[jenuno01]

I just filed my taxes, I kind of waited last minute due to a problem with one of my W-2s. Anyway, I bought a house last year after I graduated. At first, I wasn’t planning on having any roommates, but a flood happened in town and 3 of my friends were affected by it. I let them live in my house for what we thought would be a 2-month period, but we decided they are going to stay for good, or until they get married. I charge them $350 in total (which is really cheap). I’ve always been bad with taxes and completely forgot about the implications of Rent Revenue. What should I do now?! I am freaking out. Should I amend my return? I know this makes me seem dumb… but I honest to God completely disregarded this income until last night while briefly studying for REG.

Class of 2012

[Anonymous]

I would amend the return and include the rental income.

[kmwgrace]

Yep. Kricket's right, sorry Dude you need to file an amendment. It's not a big deal though. People freak out over it but really as long as you report the income prior to tax day (April 17 this year) you'll be fine.

~ Kate... MTX!
CPA exam on hold while I homeschool my 6 year old!

[jenuno01]

Thanks girls! Ok so I've been freaking out all day because the deadline to file is close! So I just got off the phone with a popular tax preparer in town (I originally did my taxes online by myself), and these were his words: “Okay so you had a couple rommates last year, the rent income was $2,000 right? If it's not reported on a 1099, why would you want to report it? Just pocket the money and forget about it dude”

LOL, I was so disgusted, I instantly hung up on him.

My question is, since I already filed my taxes, paid the Federal, and got a refund from State, can I wait until after the deadline to file an amendment? Or do I absolutely need to report the $2,000 rent revenue before the deadline?

I feel so dumb lol

Class of 2012

[jomarie]

In our office, we have a couple of amendments to file. We usually wait until after the deadline, just to let things calm down a bit plus to give the orginial return time to process through the system. I don't see why you wouldn't be okay to wait until after the 17th.

Started sitting in May 2002, on and off. But since 2008 I've been nonstop and my scores are....
AUD - 39, 48, 56, 65, 68, 73, 76!!! (Finally passed in Oct 2011!!!) Becker, NINJA, & Wiley
REG - 75 (Lost Credit) 72, 68, 73, 75 (Passed again in Aug 2011) Becker, NINJA, & Wiley
FAR - 65, 68, 75 (Lost Credit) 68, 73, 73, 80 (Passed again in May 2012) Roger, NINJA, & Wiley
BEC - 65, 68, 71, 72, 72, 71, 76 (Lost Credit)- 70, 76!!!! I AM DONE!!! - Roger, NINJA, & Wiley
After 10 long years of studying, I AM DONE!!!! Finally a Licensed CPA in the State of New York!!

[kmwgrace]

Because if he ends up owing tax on the income the interest starts accruing the day after tax day. That was my thought anyway.

~ Kate... MTX!
CPA exam on hold while I homeschool my 6 year old!

[jomarie]

Never thought of that. But won't he have some expenses to offset the income?

Started sitting in May 2002, on and off. But since 2008 I've been nonstop and my scores are....
AUD - 39, 48, 56, 65, 68, 73, 76!!! (Finally passed in Oct 2011!!!) Becker, NINJA, & Wiley
REG - 75 (Lost Credit) 72, 68, 73, 75 (Passed again in Aug 2011) Becker, NINJA, & Wiley
FAR - 65, 68, 75 (Lost Credit) 68, 73, 73, 80 (Passed again in May 2012) Roger, NINJA, & Wiley
BEC - 65, 68, 71, 72, 72, 71, 76 (Lost Credit)- 70, 76!!!! I AM DONE!!! - Roger, NINJA, & Wiley
After 10 long years of studying, I AM DONE!!!! Finally a Licensed CPA in the State of New York!!

[Anonymous]

Your not going to like this reply, but since its not reported anywhere and your roommates are not reporting this as a expense anywhere. I dont see a reason for you to report it either. Yes its not ethical and all, but i dont see this as a material amount that would really make much of a difference.

[Anonymous]

The IRS doesn't really care about “material” amounts. It is a violation of the IRS code to exclude income of any kind. Hobby income must also be reported and expenses up to the amount of the hobby income are allowed. Hobby losses are not allowed.

[Minimorty]

@jenuno – Perhaps this was a gift from your buddies to show their appreciation of your generous gesture? Since its under the $13k limit, they won't need to file a 709. Since you are the recipient of a gift, you won't need to report. 😉

[Minimorty]

@kricket – “it is a violation of the IRS code to exclude income of any kind.” There are many exceptions to this rule, so this isn't an entirely accurate statement.

[Anonymous]

Now that you've brought this up publicly on an internet site, I'd strongly advise you to file an amended return. The toothpaste is out of the tube, as they say. You don't want to jeopardize your future licensure in any way. Not worth it.

[Anonymous]

Also, consider calling the IRS! (I know, sounds crazy). It will take you awhile to get through this week for sure, but someone will eventually speak with you and advise you. Document their name and ID number, so, whatever happens, you can show a good faith effort to do things correctly.

I've done lots of work for small nonprofits that can be disorganized/late with filings, and I've actually found the IRS to be very responsive in waiving penalties and interest for honest errors and lapses, if you're upfront in communicating with them.

[Chantel]

If you did amend it, it would probably help your return and get you more of a refund because you would more than likely end up with a loss on it. If you take into account mortgage interest, taxes, utilities, repairs, etc. Even splitting that up and taking away what would be considered your part, I would think you would end up with a loss with that small of rent.

Personally, I wouldn't take the time to amend my return at all.

F - F ('12), 90 (Dec '15)
A - F ('12), 73 (Feb '16), ? (July '16)
R - 87 (May '16)
B -

[Anonymous]

OK, this must be why I turned out to be an accountant — I did some research because I really wanted to find out the exact correct treatment! (Also I might easily find myself in this situation with my college-age kids — one day I might wake up and find them BAAAACK in the spare bedroom.)

IRS publication 527 addresses this specific situation under “Not Rented For Profit” section. Report not for profit rental income on 1040 line 21. And you can show rental expenses up to the amount of rent income as a miscellaneous itemized deduction on schedule A. So you might get a little break there, depending.

The only workaround I can see in future is for you to allow them to live in your house for free and, in unrelated transactions, accept gifts from them from time to time. Or, to get really complicated, you could give them gifts from time to time, charge them market rate rent, and then have access to the full expense/loss deduction tax benefits.

Disclaimer: Consult with your tax advisor. This is not tax advice.

https://www.irs.gov/pub/irs-pdf/p527.pdf

[jenuno01]

You guys are awesome!

I feel like I may have opened an unnecessary can of worms. Part of me wants to amend, and part of me says to forget about it. I messed around with the numbers this morning and after subtracting my portion fo the expenses, it would actually benefit me. So if I get audited (I know it's unlikely), would I be screwed?

General question. I know that you can get your CPA licence taken away if you fail to file on time, or if you are negligent, etc but what happens if say, you are CPA candidate and you didn't file on time? Does it have future implications on your license?

Class of 2012

[Author]

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