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Lane
Lane, JD, CFP, MBA, CRPS
Category: Tax
Satisfied Customers: 10938
Experience:  Law Degree, specialization in Tax Law and Corporate Law, CFP and MBA, Providing Financial & Tax advice since 1986
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I found out I'm being audited by the IRS related to

Customer Question

I found out I'm being audited by the IRS related to unreported rental income. I received rental income but received confusing advice on where I needed to report it and I didn't
JA: The Accountant will know how to help. Please tell me more, so we can help you best.
Customer: I found out I'm being audited by the IRS related to unreported rental income. I received rental income but received confusing advice on where I needed to report it and I didn't as rental income and mortgage payment was a wash
JA: Is there anything else important you think the Accountant should know?
Customer: I'm concerned what of the penalties
Submitted: 1 month ago.
Category: Tax
Expert:  Lane replied 1 month ago.

Hi, My name's Lane. I can help

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What you should do is get together the return the way this should have been reported.

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Rental income (and expenses) are reported on Shcedule E.

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It's very possible that you'll have enough expenses that the income is offset (or at least reduced).

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If you can show that the expenses offset the income there will BE no penalties.

Expert:  Lane replied 1 month ago.

It's important to understand, however, that the entire mortgage payment is not a deduction against the rental income, but rather the interest (repayment of principal isn't deducted becasue you weren't taxed on the loan itself)

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BUT if this is a relatively new mortgage MOST of the payment my BE interest (you'll see the interest on the 1098 the lender should have sent you)

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AND there are other rental expenses that are deductible as well (such as depreciation on the house, advertising, travel to the rental to inspect, etc)

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If you'd like help with the reporting, let me know.

Expert:  Lane replied 1 month ago.

Here's a pretty good list of deductible expenses for landlords: http://www.nolo.com/legal-encyclopedia/top-ten-tax-deductions-landlords-29497.html

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From there:

    Interest. Interest is often a landlord's single biggest deductible expense. ...Depreciation. ...Repairs. ...Local Travel. ...Long Distance Travel. ...Home Office. ...Employees and Independent Contractors. ...Casualty and Theft Losses.
Expert:  Lane replied 1 month ago.

Please let me know if you have ANY questions at all, before rating me

But if this has helped, and you don’t have other questions, I would appreciate a positive rating (using those stars on your screen – and clicking submit)

That’s the only way JustAnswer will compensate me for the work here.

Thanks,

Lane

I hold a law degree, with concentration in Tax Law, Estate law & Corporate law, an MBA, with specialization in finance, a BBA, and CFP & CRPS designations, as well - I’ve been providing financial, Social Security/Medicare, estate, corporate, non-profit, and tax advice, since 1986.