Ask Me Help Desk - Do you have to claim room and apartment rentals?

Do you have to claim room and apartment rentals?

State of NY

Would anyone happen to know if you must claim income from apartment(basement) and room rentals? I thought that you did but the IRS doesn't seems to care either way. Neither does the state. The tough part here is that there are no receipts between the renters and the landlords. There are only witnesses. If this is the case, I would think that everyone should rent and not claim this when they file their taxes. Everyone should have the same privilege. The amount in question is well over $25,000 for just one of the landlords. Maybe I'm wrong and you really don't have to claim at all? :confused:

Quote:

Originally Posted by trmpldonagn

State of NY

Would anyone happen to know if you must claim income from apartment(basement) and room rentals. I thought that you did but the IRS doesn't seems to care either way. Neither does the state. The tough part here is that there are no receipts between the renters and the landlords. There are only witnesses. If this is the case, I would think that everyone should go ahead and rent and not claim this when they file their taxes. Everyone should have the same privilege. The amount in question is well over $25,000 for just one of the landlords. Maybe I'm wrong and you really don't have to claim at all? :confused:

I own apartments - it's income which you must claim. If you don't and never get caught, no problem, but I wouldn't take a chance.

If you DO get caught it's penalties and interest and fines and you'll be audited as far back as the IRS is willing to go.

Other people paying taxes on all of their income are very likely to report someone who is not listing income and paying taxes.

Thank you very much. I thought so. There are a few people I know that have gotten away with it for a long time. One person got away with it for 14 years now. They were reported 2 years ago and nothing was ever done. It definitely is not fair but I guess the IRS didn't feel is was worth their time or money. Also, there are no receipts. Just witnesses. I'm curious why the IRS let it go. Thank you again.

Quote:

Originally Posted by trmpldonagn

Thank you very much. I thought so. There are a few people I know that have gotten away with it for a long time. One person got away with it for 14 years now. They were reported 2 years ago and nothing was ever done. It definitely is not fair but I guess the IRS didn't feel is was worth their time or money. Also, there are no receipts. Just witnesses. I'm curious why the IRS let it go. Thank you again.

No way of knowing when IRS moves... and when IRS doesn't. I'm a former Fed employee and I can tell you that the number of calls reporting illegal activity to all Agencies is almost overwhelming and perhaps IRS has to also sort of pick.

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Originally Posted by JudyKayTee

I own apartments - it's income which you must claim. If you don't and never get caught, no problem, but I wouldn't take a chance.

If you DO get caught it's penalties and interest and fines and you'll be audited as far back as the IRS is willing to go.

Other people paying taxes on all of their income are very likely to report someone who is not listing income and paying taxes.

IRS Publication 527 may be of use to you. See the section about personal use of your dwelling. Go to IRS.gov/formspub/index.html. Choose Publications, then search for Publication 527.

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Originally Posted by de_de_gc

IRS Publication 527 may be of use to you. See the section about personal use of your dwelling. Go to irs.gov/formspub/index.html. Choose Publications, then search for Publication 527.

It's not the OP's property - the form you posted states very clearly that income from rentals must be reported, which is the question.

This publication has to do residential rental property (including vacation homes). The original question did not exactly say if there was a personal use issue, so I thought the pub might be of helpful.

I am sure it will be ignored if it is not helpful.

Thanks very much both of you. I do appreciate your help and much help it was.
JudyKay, I thought that might be it when you say they are so overwhelmed that they must pick in order of important or they prioritize I should say. Thanks so much again. Maybe eventually they'll get to the smaller cases. It just stinks that so many people get away with it. Thanks so much again!

Quote:

Originally Posted by trmpldonagn

Thanks very much both of you. I do appreciate your help and much help it was.
JudyKay, I thought that might be it when you say they are so overwhelmed that they must pick and choose in order of important or they prioritize I should say. Thanks so much again. Maybe eventually they'll get to the smaller cases. It just stinks that so many people get away with it. Thanks so much again!

And part of the problem - you see it here on the Immigration Legal Board all the time - is that people call in and report their friends, relatives and neighbors, making the whole thing up just to cause problems. Meanwhile the people who are actually committing the crimes skate.

Same with Child Protective Services - women busy calling the authorities on each other. Meanwhile, child abusers run around loose.

<clunk! Off my soapbox!>

JudyK, I couldn't have put that better myself and I will check out that other legal board you mentioned just for the heck of it. Hopefully, I can keep you posted and let you know if just is ever done. It is such a shame that these people you're referring to are doing things RIGHT; working hard, taking care of their kids, paying taxes, not pulling anything illegal or taking advantage of the system, yet these other knuckleheads are being overlooked and getting away with so much. Ay yi yi... Let's not lose hope or faith.

Generally, if you are receiving income from renting part of your personal residence, you do NOT have to report the income.

The reason is simple: the expenses normally associated with such rentals usually exceeds the income realized. Since the excess expenses CANNOT be deducted from your other income, it would be a waste of time to report the income to begin with.

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Originally Posted by AtlantaTaxExpert

Generally, if you are receiving income from renting part of your personal residence, you do NOT have to report the income.

The reason is simple: the expenses normally associated with such rentals usually exceeds the income realized. Since the excess expenses CANNOT be deducted from your other income, it would be a waste of time to report the income to begin with.

Can you post the law on this? My nephew rented a room in his house to a college student. When the student applied for tuition assistance and the amount he paid for rent came to the attention of the Feds - and IRS, specifically - my nephew was charged a penalty and interest for not reporting the income - then NY came after him for their share of taxes.

At the time IRS furnished information which indicated that the cost of maintaining the house could be percentaged out and the total amount of rent paid could be reduced but that he was obligated to file it as income. I don't have the Sections they quoted to him but will get them when he returns my call.

He is STILL filing it as income and if this is not necessary I will tell him to appeal to both IRS and NY and stop claiming the income, minus the expenses.

If you furnish the section I'll do the research -

(He did not consult with an Attorney or an Accountant - he just made arrangements to pay.)

Sorry, I cannot provide the IRC citation, because I am NOT at home and do not have access to my research resources.

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Originally Posted by AtlantaTaxExpert

Sorry, I cannot provide the IRC citation, because I am NOT at home and do not have access to my research resources.

When you get it - whenever that is - would you please post? It certainly could save my nephew a lot of money and with any luck he could reverse all the penalties and interest.

Send me an email to [email protected] AND [email protected], or I will forget it for sure.

I do hope that one of yous' will post that information here. I don't mind admitting that I am thoroughly confused. But that is why I ask you experts. Thank you for replying to my post. I'm learning... Thanks very much.

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Originally Posted by trmpldonagn

I do hope that one of yous' will post that information here. I don't mind admitting that I am thoroughly confused. But that is why I ask you experts. Thank you for replying to my post. I'm learning...... Thanks very much.

Very often experience and rules and regulations are two different things. I did ask my accountant (on behalf of my family member) and was told the rental has to be claimed as income, if any rent is collected for any property (including a room in a house), it's income.

That, of course, doesn't mean that's according to IRS Code. That's just what my accountant says.

I do agree with that. I think the IRS knows very well that people are supposed to claim rentals as income but as you said earlier, they just have too many complaints and/or people to investigate so they must pick.

Quote:

Originally Posted by trmpldonagn

I do agree with that. I think the IRS knows very well that people are supposed to claim rentals as income but as you said earlier, they just have too many complaints and/or people to investigate so they must pick and choose.

Right. And nobody here (hopefully) is going to suggest that anyone break the Law.

Not saying everyone always agrees on the exact advice but I believe we all agree on the basic concept that it's best to follow the Law.

Agree 100% Judy which will bring me to my next question in another week or two when I do my taxes. Thanks for all of your replies and your help! Now I'm going to see if I can close this since I don't believe I figured out how to close any of my questions since I joined. And I do know that the posts are not for the asking of this. I believe I just saw how to do it right in my email. Let me stop rambling and just thank you again!