Monday,May 02, 2011
Dishonesty Among Landlords Leads To IRS Changes
As more and more landlords fail to report income from rental properties, the IRS is developing a plan to combat the problem. The Treasury Inspector General for Tax Administration (TIGTA), which is responsible for monitoring the IRS, reports that landlords misrepresented their rental earnings by as much as $12.4 billion since 2001. The IRS disputes the figure provided by TIGTA, but does acknowledge that there is money that goes uncollected each year that could make a big difference to the government's revenue stream. In fact, it is predicted that by simply increasing the number of audits performed on filers who own rental property could generate an extra $27.3 million in just five years.
Agreeing that more can be done to collect on unpaid taxes, the IRS hopes to increase the number of audits it performs on tax returns with rental income beginning in the summer of 2013, although the IRS admits that their resources (or lack thereof) may dictate the amount that they can afford to increase auditing.
Changes that can be expected for the 2011 tax year include a requirement that landlords with passive activity loss, as defined by the Tax Reform Act of 1986, will need to submit an additional form with their tax return, as well as a requirement that real estate agents report their total net earnings or losses. Both measures are expected to increase the revenue generated by the annual tax returns.