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InfoTaxes
InfoTaxes, Tax Preparer
Category: Tax
Satisfied Customers: 262
Experience:  CTEC and IRS Registered Tax Return Preparer
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Is No Schedule E an automatic audit flag?

Resolved Question:

My 2011 return included Sched. E income - less than $2,000 - for renting out a room. I'd rather not rent out that room this year. If my 2012 return does not include a Sched. E, would that be an automatic audit flag?


 


(You've helped me previously re multi-year delinquencies.)

Submitted: 4 years ago.
Category: Tax
Expert:  InfoTaxes replied 4 years ago.

InfoTaxes :

Thank you for using JustAnswer.com I will be more than happy to assist you!


 

InfoTaxes :

If on your Schedule E you marked that it was a room that you rent out and not a property you don't have to worry


 

Customer:

OK, my preparer messed up.

Customer:

On line A he entered just the address of the building and my apartment number. No indication that I was renting out a room to someone.

InfoTaxes :

Property rented less than 15 days. If a property is rented less than 15 days, it's primary function is not considered to be rental and it should not be reported on Schedule E (Form 1040). You are not required to report the rental income and rental expenses from this activity. The expenses, including qualified mortgage interest, property taxes, and any qualified casualty loss will be reported as normally allowed on Schedule A (Form 1040). See the instructions for Schedule A for more information on deducting these expenses.


 

Customer:

Looks bad for me. The enrolled agent who did this return entered 365 as the number of fair rental days. I'd told him that the room was rented for four months, but didn't notice his errors when I signed the return.

InfoTaxes :

You can go back to him and you can amended your return


 

Customer:

OK, that's what I'll do. Thanks for the help.

InfoTaxes :

Make sure that your schedule E shows that it is a short term rental

Customer:

Ok, will do. What about my original question: If I don't rent out that room this year, would not having a Schedule on the 2012 return be an automaitci audit flag?

InfoTaxes :

The IRS won't audit if your schedule E shows that it was just a short term rental

Customer:

Does 4 months qualify as "short term"?

InfoTaxes :

Yes because you only did it once and you are not planning on renting your room again


 

Customer:

Got it. Thanks.

Customer:

Are you a CPA?

InfoTaxes :

I'm not a CPA


 

InfoTaxes :

I'm a certified tax preparer


 

Customer:

Ok, just wanted to know what to say to the enrolled agent.

InfoTaxes :

Just tell him/her that you rent the room for 4 months not 365 days and that you are planning on not renting the room anymore


 

InfoTaxes :

I have to step out of my office for few minutes but if you need more help I will be more than happy to assist you as soon as I get back!

Customer:

Will do. Over and out.

InfoTaxes and 2 other Tax Specialists are ready to help you