8 Common IRS Red Flags That Trigger An Audit
VIDEO TRANSCRIPTION – 8 common IRS red flags that trigger an audit. This is tip 1 of 8. Hi, I’m Steven D. Cooper, your tax strategist with Coopers Accounting Service, because your financial freedom matters.
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Tip #1 one starts with what is a real estate professional? A real estate professional by the IRS is a person who commits to 750 hours in real estate related fields. One of the key things is that majority of your income must be real estate related. Can you be a broker? Yes, you can. Can you be a real estate agent? Yes, you can.
But you have to materially key word materially participate. So as I was talking to a client, his business income is over $900,000. He also owns three residential rental properties. It has a loss over $400,000. But they residential, they’re not commercial.
So that means that majority of his income is derived from his company. It is not derived from his real estate. And sadly, his tax person applied the $400,000 loss to his tax return.
That should never have happened because he’s not a real estate professional. And if he is found out by the IRS, which sadly is a high probability, he’s going to have to pay that.
Money back because the loss does not exist. As a result of that, it could be conflicted that it is a fraudulent transaction because the software never should allow that to happen as a result of this.
So getting advice and getting the right advice is always pertinent on the tax returns as a result of this.
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