For a cell phone, one reasonable and conservative way to come to a reasonable deduction is to prorate what you pay monthly between business and personal based on minutes. Any REASONABLE method of assigning costs between business and personal is acceptable. One unreasonable method is to try to claim the cell is for business only and only count personal use if you go over your minutes and incur airtime charges. I haven't seen cell phone deductions challenged or even questioned on legit clients, only the ones that were trying to get away with something by trying to pretend they had a business.
For the home office deductions, Lighthouse24 is correct that the expenses are only deductible if the space is exclusively used for business. That said, the space doesn't have to be an entire room, the part of the room around a computer could be valid for example. Keep in mind that if you are claiming exclusive business use, it has to be practical. If you have only one computer in your house and you are not the only member of the household, you are going to all but have to prove that no one else touches the computer to qualify the space.
Home office deductions cannot cause or increase a loss. The deductions will be suspended until the business otherwise has a net profit. I have seen people try to get around this by treating part of their utilities or rent as direct deductions on Schedule C. That is a dead loser.
The bottom line is that for the most part if the business is legitimate and treated like a business, the losses/deductions may be questioned, but not likely overturned. I have had auditors try to claim the hobby loss rules with the three of five years rule on real businesses where people just made a lot of bad business decisions. As soon as the conversation turns that way, I ask if they are as comfortable taking that stance in front of Appeals or the Tax Court as I am defending against it. I have yet to hear the question a second time on any audit outside of a horse business (and even that one was a valid business).
If the only reason it's a business is for tax deductions, one will almost certainly lose. Every once in a while, I get someone who wants to play the games. I won't take them even if I could use the fees because I know that I am doing them no favor. If during the conversation, the strongest defense for a position is "Who is going to know?", that is the losing side of an audit waiting to happen.
If one wants to set up a second nearly identical "business" because their deductions were disallowed the first time around, they should seriously reconsider. At a certain point, mistakes become negligence and negligence becomes fraud.
I now descend from my soapbox. My apologies.
