Taxes and Real Estate,
The overall rate of IRS audits is low; but, despite a lack of hard numbers, being a real estate agent appears to increase the chances of getting extra attention during tax season.
While passive loss rules severely restrict the ability to deduct rental property losses from other nonrental income, real estate professionals can claim an exemption. However, the IRS will look more closely at their return as a result—particularly if the filer has full-time employment and claims to be a property professional as well. The agency believes that most people with day jobs do not have the time to qualify as a real estate professional for tax purposes.
Another way to bring on IRS heat is to claim use of a vehicle 100 percent for business purposes when that is the only vehicle owned by the filer.
Also, agents who fail to report all income could face an audit, since the IRS compares the 1099 forms that self-employed realty practitioners receive with the tax forms to determine if there are any discrepancies. Claiming ambiguous general expenses, making charitable donations that seem out of reach with income, and/or claiming large travel and entertainment deductions also could prompt the IRS to contact a filer. The Kniffin Team Real Estate Professionals
Daniel Kniffin 505 440-6878