Over the past few years the IRS and states have drastically increased audits relating to rental real estate and other passive activities. The Treasury Inspector General issued a report urging more audits of tax returns that report losses from rental real estate and other passive activities. The report follows a Government Accountability office study in 2008 that found most taxpayers with rental real estate misreported their income and deductions. The IRS is changing the way it is reviewing and auditing returns and we are well aware of these changes and equipped to prepare our returns to minimize audit risk. Additionally, we offer an annual voluntary Audit Risk Fee program where our clients can pay a nominal “insurance” fee that will cover our time in dealing with an IRS or State Audit or Notice.The IRS plans to audit more landlords and others claiming losses from rental real estate. In addition to increased audits, the IRS plans on asking for more information on future returns.
The tax rules related to passive activities are not well understood by the tax preparation community or by the IRS. We know the rules and have a successful record in defending taxpayers. We know passive activity law. If you have been selected for an IRS audit you owe it to yourself to get the best defense.
What does this mean for those claiming real estate rental losses?
Expect more paperwork and an increased chance of being audited. If you believe that there might be problems with your returns, contact us.What does this mean for those claiming real estate rental losses? Expect more paperwork and an increased chance of being audited. If you believe that there might be problems with your returns, contact us.
Let us do the work, call or email today!