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taxes for remote workers

Home Office Deductions for Tax Year 2022

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In 2020, we shared the latest home office deductions information in regard to the shift to remote work caused by the pandemic. Two years later, we wanted to share an update to help you prepare for your 2022 taxes.  What has Changed Since 2020? Who qualifies for a home office deduction has not changed. Only self-employed individuals who work from a home office can take advantage of this deduction. How the deduction is calculated has been the same since 2013.  While this deduction hasn’t changed, it bears repeating how to take advantage of this deduction.  How to Calculate the Home Office Deduction According to the IRS, you have two options to calculate the deduction: the regular method and the simplified method. The Regular Method Using the regular method, you calculate the deduction by determining the percentage of the space that is dedicated solely to business use.  Direct business expenses are fully deductible. This includes updates made only to your home office, such as: Painting  Installing flooring Making repairs  Furniture Fixtures Indirect expenses can be partially deductible. This includes costs associated with your entire home: Property taxes Mortgage interest Rent Casualty losses Utilities Homeowner’s or renter’s Insurance Maintenance and repairs Depreciation The Simplified Method Using the simplified method, you can deduct a flat rate per square foot of the space dedicated to your business. For tax year 2022, that’s $5 per square foot with a maximum of 300 square feet or $1,500.  Remember: Your calculation must focus on the space dedicated to your business, not your entire home. How to Choose Your Deduction Method You can change your deduction method each year to maximize the deduction – and you don’t need a specific reason in order to do so.  It’s best to calculate using both methods and then choosing to use the method that will help you save the most money. Of course, this means …

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How to Handle Remote Work & Taxes

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Have you hired or transitioned employees to a remote or hybrid work model recently? Here’s how that could affect your business taxes. State Laws and Taxes More than ever before, people are working from home offices. And that means you and your payroll department must be on top of the laws and taxes that not only govern the state your business is based in, but also the states where your employees live and work. If your remote employees are based in the same state as your business, you can use your state’s employment and tax laws for everything. But if you have remote workers who live in other states – or even countries – it is still your responsibility to withhold and file the necessary paycheck percentages and tax files that apply to their state of origin as well. This remote employee and their work may also mean that you have to pay different amounts in income tax and even possibly minimum wage if each state involved has differing policies. For example, if your business is located in Michigan – where the minimum wage is $9.87 an hour – but your employee is working from Illinois, you’ll have to make sure your payroll employees or third-party service accounts for the $12.00 minimum wage in place there. These differences also often exist at the local level as well, and can also affect Social Security and Medicare withholding, too. When it comes to remote employees, the more variables you contend with, the more difficult it will be to accurately calculate and file the applicable taxes per each employee, state, and situation. Remote Work & Taxes: Credits, Incentives According to the Tax Adviser, there are tons of tax incentives and credits that are specifically tied to geographic areas. And when your employees reside outside those areas, you potentially lose out on some of those perks. The evolving remote work environment is creating a lot of buzz around the effectiveness and application of these location-based incentives. It also calls into …

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