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Robin D.
Robin D., Senior Tax Advisor 4
Category: Tax
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Experience:  15years with H & R Block. Divisional leader, Instructor
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I have not been able to work for a number of years and have

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I have not been able to work for a number of years and have gotten along happily on about $4,000 to $7,000 per year income from rental to friendly housemates in my own owned home and some flea market selling. My income is generally below taxable levels and I haven't been filing. It is possible that my income may take a jump up into the $10,000 or so range either at the end of this year or the beginning of next year as I will be publishing a book on fishing that I expect will sell well (Yes, I know such expectations are rarely met, but I have reason to believe this will sell at LEAST a couple of thousand copies.) under a self-proprietorship. Total expected book income under $5,000 to $10,000.

At that point my total income would probably require filing, although I am sure that after proper deductions I would owe nothing. My questions are several:

1) What penalties might I face if I simply didn't file, got caught, and was able to show that indeed I owed nothing?

2) If I filed, do I have to declare that housemate income? And if I *do* have to declare it, do I then have to worry about declaring myself a landlord in my city and dealing with whatever crazy regulations landlords have to deal with? These two folks are just renting a room and sharing my general living space: total monthly rent including all utilities, $400.

3) When income levels are that low, is it at all likely that I would indeed be called up for accounting by tax authorities?

4) Any other thoughts or good sources of elementary reading on this sort of question on the internet?
Submitted: 1 year ago.
Category: Tax
Expert:  Fran-mod replied 1 year ago.
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Expert:  Robin D. replied 1 year ago.

Hello and thank you for using Just Answer,

1) What penalties might I face if I simply didn't file, got caught, and was able to show that indeed I owed nothing?
Penalties are assessed based on the amount owed. If a taxpayer does not have a tax liability there are no penalties.

2) If I filed, do I have to declare that housemate income? And if I *do* have to declare it, do I then have to worry about declaring myself a landlord in my city and dealing with whatever crazy regulations landlords have to deal with? These two folks are just renting a room and sharing my general living space: total monthly rent including all utilities, $400.

If you are collecting rent from someone then you are required to declare the rental on your tax return. If they were just friends living with you and paying their share of expenses then that would not be taxable. The $400 you are collecting should be reported on Schedule E of course you are allowed expenses.

Some examples of expenses that may be deducted from your total rental income are:

  • Depreciation- You begin to depreciate your rental property when you place it in service. You can recover some or all of your original acquisition cost and improvements by using Form 4562 (to report depreciation) beginning in the year your rental property is first placed in service, and beginning in any year you make improvements or add furnishings.
  • Repairs- Repairs just keep your property in good working condition but do not add to the value of the property.
  • Operating Expenses

You would need to prorate the portion of the home they use for rental and you personal use to claim the expenses. It is possible that your expenses would be more than the rental. This would mean that you would still have no tax liability for the rental income.

As far as the legality of your rental in your city that is beyond tax advice and you would need to inquire with your city about that issue.

 

3) When income levels are that low, is it at all likely that I would indeed be called up for accounting by tax authorities?

See the above. If no tax liability then no penalties or tax due.

 

4) Any other thoughts or good sources of elementary reading on this sort of question on the internet?

Your best resource would be the irs.gov site.

http://www.irs.gov/publications/p527/index.html

 

I thank you for your patience and for a positive rating.

 

 

Robin D., Senior Tax Advisor 4
Category: Tax
Satisfied Customers: 7421
Experience: 15years with H & R Block. Divisional leader, Instructor
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