For the past 6 months or so, we’ve been reporting on the increase in IRS audits of Real Estate Professionals. And at the same, I offered a free review of tax returns to see how much my full-service tax firm, Diane Kennedy’s Tax Services, could save them.
Not surprisingly, we’ve been flooded with tax returns. I know Richard (my husband) had 90 phone calls to return yesterday. (He didn’t make it, but he’s going to keep working to get all caught up through the weekend.)
A lot of the tax returns are for real estate investors who took the real estate dealer status. And this is the part that shocked me – 75% were done wrong. That’s 3 out of 4! No wonder the IRS is targetting this group. I was just ranting to Richard that I couldn’t believe how many mistakes I saw. He reminded me that I quoted the official at an AICPA (American Institute of CPAs) meeting who said 80% of CPAs don’t understand basic real estate tax and accounting. Based on that, I shouldn’t be surprised.
But, now I see why the IRS is targetting this group. There is huge opportunity, at the expense of the taxpayer.
I’ve also gotten a lot of calls from taxpayers and CPAs who are currently going through the audit process. In almost every case, the problem is not what they think it is. For example, one CPA exclaimed that his client was a real estate broker so he should be a real estate professional without a problem. Maybe. But what about material participation? He didn’t have a clue what I was talking about.
Real estate tax and accounting is a very specialized field. And with the IRS on the attack, if you want to take (and keep) your deductions you need to be forearmed. I have two suggestions:
(1) Invest in the IRS Survival Guide TODAY and review the issues that can cost you big time in an audit.
(2) Call Richard at 888.592.4769 to schedule a free review of your tax return. Are you at risk?