self-Employed/Self-Employed-Individuals-Tax-Center 

Publication 334, Tax Guide for Small Business
http://www.irs.gov/pub/irs-pdf/p334.pdf 

Publication 535 Business Expenses
http://www.irs.gov/pub/irs-pdf/p535.pdf 

Home Office Expenses … Business Use of the Home

https://www.irs.gov/businesses/small-businesses-self-employed/home-office-deduction

https://www.irs.gov/pub/irs-pdf/p587.pdf

There is also QuickBooks Self Employment bundle you can check out which includes one Turbo Tax Home & Business return and will help you keep up in your bookkeeping all year along with calculating the estimated payments needed ....
http://quickbooks.intuit.com/self-employed

Self Employment tax (Scheduled SE) is generated if a person has $400 or more of net profit from self-employment on Schedule C.  You pay 15.3% for 2017 SE tax on 92.35% of your Net Profit greater than $400.  The 15.3% self employed SE Tax is to pay both the employer part and employee part of Social Security and Medicare.  So you get social security credit for it when you retire.  You do get to take off the 50% ER portion of the SE tax as an adjustment on line 27 of the 1040.  The SE tax is already included in your tax due or reduced your refund.  It is on the 1040 line 57.  The SE tax is in addition to your regular income tax on the net profit.
 


PAYING ESTIMATES
For SE self employment tax - if you have a net profit (after expenses) of $400 or more you will pay 15.3% for 2017  SE Tax on 92.35% of your net profit in addition to your regular income tax on it. So if you have other income like W2 income your extra business income might put you into a higher tax bracket.

You must make quarterly estimated tax payments for the current tax year (or next year) if both of the following apply:
- 1. You expect to owe at least $1,000 in tax for the current tax year, after subtracting your withholding and credits. 
 
- 2. You expect your withholding and credits to be less than the smaller of: 
    90% of the tax to be shown on your current year’s tax return, or 
  100% of the tax shown on your prior year’s tax return. (Your prior year tax return must cover all 12 months.)

To prepare estimates for next year, You can just type W4 in the search box at the top of your return , click on Find. Then Click on Jump To and it will take you to the estimated tax payments section. Say no to changing your W-4 and the next screen will start the estimated taxes section.

OR Go to….
Federal Taxes or Personal (H&B version)
Other Tax Situations
Other Tax Forms
Form W-4 and Estimated Taxes - Click the Start or Update button

[eksing]

I have a question about this - I get that QB will do the calculation for me for the % used for home office for my schedule C, BUT it also then registers the entire expense which changes my P&L etc and is just inaccurate since my business is not covering the costs, but rather 'reimbursing' my personal accounts for its % use. I just don't understand how this is accommodated without something being off in my books. 

[Critter]

QB is a bookkeeping program for your business ... NO personal expenses should be registered in it or paid from the business account.  All the personal residence costs should be paid thru the personal checking account and then a portion is allocated to the OIH on the Sch C and is taken into consideration on the return ... not in advance in the bookkeeping program.  You do not reimburse your personal account from the business when you are a sole proprietor ... you really need to keep the personal & business separated. 

[asc]

Hi.  You have answered this question for someone who qualifies for a Home Office deduction so your answer says to enter the total internet mount and let Turbotax prorate the amount that can be deducted based on the Home Office percentage. 

However,  in my case I do not have any space in my home that I exclusively use for business so my understanding is that I cannot use the Home Office deduction.

Can I still prorate my Internet cost based on the percentage use for my home writing and consulting business relative to personal use?   

Thanks in advance.

[JeffreyR77]

Yes.  You should document your usage to support your deduction.