Short-Term Rental Can Result In Loss Of Homestead Exemption!
DID YOU KNOW: If you do short term rentals of 30 days or more per year for any two consecutive years in a row you could lose your homestead exemption.
This could mean paying tax on a much higher assessed value.
It has recently come to our attention that at least some property tax departments, including Broward County, have subpoenaed the records of Airbnb, Homeaway, VRBO, Tripadvisor and others for 2014 through 2020 to determine if additional taxes were due on properties listed as homesteads.
While short-term rentals of your home can create some extra income and, federal tax exempts income from up to 14 days per year of short-term rental income from a principal residence, rent days of 30 or more in two consecutive years is deemed to be abandoning your homestead exemption. This could result in additional real estate taxes and or tax liens on your home.
Click here for the complete letter from Broward County shown below.
Don’t Ignore IRS Correspondence
The IRS is back – at least when it comes to the sending of millions of letters to taxpayers whom it believes underpaid their taxes. The letter takes the form of a CP14 and it is important not to ignore these notices.
Just because you get a notice does not mean that you necessarily owe the additional amounts due shown by the IRS. A CP14 means that the IRS shows a balance due on a tax return. This could be due to a number of things including missing payments or credits. Check the notice to see if it accounts for all the payment shown on your return. If for some reason a payment is missing, or was mis-posted by the IRS you will need to provide proof of payment and a timely response to the IRS.
If the CP14 is correct and all payment have been accounted for, will need to pay the amount shown as the balance due. The CP14 notice will tell you how much you owe and request payment within 21 days.
Paying the amount shown by the due date will avoid the assessment of additional interest.
If you don’t pay the amount due within 60 days, the IRS can move to collect on the balance and even place a lien on your property, such your home or your car.
If you believe the IRS notice is incorrect or need help, give us a call and we will be happy to assist you
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IRS Destroyed Millions of Paper-filed Taxpayer Documents
According to an audit report (2022-40-036) published on 5/4/22 by the Treasury Inspector General for Tax Administration (TIGTA), a service-wide strategy is needed to address challenges that limit growth in business tax return electronic filing. The report states, “This audit was initiated because the IRS’s continued inability to process backlogs of paper-filed tax returns contributed to management’s decision to destroy an estimated 30 million paper-filed information return documents in March 2021. The IRS uses these documents to conduct post-processing compliance matches to identify taxpayers who do not accurately report their income. “The IRS advised TIGTA that once a tax year concludes, the information returns, Form 1099-MISC (Miscellaneous Information), can no longer be processed due to system limitations. This happens because the system used to process the information returns is taken offline for programming updates in preparation for the next filing season. The report can be found at www.treasury.gov/tigta/auditreports/2022reports/202240036fr.pdf .
Gig Economy Income Reporting Requirements
IR 2022-45, 3/1/2022
In an information release, the IRS has remined taxpayers of their reporting and potential tax obligations from working in the gig economy.
Gig economy earnings are taxable. Generally, income earned from the gig economy is taxable and must be reported to the IRS. The IRS notes that taxpayers must report income earned from the gig economy on a tax return, even if the income is:
- From part-time, temporary or side work,
- Not reported on an information return form-like a Form 1099-K (Payment Card and Third-Party Network Transactions), 1099-MISC (Miscellaneous Income), W-2 (Wage and Tax Statement) or other income statement or
- Paid in any form, including cash, property, goods or virtual currency.
Fraud Blog
IRS Warns Child Tax Credit Portal May Have Wrong Amounts
Under the heading Not Quite Ready for Tax Season the IRS is urging people to use the 
information in their online taxpayer accounts for the most up-to-date figures on the amount of the advance Child Tax Credit to include on their tax returns — instead of the numbers stated in the letters it has been sending.
The IRS began hearing questions from reporters the day tax season started on January 24 about why some of the letters the IRS had been sending to taxpayers who had received the monthly Child Tax Credit payments seemed to have incorrect amounts. The IRS believes the inconsistencies are relatively limited and mostly apply to taxpayers who have changed addresses, whose payments were undelivered, or where the direct deposit failed to work, perhaps because they changed bank accounts.
The best answer, as always, is to check your records and bank statements to see exactly what you received. This is another reminder that it is never a good idea to leave the record keeping for your taxes up to a third party, even when that third party is the IRS. W2s, 1099s and other tax documents you receive are not always correct and if you have the records to prove they are wrong you can use those records to make sure you don’t over pay your taxes.
It’s Fraud
conspiring to defraud the U.S. by promoting a nationwide tax fraud and assisting in the preparation and filing of false returns for the participants. Mr. Bey led taxpayers to believe that they were entitled to refunds by convincing them that their mortgages and other debts entitled them to refunds.IRS is Still Suffering Pandemic Delays
IRS warns taxpayers and tax professionals to be ready for a turbulent tax-filing season. The IRS is still dealing with backups in processing returns from the past two filing seasons, and the upcoming filing season will just make things worse. The volume of unopened mail at the IRS, including tax returns, as of December 23rd was over six million pieces, which is more than six times the normal amount.
Thus, when it comes to dealing with the IRS or having your tax professional deal with them for you, patience is more important than ever. It still sometimes takes hours to get anyone from the IRS on the phone; and when they do answer, they might just tell you to allow more time for payments or other correspondence to be processed.
Filing your tax return electronically will help get your return around the backlog and in most cases will speed up your refund. It will also assure that you have proof of timely submitting your return.
The IRS will begin electronically accepting returns on January 24, 2022 for the 2021 individual tax filing season.
Free 2021 Tax Organizer
Now is the time to start getting your 2021 tax records together. be sure to set-up a safe place to keep your W2s, 1099s and other important tax information. Keep an eye open for letters from the IRS reporting the amounts of Economic Impact Payments your received and or Advance Child Tax Credits.
If you are a prior year client of RMS Accounting you can email us for a custom 2021 Tax Organizer that will include last years tax data so that you can use it to help locate this years tax information just email us at Info@RMSAccounting.com and be sure to include your name and spouses name and to include “2021 Tax Organizer” in the subject line.
New to our firm or just looking for a little help to get organized? Just click here to download our FREE 2021 TAX ORGANIZER!
Economic Impact Payment letter can help with the Recovery Rebate Credit
The IRS will begin issuing Letter 6475, Your Third Economic Impact Payment, to EIP recipients in late January. This letter will help Economic Impact Payment recipients determine if they are entitled to and should claim the Recovery Rebate Credit on their tax year 2021 tax returns that they file in 2022.
Letter 6475 only applies to the third round of Economic Impact Payments that was issued starting in March 2021 and continued through December 2021. The third round of Economic Impact Payments, including the “plus-up” payments, were advance payments of the 2021 Recovery Rebate Credit that would be claimed on a 2021 tax return. Plus-up payments were additional payments the IRS sent to people who received a third Economic Impact Payment based on a 2019 tax return or information received from SSA, RRB or VA; or to people who may be eligible for a larger amount based on their 2020 tax return.
Most eligible people already received the payments. However, people who are missing stimulus payments should review the information to determine their eligibility and whether they need to claim a Recovery Rebate Credit for tax year 2020 or 2021.
The Economic Impact Payment letters include important information that can help people quickly and accurately file their tax return.