Do you rent property to others? If so, you’ll want to read the following tips about rental income and expenses.
You generally must include in your gross income all amounts you receive as rent. Rental income is any payment you receive for the use of or occupation of property. Expenses of renting property can be deducted from your gross rental income. You generally deduct your rental expenses in the year you pay them.
When to report income. You generally must report rental income on your tax return in the year that you actually receive it.
1. Advance rent. Advance rent is any amount you receive before the period that it covers. Include advance rent in your rental income in the year you receive it, regardless of the period covered.
2. Security deposits. Do not include a security deposit in your income when you receive it if you plan to return it to your tenant at the end of the lease. But if you keep part or all of the security deposit during any year because your tenant does not live up to the terms of the lease, include the amount you keep in your income in that year.
3. Property or services in lieu of rent. If you receive property or services, instead of money, as rent, include the fair market value of the property or services in your rental income. If the services are provided at an agreed upon or specified price, that price is the fair market value unless there is evidence to the contrary.
4. Expenses paid by tenant. If your tenant pays any of your expenses, the payments are rental income. You must include them in your income. You can deduct the expenses if they are deductible rental expenses.
5. Rental expenses. Generally, the expenses of renting your property, such as maintenance, insurance, taxes, and interest, can be deducted from your rental income.
6. Personal use of vacation home. If you have any personal use of a vacation home or other dwelling unit that you rent out, you must divide your expenses between rental use and personal use. If your expenses for rental use are more than your rental income, you may not be able to deduct all of the rental expenses.
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A federal district court in Ohio has issued a permanent injunction ordering ITS Financial LLC, the parent company of Instant Tax Service tax franchiser, to cease operations. The order, which was issued as a result of a two-week trial in June, also bars Fesum Ogbazion, the sole owner and CEO of ITS Financial, from operating or being involved with any business relating to tax-return preparation.
ITS Financial, which claims to be the fourth largest tax-preparation business in the country, had more than 150 franchisees that filed more than 100,000 tax returns each year in 2011 and 2012. Ogbazion also
owned two other entities, Tax Tree LLC and TCA Financial LLC, that were also shut down.
The Justice Department cited a long list of the company’s transgressions, including:
The court cited an IRS study that showed that the tax harm the company’s franchisees caused in just five cities during a single filing season was between $10 million and $25 million. The company also had failed to
comply with the terms of a preliminary injunction order that the company had agreed to in October 2012.
In a Justice Department press release, Assistant Attorney General Kathryn Keneally said of the company, “As described by the court, this company grew large through abhorrent means—filing returns without customer authorization, forging customer signatures, pushing fraudulent loan products, and much more. As the court’s decision recognizes, a business model based on false and fraudulent conduct cannot be allowed to prevail.”
WASHINGTON — The Internal Revenue Service today warned consumers about a
sophisticated phone scam targeting taxpayers, including recent immigrants,
throughout the country.
Victims are told they owe money to the IRS and
it must be paid promptly through a pre-loaded debit card or wire transfer. If
the victim refuses to cooperate, they are then threatened with arrest,
deportation or suspension of a business or driver’s license. In many cases, the
caller becomes hostile and insulting.
“This scam has hit taxpayers in nearly every state in the country. We want to educate taxpayers so they
can help protect themselves. Rest assured, we do not and will not ask for credit card numbers over the phone, nor request a pre-paid debit card or wire transfer,” says IRS Acting Commissioner Danny Werfel. “If someone unexpectedly calls claiming to be from the IRS and threatens police arrest, deportation or license revocation if you don’t pay immediately, that is a sign that it really isn’t the IRS calling.” Werfel noted that the first IRS contact with taxpayers on a tax issue is likely to occur via mail
Other characteristics of this scam include:
Taxpayers should be aware that there are other unrelated scams (such as a lottery sweepstakes) and solicitations (such as debt relief) that fraudulently claim to be from the IRS.
The IRS encourages taxpayers to be vigilant against phone and email scams that use the IRS as a lure. The IRS does not initiate contact with taxpayers by email to request personal or financial information. This includes any type of electronic communication, such as text messages and social media channels. The IRS also does not ask for PINs, passwords or similar confidential access information for credit card, bank or other financial accounts. Recipients should not open any attachments or click on any links contained in
the message. Instead, forward the e-mail to firstname.lastname@example.org.
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