January 30, 2013

State of Alabama
Press Release: Alabama Department of Commerce

IRS Implements “Common Sense” Change on Behalf of Small Business

January 2013

The Small Business Advocate

Advocacy: the voice of small business in government



Vol. 32, No. 1

by Dillon Taylor, Assistant Chief Counsel, and Rebecca Krafft, Editor


In a win for small business, the Internal Revenue Service has announced a simplified option for small businesses to calculate the home office deduction. The new option allows a deduction of up to $1,500 based on a formula of $5 per square foot of home office space used. It will take effect for the 2013 tax year.


Chief Counsel for Advocacy Winslow Sargeant applauded the IRS announcement. “The Office of Advocacy has worked on this issue for decades, reinforcing this as a top priority of small business. This simplified option reduces costs for millions of America’s small­est businesses.” Dr. Sargeant also hailed the steadfast advocacy of the many small business organizations that have pressed for this change over the years.


In raw numbers, 14.4 million, or 52 percent of America’s 27.8 million small businesses, are home-based and may stand to benefit from the new home office deduc­tion option. The IRS estimates that this will reduce the paperwork burden on small businesses by 1.6 million hours annually.


According to Acting IRS Commissioner Steven T. Miller, “This is a common-sense rule to provide taxpayers an easier way to calculate and claim the home office deduction.”


The Office of Advocacy has diligently pursued this change on behalf of small business as part of its congressionally mandated mis­sion to reduce the disproportion­ate burden of regulation on small business. The office’s most recent formal request came in 2009, when Advocacy made this its top rec­ommendation to the Tax Reform Subcommittee of the Presidential Economic Recovery Advisory Board. Advocacy suggested that the IRS offer the option of a standard home office deduction to home-based business owners along the lines of the Form 1040 standard deduction. The change would allow at-home workers to continue to follow the current home office deduction rules or choose the new standard deduction.


Advocacy’s 2009 letter is online at www.sba.gov/content/letter-dated-092909-tax-reform-subcommittee-presidential-economic-recovery-advisory-board-0.


IRS Revenue Procedure 2013-13 is available at www.irs.gov/pub/

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