Why me? Now? Multi-state psychologist issue

[Margaret CPA in OH]

Who knew this would generate such lively discussion?  Obviously there is no (I think) clear easy answer.  I will ask whether she will continue her in person consults in OH if deducting an allocable amount of rent for a place to sleep as she obviously cannot commute is disallowed (by me, not necessarily by IRS as they don't know and chances of audit are about 0).  Her answer will matter.  Then she can be upset that her previous free accommodations were removed by her friend's relocation.

Have a good evening.  I will enjoy another snow day tomorrow with the 8-10 inches we received today.  Our cul-de-sac is not cleared yet.

[Lion EA]

I'm sleep-deprived this week (medical appointments) so bow to Danrvan's clearer thinking that the client has one principal business. Is more time spent on her TN biz? Or, does the in-person OH biz have higher revenue?

14 hours ago, PapaJoe said:

One question I would ask is if she had no clients in Ohio, would she still travel there twice a month for church and social reasons? Also, how many days does she spend each trip?

I don't think Margaret specified whether her client's travel to OH was primarily for business when she talked about the friends and socializing she does in OH, so I still think Margaret should ask more questions before she concludes how much of her travel/lodging to/in OH is biz related.

[TexTaxToo]

I agree with others that you first have to determine whether the trips are primarily for business or primarily personal.  If primarily personal, no travel expense is deductible.  If primarily business, then you can apportion as necessary (if for example, she extended the stay for personal reasons, she could not deduct those nights).

One issue is that your client has not deducted anything for travel in the past.  That implies that she considered the trips primarily personal.  Does switching from staying with a friend to renting an apartment change the nature of the trips? 

If the trips are primarily business, then I believe you should deduct all allowable expenses, including mileage or air fare - you should not pick and choose which expenses to deduct.
 

[DANRVAN]

On 1/8/2025 at 9:00 AM, TexTaxToo said:

If the trips are primarily business, then I believe you should deduct all allowable expenses, including mileage or air fare - you should not pick and choose which expenses to deduct.

Agree with that.

On 1/8/2025 at 9:00 AM, TexTaxToo said:

One issue is that your client has not deducted anything for travel in the past.  That implies that she considered the trips primarily personal. 

Disagree with that. The OP implies that cost were minimal or maybe never taken into consideration.  But at any rate each tax year stands on its own regardless of how it was handled in the past.

 

[Margaret CPA in OH]

I have discussed this with the client and she has decided it just isn't worth all the tracking and rationalization.  She clarified to me that in the past she and partner stayed with partner's mother renting space in the basement to sleep or with friends and occasionally an AirBnB and not just with a friend every time, as I thought. They decided that wasn't working reliably or well as they are both over 60.  She also stated that the primary reason she continues to come to OH so often is work to maintain those in person clients. She  sees them on the first and third Friday and Saturday of the month.  The 4 1/2 drive from TN does not work with commuting especially when seeing clients on both Friday and Saturday.

When both come to OH, only one drives and it could be either so determining mileage isn't easy nor is meals away as they were a combination of dining with family or friends or cooking or eating out, etc.  I just wonder what other folks in similar situations might do.  I think it not at all unlikely that a sole proprietor in a variety of fields may have work locations in more than one state or at a distance too far to commute but still have ordinary and necessary business expenses.  I trust there is no disagreement that the office space she rents in OH for the in person counseling is not in dispute even though she does not do her billing there and does most of her counseling via telehealth from TN but not in a rented office space.

Thanks again to all for the thoughtful discussion.  Always more to learn...

[mcb39]

Margaret, I do maintain an exclusive OIH in my "Home away from Home".  I do take the expenses for OIH because I work on tax returns when I am there.  However, those are the only expenses that I take, and those are subject to quite a small square footage.  I might get slapped for that some day, but I do feel justified.  I have an exclusive laptop for that location as well.  It stays there when I leave unless I bring it home for IT to update. (No expense for him).

[DANRVAN]

18 hours ago, Margaret CPA in OH said:

office space she rents in OH for the in person counseling is not in dispute

If the space is used exclusively for business then there is no problem (assuming this is outside of the rented apartment).

3 hours ago, mcb39 said:

I do maintain an exclusive OIH in my "Home away from Home".  I do take the expenses ........ I might get slapped for that some day,

You need to use it on a regular basis (rather than occasional or incidental) and also prove it was your principal place of business.

The IRS has never set forth any criteria for "regular" use. In the case of Green, it was established that he met the regular use requirement by using his home office about 2 hours an evening, five nights a week.   However, he was denied a deduction because he failed to prove it was his principal place of business per sec 280(A)(c)(1)(A).

The IRS and case law have allowed OIH deductions for both a main home and 2nd home.  In Moller  taxpayers had an office in both their summer and winter homes; and established both were used on a regular basis; in their case over 40 hours per week regardless of which residence they were at for the season.

So it boils down to facts and circumstances.