Quote: (02-16-2017 08:17 PM)Armogan Wrote:
My tax situation has gotten increasingly more complex for 2016, unfortunately, and I just fired my accountant and am trying to sort some of these things out. Hoping some of the knowledgeable members could provide insight:
1. I have rental property income, where do I list the rent expense for this property on schedule e? Would it be appropriate to put this in the "other" category, do I have to provide additional support somewhere?
2. No 1099 was issued for this income, theoretically, what would happen if I didn't report this and someone finds out. Can I just use plausible deniability then pay the tax with a penalty? Or does it escalate something more serious much faster?
2. Started a new LLC in 2016 in inventory/sales realm. Would this go on schedule E or schedule C?
3. The LLC technically had a loss in 2016 as I only bought inventory and didn't ramp up any sales. How do I account for this loss, can it offset gains from my rental property, or from my brokerage activity (capital gains)?
4. If I say there was a loss in 2016 for the LLC, and I'm accounting for it on a cash basis, does that mean all sales incurred in 2017 are taxed on total amount received? Seems unfair since proceeds from each sale don't represent profit. How do I calculate taxable profit for this type of business.
5. I got some crypto currency gains and have a long-term capital loss carryover from last year (related to stocks). Can I use the long-term carryover to offset the crypto gains? Also, traded one type of crypto currency for another, does this qualify as a 1031 exchange, or do I owe tax. Some research on the internet indicates this is taxable, but was hoping someone had more insight.
Armogan - I'll take a stab at some of my thoughts on these -
1. When you say "rent expense", do you mean that you pay rent on the place that you rent out to others rather than own the property yourself? If so, "Other Expenses" (Line 19 on page one of Schedule E) is the place where you would list that. No other support is needed though make sure you have proof of these rent payments in case called upon later.
2. If you don't report it and the IRS find out, they'll probably just send you a notice in the mail suggesting that you have a balance due for whatever the amount is that you under reported and they'll tack a modest penalty and/or some interest on it. You can deny it at that point, but it won't matter - unless you go through the painstaking process of proving you aren't responsible for it, you'll be on the hook. It won't get escalated any further than the notice unless you refuse to pay it and don't correspond back with a valid reason. That said, if this was a cash-basis arrangement you made with your tenant and no official documents were signed (lease, property management agreements, etc), it's less likely any of the rental income will pop up on the IRS's radar.
2(b). Schedule E is generally for passive activities like Rental Income and K-1's, etc. Assuming your LLC is a disregarded entity (meaning you are the sole proprietor) it would go on your Schedule C.
3. Inventory goes on a Schedule C, and technically you aren't supposed to deduct any of it that wasn't sold. Part III on page two of the Schedule C is how you calculate the Cost of Goods Sold (beginning inventory + purchases - ending inventory = COGS) and that's the only "expense" that's deductible as far as inventory goes, generally speaking.
4. If you end up with a net loss on your Schedule C for the LLC then nothing should be taxable. If anything, you'd be able to reduce your Adjusted Gross Income with whatever the amount of the loss was. I'd definitely recommend you make sure you are properly accounting for the expenses and start-up costs though, as large Schedule C losses can be a flag for an audit. Also, you'll want to start showing a profit for the LLC (even if it's a small one) after a couple of years because of the Hobby Loss rule which is where the IRS disallows the losses from your Schedule C if it's considered a hobby rather than a business. Three straight years of losses tends to catch their eye for this, so just keep that in mind.
5. I'll have to look into this a bit further, too much tax prep work to get through tonight. But I'll check it out.