Mixed Tele-Signals

2007-07-10 by

Today TaxMama hears from Charles in Louisiana, who tells us. “I have an Internet consultation business (LLC) and I use my Internet connection and mobile phone primarily (but not exclusively) for business. Should I be able to expense these?”

Hi Charles,

Phones, Internet connections, computers, cameras, autos – all of those are things that folks tend to use for both personal and business.

You should have no problem deducting the business use of all these things.

The question is, how do you determine what part of the expenses are for business and which are personal.

Essentially, when it comes to phones, on your home phone, the base phone fee is always personal.

On all the other phones, and the rest of the home phone, keep logs to keep track of business and personal use.

I’ve read tax cases where the courts backed IRS’s denial of deductions where the business-owner didn’t have records to show the business and personal use.

Go through the phone bills to review the calls and separate out the personal calls – and don’t deduct those.

For the Internet, if your family is using it too, either keep logs or prorate the costs among all the users in the family. If you have 4 people, split the cost 5 ways – 1 for each member of the family’s personal use (including your own) and 1 for the business use. I hope this helps?

And remember, you’ll find answers to lots of questions about business expenses and other tax information, free. Where? At TaxMama.com

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# | Posted in Tax Quips | Comments » (4)



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  1. Ron Says:
    July 10th, 2007 at 01:09 am

    Starting with 2005, Turbo Tax allowed deducting my home internet service used for business to be based on the percent of my home used as my home office, just like my electric utility.

  2. TaxMama Says:
    July 10th, 2007 at 06:49 am

    Hi Ron,

    That's an interesting concept. But square footage of the home rarely has anything to do with Internet usage.

    Someone with a day job and a part-time business might find themselves using the Internet for their business for, perhaps an hour a night. Perhaps, another hour for personal play or research. While their children and spouse will use it for 3-4 hours each during the day or evening.

    With 2 children and one spouse, that could mean 8 hours of personal use, plus his own hour = 9 hours of personal use—compared to one hour of business use. That's 10% business.

    But the office may be 200 sq ft in a 2500 sq ft home = 8% business.

    Just as a for instance…

    OR…he's got a full-time business from home, in that same 200 sq ft space. But he uses the Internet for business for 10 hours a day, compared to his family's 9 hour personal use. That yields over 52% business use.

    So the square footage option is the lazy way out. It can cost you the business owner a lot of money.

    But thanks for pointing out that option. It's an interesting alternative.

    Hugs
    Eva

  3. Patty Says:
    July 10th, 2007 at 07:15 am

    My son's partnership was audited by IRS a number of years ago. The business at that time was operated from home, they did not keep records concerning phone use. All the phone deduction they took was denied because, according to the IRS agent, the assumption is that if one did not have a business at home, they'd have a telephone, anyway; therefore, all of the telephone expense is personal. I like your suggestion better!

  4. Toni Says:
    July 10th, 2007 at 09:21 am

    I'm guessing that Ron is including his internet use in his offic-in-home calculation. If there is a loss that will put off when that expense can be taken. I don't necessarily think it should be included there. I would include it under other on the back of the Sch C.

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