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HOME OFFICE TAX (tm) 1989 Version 1989.1C Jan 31, 1990 Shareware Version Copyright (c) 1988-1990 by ParyTech Associates NOTE: This version is up to date on tax law changes through Dec 31, 1989. If the IRS makes any changes, revised versions of this program will be available on the CompuServe forums listed below, or an updated shareware version may be obtained directly from us for $8.00. CompuServe forums: WORK and IBMAPP _______ ____|__ | (tm) --| | |------------------- | ____|__ | Association of | | |_| Shareware |__| o | Professionals -----| | |--------------------- |___|___| MEMBER ParyTech Associates 16559 Quincy St. NE Ham Lake, MN 55304 (612) 434-4330 TABLE OF CONTENTS SUBJECT PAGE Copyright Notice ..................................... 1 Trademarks ........................................... 1 Disclaimer of Warranty ............................... 1 License .............................................. 2 Registration and Ordering ............................ 3 Quantity and Corporate Purchases ..................... 4 Shareware ............................................ 5 ASP Ombudsman ........................................ 7 Free Offer ........................................... 8 Introduction ......................................... 9 System Requirements .................................. 10 Installation ......................................... 11 Information Needed for Data Entry .................... 12 Your Name ....................................... 12 Social Security Number .......................... 12 Total Square Footage of Home .................... 12 Square Footage of Office Space .................. 12 Average Hours per Week You Provided Day Care .... 12 Number of Weeks You Provided Day Care ........... 12 Date Home Purchased ............................. 13 Straightline Depreciation ....................... 13 Straightline Years (if ACRS property) ........... 13 Cost/Basis of Home .............................. 13 Mortgage Interest Paid .......................... 13 Property Tax Paid ............................... 13 Rent ............................................ 13 House Insurance Paid ............................ 14 Gas Utilities Paid .............................. 14 Electric Utilities Paid ......................... 14 Other Utilities ................................. 14 Indirect Maintenance Costs ...................... 14 Business Expenses ............................... 14 Business Gross Profit ........................... 14 Casualty Losses ................................. 15 Indirect Expense Carry Forward from 1988 ........ 15 Depreciation Carry Forward from 1988 ............ 15 Schedule C or Form 2106 Filer ................... 15 In General ........................................... 16 (Table of Contents continued on next page) Home Office Tax 1989 Table of Contents (cont'd) SUBJECT PAGE Main Menu ............................................ 16 Print Reports ................................... 16 Data Entry ...................................... 16 Print Input Form ................................ 16 View Shareware Notice ........................... 16 Configure System ................................ 17 OS Shell ........................................ 17 Exit to DOS ..................................... 17 Getting Out of a Work Area ...................... 17 Getting Help .................................... 17 File Names ...................................... 17 Depreciation Conventions Used ........................ 18 Calculation Methods ............................. 18 Periods Used .................................... 18 Conventions Used ................................ 18 Explanation of Worksheet ............................. 19 Registration Form .................................... 23 Home Office Tax 1989 COPYRIGHT NOTICE HOME OFFICE TAX is copyrighted by ParyTech Associates. No parts of HOME OFFICE TAX or the manual may be copied in whole or in part except as provided in the License in the following pages. TRADEMARKS HOME OFFICE TAX is Trademarked by ParyTech Associates. Many product names found throughout this manual are trademarks of various companies. DISCLAIMER OF WARRANTY THIS SOFTWARE AND MANUAL ARE SOLD "AS IS" AND WITHOUT WARRANTIES AS TO PERFORMANCE OF MERCHANTABILITY OR ANY OTHER WARRANTIES WHETHER EXPRESSED OR IMPLIED. BECAUSE OF THE VARIOUS HARDWARE AND SOFTWARE ENVIRONMENTS INTO WHICH THIS PROGRAM MAY BE PUT, NO WARRANTY OF FITNESS FOR A PARTICULAR PURPOSE IS OFFERED. GOOD DATA PROCESSING PROCEDURE DICTATES THAT ANY PROGRAM BE THOROUGHLY TESTED WITH NON-CRITICAL DATA BEFORE RELYING ON IT. THE USER MUST ASSUME THE ENTIRE RISK OF USING THE PROGRAM. ANY LIABILITY OF THE SELLER WILL BE LIMITED EXCLUSIVELY TO PRODUCT REPLACEMENT OR REFUND OF PURCHASE PRICE. - 1 - Home Office Tax 1989 LICENSE HOME OFFICE TAX (tm) is copyright (c) 1988, 1989 by ParyTech Associates. HOME OFFICE TAX is not, nor has ever been, public domain or free software. The commercial, registered version of HOME OFFICE TAX may not be duplicated other than for backup purposes. A registered copy of HOME OFFICE TAX must be treated like a book, in that the same registered copy of HOME OFFICE TAX may not be used in more than one computer at the same time, just as a book may not be read by more than one person at the same time. Users are granted a limited license to use the User Supported, trial version of HOME OFFICE TAX for a limited evaluation period of up to 45 days, in order to determine if it suits their needs. Any other use of HOME OFFICE TAX or use past this period requires registration. All users are granted a limited license to copy the User Supported (Shareware) version of HOME OFFICE TAX only for the purpose of allowing others to try it, subject to the above restrictions as well as the following: HOME OFFICE TAX must be distributed in absolutely unmodified form, including ALL program, documentation, and other files. HOME OFFICE TAX may not be included with any other product for any reason whatsoever without a license from ParyTech Associates. No charge or payment may be levied or accepted for HOME OFFICE TAX. Bulletin Board system operators may post the User Supported (Shareware) version of HOME OFFICE TAX on their BBS for downloading by their users, without written permission only if the above conditions are met, and only if no special fee is necessary to access the HOME OFFICE TAX files (a general fee to access the BBS is OK). Distributors of User Supported and Public Domain software MUST obtain written permission from ParyTech Associates before distributing HOME OFFICE TAX and must follow the above conditions. Permission is almost always granted. This requirement is necessary to ensure protection for ourselves and HOME OFFICE TAX users from unscrupulous individuals. The following section contains information on registration and licensing. - 2 - Home Office Tax 1989 REGISTRATION AND ORDERING Registering HOME OFFICE TAX allows you to use the product after the trial period. Registered HOME OFFICE TAX users get the current copy of HOME OFFICE TAX on disk along with their own serial number, mailed notification of HOME OFFICE TAX updates, and priority when calling for support. Most importantly, registered users know they are helping to make sure that high quality software like HOME OFFICE TAX continues to be sold in this low cost manner. HOME OFFICE TAX registration costs $18 in U.S. funds, and includes a copy of HOME OFFICE TAX on disk. Check and money orders are accepted but must be in U.S. funds drawn on a U.S. bank. An evaluation disk with the current copy of HOME OFFICE TAX is available for $8 U.S. This is to be used to try out HOME OFFICE TAX, and does not include registration. The fee covers the cost of postage, diskettes, and handling. To place an order, please use the order form at the end of this documentation. CORPORATIONS and INSTITUTIONS: please see the section titled 'Quantity and Corporate Purchases' for information on licensing multiple copies of HOME OFFICE TAX. Under no circumstances may an unregistered copy of HOME OFFICE TAX be used in a corporate or institutional environment after the trial period is over. - 3 - Home Office Tax 1989 QUANTITY AND CORPORATE PURCHASES Any commercial (business, corporate, government, or other institutional) use of HOME OFFICE TAX must be registered. Volume discounts and site licenses are available. The order form at the end of this documentation may be used to purchase multiple copies of HOME OFFICE TAX with discounts as follows: 1 to 10 copies no discount 11 to 20 copies 10% discount 21 to 50 copies 15% discount 51 to 100 copies 25% discount 101 + copies 40% discount Purchases of up to 10 copies are bulk purchases and include that many copies of HOME OFFICE TAX on disk as with single registrations. Purchases of 11 or more copies are site licenses. ParyTech Associates provides a master copy of HOME OFFICE TAX and the appropriate number of diskette labels. The licensee is responsible for copying the disks (backups of the MASTER do not count towards the total copies in the license). The name on the order form is considered the contact and is the person with whom all correspondence will take place. NOTE: All prices and discounts are subject to change without notice. Discounts only apply to separate orders and are not cumulative. - 4 - Home Office Tax 1989 SHAREWARE You have probably heard the terms "public domain", "freeware", "shareware", and others like them. Your favorite board probably has many programs described by one or more of these words. There's a lot of confusion about and between these terms, but they actually have specific meanings and implications. Once you understand them you will have a much easier time navigating the maze of programs available to you, and understanding what obligations are, or are not, with each type of program. Let's start with some basic definitions. PUBLIC DOMAIN has a very specific legal meaning. It means that the creator of a work (in this case, a piece of software) who had legal ownership of that work, has given up ownership and dedicated the work "to the public domain". Once something is in the public domain, anyone can use it in any way they choose, and the author has no control over the use and cannot demand payment for it. If you find a program which the author has explicitly put into the public domain you are free to use it however you see fit, without paying for the right to use it. But use care - due to the confusion over the meaning of the words, programs are often described by others as being "public domain" when in fact they are shareware or free, copyrighted software. To be sure that a program is public domain you should look for an explicit statement from the author to that effect. COPYRIGHTED is the opposite of public domain. A copyrighted program is one where the author has asserted his or her legal right to control the program's use and distribution by placing the legally required copyright notices in the program and documentation. The law gives copyright owners broad rights to restrict how their work is distributed, and provides for penalties for those who violate these restrictions. When you find a program that is copyrighted you must use it in accordance with the copyright owner's restrictions on distribution and payment. Usually these are clearly stated in the program documentation. Maintaining a copyright does not necessarily imply charging a fee, so it is perfectly possible and legal to have copyrighted programs which are distributed free of charge. Such programs are sometimes termed "freeware", though this term was in fact trademarked by the late Andrew Flugelman and the legality of its use by others could be questioned. In any case, the fact that a program is free does not mean that it is in the public domain - though this is a common confusion. SHAREWARE is copyrighted software which is distributed by authors through bulletin boards, on-line services, disk vendors, and copies passed among friends. It is commercial software which you are allowed to try out before you pay for it. - 5 - Home Office Tax 1989 Shareware authors use a variety of licensing restrictions on their copyrighted works, but most authors who support their software require you to pay a "registration fee" - the purchase price of the software - if you continue to use the product after a trial period. Some authors indicate a specific trial period after which you must pay this fee; others leave the time period open and rely on you to judge when you have decided to use the program, and therefore should pay for it. Occasionally a shareware author requires registration but does not require payment - this is so called "$0 Shareware". The shareware system and the continued availability of quality shareware products depends on your willingness to register and pay for the shareware you use. The registration fees you pay allow authors to support and continue to develop their products. As a software user you benefit from this system because you get to try the software and determine whether it meets your needs before you pay for it. Authors also benefit because we are able to get our products into your hands with little or no expense for advertising and promotion. As a result it is not unusual to find shareware products which rival retail software that costs several times the amount of the shareware registration fee. ASP members' shareware meets additional quality standards beyond ordinary shareware. Our members' programs must be fully functional (not crippled, demonstration, or out of date versions); program documentation must be complete and must clearly state the registration fee and the benefits received when registering; members provide free mail or telephone support for a minimum of three months after registration; and members must meet other guidelines which help to insure that you as a user receive good value for your money and are dealt with professionally. We also provide an Ombudsman program to assist in resolving disputes between authors and users. For more information on the ASP or to contact the ASP Ombudsman, write to ASP, P.O. Box 5786, Bellevue, WA 98006. You can also contact the Ombudsman on CompuServe via an EasyPlex (electronic mail) message to 70007,3536. Home Office Tax was created and is supported by the organization listed below. Users are encouraged to report any problems and/or bugs by mail, phone, or thru CompuServe EasyPlex (ID# 76407,607). Our address and phone number is listed below. We will do our best to respond to your questions and problems within 48 hours of receipt. Suggested Contribution for Home Office Tax is $18.00 Please use the registration form at the end of this documentation. - 6 - Home Office Tax 1989 ASP OMBUDSMAN This program is produced by a member of the Association of Shareware Professionals (ASP). ASP wants to make sure that the shareware principle works for you. If you are unable to resolve a shareware-related problem with an ASP member by contacting the member directly, ASP may be able to help. The ASP Ombudsman can help you resolve a dispute or problem with an ASP member, but does not provide technical support for members' products. Please write to the ASP Ombudsman at P.O. Box 5786, Bellevue, WA 98006 or send a CompuServe message via EasyPlex to ASP Ombudsman 70007,3536. - 7 - Home Office Tax 1989 FREE OFFER If you are an owner of, or purchase any software products published by Great American Software, Inc., you may obtain a free Special Edition of 'Home Office Tax 1989'. Great American Software, Inc. publishes 'One-Write Plus' and 'Money Matters' accounting and finance packages, just to name a few. To obtain your free copy of Home Office Tax write to: Great American Software, Inc. Home Office Tax Offer 615 Amherst St. Nashua, NH 03063 - 8 - Home Office Tax 1989 INTRODUCTION Home Office Tax is designed to take the drudgery and headaches out of figuring home office expenses for tax deductions by letting your computer do the hard work of figuring the percentages and allowances. In the past, the IRS has printed Publication 587 "Business Use of Your Home". While this publication is a good effort on the part of the IRS, some people still have a difficult time trying to decipher the instructions. In the 1987 publication there was an error in reference to the amount of gross business income, and a non-existent line number was referenced. This caused some errors on some tax returns of the taxpayers who did not happen to catch these instruction errors, which required amended returns to be filed. Actually, it caused people to pay more tax than was necessary. The IRS did correct this problem, altho a little late for some people. Home Office Tax uses a modified approach to the IRS worksheet to present information more logically. You are asked to enter information on your home office space and expenses. Home Office Tax asks you for the basic raw data, total amounts spent on various items, then computes your business percentages and depreciation based on your home office space footage. Home Office Tax then prints a report detailing your deduction and limitations (if any), and carry forward's of expenses (if any). Hopefully this program will appear very simple in nature. That was our purpose. Approximately 75% of the program code involves depreciation calculations by the computer that the user doesn't see going on. This program will calculate all depreciation methods for real estate going back to the 1940's. This manual is brief. Hopefully we designed the program for maximum ease of use so that detailed instructions will not be required. CHANGES SINCE THE 1988 VERSION: * Use of pop up windows. * Use of standard keys for exiting functions and getting help. (ESC and F1) * Context sensitive help. * All data entry done in one screen that uses full screen editing. - 9 - Home Office Tax 1989 SYSTEM REQUIREMENTS IBM PC, XT, AT, PS/2, or compatible with DOS 2.11 or higher. 256K memory 1 floppy drive or more, or a hard drive Color Graphics Adaptor (CGA) or Hercules If you have a Hercules graphics adaptor, execute the file HOH.BAT to run the program. Printer: IBM Graphics compatible is known to work, altho no special printer control codes are used so it should work with almost any printer that accepts standard printer commands. Let us know if yours won't work. - 10 - Home Office Tax 1989 INSTALLATION Copy all the files to your working disk or hard drive. You may make a sub-directory for your data files. Be sure to define that directory in the Configure System selection from the main menu. The sample files demonstrate the various degrees of deductability with various profit margins. All data files have the file extension ".OFF" To execute the program, type HOT at the DOS prompt and press ENTER. - 11 - Home Office Tax 1989 INFORMATION NEEDED The following is a list of all the information you will need to enter in this program. You will need to be able to document this information (in the event of an audit). Make sure you have receipts, statements, or cancelled checks ! YOUR NAME Your first, middle initial, and last name. SOCIAL SECURITY NUMBER Your social security number. TOTAL SQUARE FOOTAGE OF HOME This is the total area of your home. You can measure it a couple of ways. You can measure every room in the house and compute the square footage of each room, then add all the square footages to get a total for your home. Or the easy way, take the outer dimensions of your home (e.g. 20 ft wide by 40 ft long = 800 square ft. If you have a two level home, multiple the 800 by 2). SQUARE FOOTAGE OF OFFICE SPACE Measure your office space to get a square footage. If your space is not used exclusively for business (such as providing daycare), you will need the average hours per week and the number of weeks in the year that your home was used for providing this service. Your square footage of office space would also be the total area that is used in providing this service. This applies only to those types of services where exclusive use is not possible. Generally this applies only to daycare services. Any other type of business activity must use their office space exclusively for business. If you have any question about how this applies to your business, contact us or your local IRS office. AVERAGE HOURS PER WEEK YOU PROVIDED DAY CARE If you provided daycare you will need to figure out the average hours each week that you provided day care. NUMBER OF WEEKS YOU PROVIDED DAY CARE If you provided daycare you will need to figure out how many weeks in the year you provided daycare. - 12 - Home Office Tax 1989 DATE HOME PURCHASED This is the date you bought your home. STRAIGHTLINE DEPRECIATION If you have deducted depreciation on your home office in previous years, you will need to know if you elected straight line depreciation. STRAIGHTLINE YEARS (if ACRS property) If the date that you bought your home is between Jan 1, 1981 and Dec 31, 1986 (inclusive) then your home is ACRS property for depreciation purposes. If you elected straightline depreciation in the past, you will need to know the number of years that you elected to use; 15, 18, 19, 35, or 45 years. COST/BASIS OF HOME This is the cost of your home (your purchase price) or your basis in your home (purchase price plus cost of improvements). Cost or Basis is NOT based on market values. It is based on what you paid. DO NOT INCLUDE THE COST OF LAND. The cost of your land should be stated on your purchase agreement or closing papers. If not, check with your county assessor to find the land value. Subtract the land value from your total purchase price or basis. MORTGAGE INTEREST PAID This is the amount of interest you paid on your home mortgage. Usually your mortgage company will send you a statement at the end of the year stating this amount. PROPERTY TAX PAID This is the amount of property tax that was paid for the year. This will usually be stated on the same statement as your interest paid from your mortgage company, or you may get this information from your local government agency (county assessor), or your property tax statement. RENT If you do not own a home you can enter the amount of rent you paid for the year. Do not enter any information for; Date House Purchased, Mortgage Interest Paid, Property Tax Paid, Cost/Basis of Home. - 13 - Home Office Tax 1989 HOUSE INSURANCE PAID This is the amount of property insurance premiums on your home that you paid for the year. This may also be stated on your statement from your mortgage company, on your insurance policy, or in your check register. GAS UTILITIES PAID This is the amount of your heating bills paid for the year. This could be natural gas, LP, oil, or cords of wood. Hopefully, you've saved your bills from the year or can track the checks paid in your check register. Or, you may be able to get the amount from your utility company. ELECTRIC UTILITIES PAID This is the amount of your electric bills paid for the year. As with the Gas Utilities, hopefully you have your bills or can get the information from your utility company. OTHER UTILITIES This is the amount of other types of utilities that you paid for the year such as; rubbish removal, sewer, water, association fees (in condos or trailer parks), etc. INDIRECT MAINTENANCE COSTS This is the amount of maintenance costs you paid for the year to maintain your home such as; exterior painting, plumbing and heating maintenance and repairs, etc. Painting or repair of rooms other than the home office are not deductible. Any expenses directly related to the home office are deductible directly as business expenses. BUSINESS EXPENSES This is the total amount of your business expenses EXCLUDING Cost Of Sales (if you sell a product). All the costs incurred in conducting your business, less the cost of your products. BUSINESS GROSS PROFIT This is the amount of your business income AFTER subtracting your Cost Of Sales (if you sell a product). - 14 - Home Office Tax 1989 CASUALTY LOSSES This is the amount of casualty losses you incur on your home such as; fire damage, storm damage, vandalism, running the car thru the garage, etc. As per Code Sect 165 where a loss is sustained with respect to property used partly for business purposes (including profit making activities), the $100 and 10% limitations apply only to that portion of the loss property attributable to non-business use. For example: Your home office percentage is 15%. Your have storm damage to your home of $10,000. You will be able to deduct $1500. This is of course calculated for you by the program. What you need to enter is the gross amount of loss after subtracting actual or expected insurance reimbursements. NOTE: When calculating your casualty loss on your schedule A, you need to apply the limitations to the balance of the loss ($8,500 as in the above example, $10,000 -$1,500 = $8,500). The $100 and 10% limitation would apply to the $8,500 when you enter it on your schedule A. INDIRECT EXPENSE CARRY FORWARD FROM 1988 This is the amount of any indirect expenses that you could not deduct on your 1988 return, if any. DEPRECIATION CARRY FORWARD FROM 1988 This is the amount of any depreciation that you could not deduct on your 1988 return, if any. SCHEDULE C, OR FORM 2106 FILER You will need to determine if you are a Schedule C or Form 2106 filer on your tax return. If you are self employed you are a Schedule C filer. If you are an outside person for a company and are required to maintain a home office, you are a Form 2106 filer. If you are a Form 2106 filer you must deduct your Home Office tax deduction on your schedule A as a miscellaneous itemized deduction which is subject to a 2% exclusion of your adjusted gross income. You can not take the deduction on your Form 2106. This may seem unfair, but it's the law. - 15 - Home Office Tax 1989 IN GENERAL This manual is brief. We assume that you understand the rudiments of using a computer and DOS. We did not provide for various file maintenance operations because they can easily be handled with common DOS commands (copying, deleting, renaming, etc). MAIN MENU When the program starts you are presented with the main menu. You have these selections: 1. Print Reports This takes you to another menu where you can select to print the home office deduction worksheet, instructions, and schedule to be attached to your tax form, based on the information you have entered. 2. Data Entry This takes you to a screen where you can enter information in regards to your name, SSN, home, and office space. To move around the input screen you can press the following keys: PRESS THIS TO DO THIS ENTER To move to the next input Down Arrow field. Tab Shift-Tab To move to the previous input Up Arrow field. To get Help, press F1. To exit the input screen, press ESC. When exiting you'll be asked if you want to save the input. 3. Print Input Form This allows you to print out a form for gathering the various items of information you will need for entering in item 2 above (Data Entry). 4. View Shareware Notice This allows you to view the shareware notice again for registration information. - 16 - Home Office Tax 1989 5. Configure System This allows you to set options so that the program will run correctly on your computer. You can select color or monochrome monitors, snow suppression, file paths, and a printer pause. 6. OS Shell This allows you to shell out of the program and execute DOS commands, or execute other programs. This leaves the program suspended while you perform other functions. When you are ready to return to the program, enter EXIT at the DOS prompt. This shell will operate correctly as long as you do not run another program that requires more memory than is available with the Home Office Tax Program loaded. ESC Exit to DOS This selection will ask you to confirm that you want to exit the program and return to the operating system. If you answer anything other than "Y", you will be returned to the Main Menu. GETTING OUT OF A WORK AREA At several points in the program you are able to exit the area you are working in by pressing "ESC" at any point to return to the previous menu. Watch the status line at the bottom of the screen to see various actions that can be taken. GETTING HELP At several points in the program you can get help on the subject that is being presented to you by pressing "F1". The help is context sensitive. Watch the bottom of the screen to see when help is available. "F1 Help" will be displayed. FILE NAMES If a file name has not been defined at any time during the program, you will be asked for a file name. You do not need to enter the file's extension. If the file does not exist, you will be asked if you want to create it. You may also select another file when at the Main Menu by pressing "F2". You can then enter the file name or press "F2" again to get a listing of the files in your file directory. To select, move the highlight bar to the file you want, then press ENTER. - 17 - Home Office Tax 1989 DEPRECIATION CONVENTIONS USED CALCULATION METHODS Being that this is a computer generated depreciation system, the best depreciation calculation is done by use of percentage depreciation tables. These may vary by a few pennies from other types of calculations, but are accurate enough for tax purposes. Any transitional property (placed in service between Jul 1, 1986 and Dec 31, 1986 electing MACRS) was not provided for because it applies to property in progress of being constructed, and I don't think very many people in the home office position would gain anything by it. You probably didn't even know about it anyway. PERIODS USED The periods used are the periods defined by law based on the date you bought your home. Exceptions are where you have elected straightline depreciation and elected different periods. CONVENTIONS USED The conventions used are those defined by law based on the date you bought your home. The present conventions used are: CLS Class Life System. Generally a straightline depreciation over 40 years. ADR Asset Depreciation Range. No real change from the CLS convention for real estate. ACRS Accelerated Cost Recovery System. Enacted by the Tax Reform Act of 1980. This system incorporated several methods based on the date your home was purchased and defined various periods. MACRS Modified Accelerated Cost Recovery System. Enacted by the Tax Reform Act of 1986. This system simplified ACRS and extended the periods of depreciation. No depreciation is computed for those of you who rent your home or apartment. Instead, you get to deduct a portion of the rent you paid. The program will figure that for you. - 18 - Home Office Tax 1989 EXPLANATION OF WORKSHEET ---- USAGE BASIS ---- AREA BASIS Line 1: Area used for business. This is the square footage of your office space that you entered in the Compute Office Space function. Line 2: Total area of home. This is the total square footage of your home that you entered in the Compute Office Space function. Line 3: Percentage of home used for business. This is the percentage of your home office space based on area. If a time usage basis is not used, the message "TOTAL PERCENTAGE OF HOME USED FOR BUSINESS X.XXXX %" will be printed next. TIME USAGE BASIS Line 4: Hours facility used. This is the average number of hours your home was used that you entered in the Compute Office Space function. If you did not enter information on time usage, this area on the worksheet will say that the time usage basis was not used. If a time usage basis is not used, the message "Time Usage Basis Not Used" will be printed next, and lines 5 thru 7 will not be printed. Line 5: Total hours available. This is the total hours available in the year which is 24 hrs X 365 days, equals 8,736 hours. - 19 - Home Office Tax 1989 Line 6: Percentage of time used for business. This is the percentage of the usage hours to total hours available in the year. Line 7: Percentage of home usage for business. This is the percentage of your home usage for business based on the space and hours used. If the time usage basis is used, the message "TOTAL PERCENTAGE OF HOME USED FOR BUSINESS X.XXXX %" will be printed next. ---- EXPENSES ---- Line 8: Business percentage of otherwise deductible expenses. These are expenses are that are deductible on your schedule A anyway. However, by taking these as a home office deduction you may avoid exclusions on some of these expenses. These expenses may be deducted even if you have a loss. These expenses are listed in two columns; TOTAL EXPENSE, and BUSINESS PART. The business part is the total expense multiplied by the PERCENTAGE OF HOME USED FOR BUSINESS listed above. When you enter these deductions on your schedule A, you should list the amount of TOTAL EXPENSE minus the BUSINESS PART. This is a favorite part for the IRS to audit because people forget to subtract the business part when they list the expense on schedule A. a) Mortgage Interest. This is the amount of mortgage interest that you entered in the Input Expenses area. b) Property Taxes. This is the amount of property tax that you entered in the Input Expense area. c) Casualty Losses. This is the amount of casualty losses that you entered in the Input Expenses area. d) Totals. This is the total of each column. - 20 - Home Office Tax 1989 Line 9: Business Expenses. This is the amount of business expenses that you entered in the Input Expenses area. This should be the amount of all business expenses excluding any costs of sales. Line 10: Indirect Expenses for Business Use of Home. These expenses are deductible only to the extent to which you have a profit from your business and after deducting the amount from line 8d. a) Electric Utilities. This is the amount of electric utilities that you entered in the Input Expenses area. b) Gas Utilities. This is the amount of gas utilities that you entered in the Input Expense area. c) Other Utilities. This is the amount of other utilities that you entered in the Input Expenses area. d) Insurance. This is the amount of home insurance that you entered in the Input Expenses area. e) Maintenance. This is the amount of indirect maintenance that you entered in the Input Expenses area. f) Rent. This is the amount of rent (if any) that you entered in the Input Expenses area. g) Carry Forward from 1988. This is the amount of carry forward from 1988 that you entered in the Input Expenses area. h) Totals This is the total of the columns. - 21 - Home Office Tax 1989 Line 11: Depreciation This is the amount of depreciation calculated for your property based on the Basis and purchase date of your home that you entered in the Input Expenses area. On the next line the convention used will be stated. This deduction is limited to the amount of profit from your business after deducting the indirect expenses above and the amount of line 8d. The reason that depreciation is the last deductible item is because it is considered a phantom expense. It doesn't require a cash outlay in the year. Generally, whether you have a home office or not, you will have depreciation anyway, (or more appropriately, for most real estate, appreciation). Carry Forward from 1988. This is the amount of carry forward from 1988 that you entered in the Input Expenses area. Total This is the total of the depreciation for this year plus any carry forward. ---- DEDUCTION LIMITATION ---- This area calculates the amount of your home office deduction taking into account any limitations as explained as above for indirect expenses and depreciation. -- PAGE 2 -- ---- CARRY FORWARD'S TO 1990 ---- If you are not able to deduct all your expenses for 1989, this area will tell you what expenses are to be carried forward to 1990. ---- WHERE TO DEDUCT ---- This area will tell you where to correctly deduct you various home office expenses on your tax returns to effect the best tax savings. -- PAGE 3 -- This page should be attached to your income tax return as per the instructions on page 2 (above). - 22 - Home Office Tax 1989 HOME OFFICE TAX 1989 REGISTRATION FORM Name: ______________________________________________________ Company: ___________________________________________________ Address: ___________________________________________________ City, State, Zip: __________________________________________ Country: ___________________________________________________ ************************************************************ Computer Make and & Model: __________________________________ Memory: ________________ Disk (5-1/4 or 3-1/2): ___________ Monitor Type: ____________________ Printer: _______________ Graphics Adaptor Type: _____________________________________ Where did you obtain a copy of this program ?: ______________ _____________________________________________________________ ************************************************************* Quantity: ______ X $18 = __________ Less Quantity Discount (see page 5) ______ % - __________ Minnesota residents add 6% sales tax + __________ TOTAL = __________ **** Upgrades for previous registered users **** Your serial number: _________________ Upgrade fee is $10 Your comments, criticisms, and appraisals will be appreciated. MAIL TO: ParyTech Associates 16559 Quincy St. NE Ham Lake, MN 55304 Phone (612) 434-4330 - 23 -