Have Tax Questions? Ask a Tax Expert for Answers ASAP
You will need to fill out an amended tax return. First you will need to complete Schedule E, to report the income and expenses of your rental.
This was for 4 years! Am i likely to go to jail or have some legal troubles? I am so scared. I didnt do it intentionally
There are other forms that you may need, such as Form 4562 for depreciation expense and 8582 for passive loss limitations.
Ok. First, don't worry until you know the numbers.
A rental home is often not profitable so there may not be any taxes owed.
Well it wasn't very profitable but over the 4 years I'm scared they may think I committed fraud. Shall I get a lawyer? I dont' even know where to begin or should I just use a tax service?
For example, if you get $1000 per month in rent, spend $500 in mortgage interest, taxes and insurance, another $200 in miscellaneous expenses then there is only a $300 profit. You then deduct depreciation, repairs etc, and usually there is no taxable income. There may even be a deductible loss.
Before getting a lawyer, have the amended returns prepared by a CPA or Enrolled agent.
Then you will know if you owe any tax. There will not be a penalty if there is no tax owing.
will the penalty be monetary only?
As with most things, it depends on the amount of deliquent tax. The more you owe, the more the penalty. If you come forward with this information before they come to you, it will be better.
Do you have any idea how much profit you had each year?
And yes, the penalty will most likely be monetary only. It is common for people to omit income from their taxes when they think there wasn't any profit (like sales of stock).