going to irs audit... need expert advice... how to prove i'm real estate professional?
1. I have more than 25K losses on my real estate (have 5 properties).
2. have a W2 for full time job. (very very flexible). 4 weeks vacation, personal time... have letter from manager to support this.
3. don't have ANY logs of time spent.
4. have ALL support for supples, c&m and repairs.
4. i actually do spend more in rental activity than full time job.
Contact a accountant and go over all your expenses, paperwork and what the law allows. Check with a lawyer for additional help. You are allowed to deduct your expenses the irs is question all your deductions with the paperwork you have stated you should have all you need. Best Wishes and Good Luck with your irs audit.
Source(s):4 years ago
There are two basic questions:
1. Can you prove the actual expenses
2. Are these business expenses for a business that you intend to make a profit from one day, or is it a hobby?
The second question will likely be the focus of the audit. For more info on this, directly from the IRS, see:
Real estate Professionals deal with other peoples properties - NOT their own
so that title won't work with IRS - Gee, with that much loss not wonder they are
investigating - even I would question that amount unless you had some really major repairs
that needed to be done - if you can prove with facts, figures and receipts how you
derived at your taxable rental income - then you have nothing to worry about.
This doesn't make you a real estate professional, it makes you an investor.
You don't need any time logs, you can't claim any credits based on your time spend as a landlord, only real expenses.
If you have been claiming time you are in lots and lots of tax fraud trouble.
Actually, you do not want to be classed as a real estate professional, because your property will become inventory, and you will not get the long term capital gain provision under the law. All you need to do is show that you are managing your own property. You should have a log of daily travel mileage to your properties. Do not worry. Do not volunteer any information. Make your answers short. Calm down. Your fears can work against you. Let them make their adjustments if any. Do not give them any personal information, like cost of living or personal check book. You did separate your business from personal checks in a separate account didn't you? Whatever happens, after they make an assessment, if any, you can always get a CPA or Enrolled Agent to appeal the assessment.
Source(s)by Bibs - 4 years ago