Schedule E required - income from renting room ?

You must have misinterpreted something. The only year that can currently be e-filed is 2007. All others must be filed on paper.

Quote: "TaxBrain is the only IRS authorized online Tax company that allows you to prepare AND FILE your prior year return ONLINE." (my emphasis)

Returning to the main point, reading the IRS instructions I see this:

IF YOU ARE NOT IN THE BUSINESS OF RENTING OUT PROPERTY THEN ON 1040 LINE 21- LIST THE TYPE AND AMOUNT OF INCOME...

Can I do it this way or MUST I use a schedule E?

Appreciate any help, especially if you can tell me what I want to hear !

Steve

The IRS tells us practitioners that ONLY the CURRENT year's cycle (2007) may be e-filed. That hasn't changed since the first e-file pilot projects about

1990.

I don't know why anyone would prefer the Line 21 method to Schedule E - the latter where the allowed deductions reduce AGI (the number on the bottom line of the 1040's front page). With the line 21 method, allowable expenses go on Schedule A, and where not appropriate to another line, in the miscellaneous deductions section that takes the 2% of AGI haircut.

Well, TaxBrain is certainly doing a good job of faking it. Has anybody gone to their site to see if they can tell? I only got so far before they wanted me to sign up and I'm not quite ready to go with them (main question here is pending).

I wonder why they claim to be the only ones and, of course, if they truly can do it. Did the IRS relent and start offering the service on a trial basis? Have they found a work-around? Maybe they actually just print the stuff out and mail it in for us?

I would be interested in your opinion after checking it out... is TaxBrain known to be a decent company or is it likely that they are doing a bait-and-switch?

I tried to state my reasons for avoiding Schedule E in the first post

- though certainly if the TaxBrain path is based on a false claim, then it matters less to me. I would use it for one or two lines only if I did, as I have no intention of getting into the expenses (fabricating numbers), basis, percentage of square footage etc, etc, etc. No thank you.

Obviously here among a group of tax experts, not doing the accounting, not showing expenses, not depreciating etc is akin to blasphemy, but I operate at such a low income level that it could not make much difference at this point. It is my primary residence and if I ever sell it, which I plan not to do, I understand (perhaps incorrectly?) that I will be able to do so with little, if any, taxation whether I do it the easy way or the complex way.

The two important points that I have indentified are that:

1) I can e-file past years more affordably at TaxBrain if it's 1040 only. 2) At my income level, the only tax I'm going to pay is social security and this may not count for rental income?

I greatly value any and all comments and suggestions, but I return to the primary question: Must I use an E under the circumstances listed in the original post?

Thanks, Steve

I was curious too, and had the same experience as you at their site. I did check at the IRS site and found a link to Tax Brain, so they're not a total fraud. However, that link was in connection with online payment of balances due.

As someone mentioned, the general rule is only current filing season returns can be e-filed. I haven't seen any IRS publicity about the ability to e-file prior years' returns, which is odd but doesn't necessarily mean they're not testing something special with one provider.

I suggest you send IRS an inquiry with reference to the Tax Brain site's claim and ask.

Individual Income Tax Returns:

Returns Not Eligible for IRS e-file

The following individual income tax returns and related return conditions cannot be processed using IRS e-file:

--Other than current year tax returns; --Tax returns with fiscal year tax periods; --Amended tax returns;

"Filing individual income tax returns using IRS e-file is limited to tax returns with prescribed due dates in the current year. An individual income tax return cannot be electronically filed after the 15th day of October following the close of that tax year even if the taxpayer has been granted an extension to file a return beyond that date."

Since this is one of the documents that 3rd party e-file providers are supposed to follow, it seems pretty clear. If they are actually e-filing prior year returns it would be interesting how they get by these requirements.

Actually that's not the "general" rule. It is THE rule. period.

Won't do any good to do this. However in fairness I can say that IRS has in the last year been CONSIDERING making previous years' returns available for efiling, but has not implemented the plan.

ChEAr$, Harlan Lunsford, EA n LA and ERO, and ET

Hmmm. But does ONLINE necessarily mean e-Filing?

Could they allow you to prepare the return on-line and then THEY print a paper copy and mail it? I wonder if there would be a signature issue?

There's also one other condition - that's not listed:

Any individual whose accounting method is not "cash basis." (cf. other than IRC 446(c)(1)).

With those (few) individuals, their W-2/1099/other-IRP documents, which are reporting on the cash basis of accounting, will usually never match.

Exactly what I was thinking. They have a work-around. Or else it's another program that's not called e-filing, so is outside the e-filing guidelines ?

Anyway, returning to the original topic and my original question:

I am not in the business of real estate, nor rental properties, I simply have somebody renting a room from me.

Reading the IRS instructions I see this:

IF YOU ARE NOT IN THE BUSINESS OF RENTING OUT PROPERTY THEN ON 1040 LINE 21- LIST THE TYPE AND AMOUNT OF INCOME ON THE DOTTED LINE

Can I do it this way or MUST I use a schedule E?

Thanks Steve

seaweedsl wrote: ...

From 1040 instructions booklet for Line 21 --

"Income from the rental of personal property if you engaged in the rental for profit but were not in the business of renting such property. Also, see the instructions for line 36 on page 31."

It would seem that would fit your situation to a T...

That thought crossed my mind also, but the web site in question says "Prepare Prior Year Taxes Online Income Tax Return & e-File Starting at $14.95"

Also and 'print paper and send' would require real signatures would they not? I thought e-file was the _only_ way to file without actual signatures.

No, it doesn't -- I retract that, and sorry. It refers to _personal_ property rental, not real estate.

I revert to my earlier reference to Pub 527 section on "Not Rented for Profit" section so see if can qualify under that provision. Otherwise, seems the Sch E route is the correct choice.

Of course, you might get away w/ a small amount on Line 21, but seems as though you would be leaving money on the table as others have noted. Of course, it may be that it's not sufficient $$ amount as to fret over...

Bearing in mind that I am neither a lawyer nor a tax professional, but I disagree.

The instructions refer to the rental of PERSONAL property, which I believe is actually different from REAL property, such as rooms, houses, etc.

There is a potential entry for income that is from an activity "not engaged in for profit".

A better source of information would be Publication 17, which has a lot more detail. There is an extensive section on real estate rentals, in which it does mention rental of real estate not for profit. It also refers one to Publication 535 (which I did not look at). If you conclude that the "not for profit" description applies to your room rental activities, it seems that you could use line 21 to report the income. It also means that there are more restrictions and limitations on the deductibility of any associated expenses.

So I would suggest you look at Pub 17 and 535 to help clarify if you think the room rental is being pursued with or without a profit motive.

...

Yeah, I realized it and had posted a retraction but it hadn't yet propagated to your newsreader by the time you saw it...

I can't see a way to call it not-for-profit. It's simply a casual income that does add up. I missed the part about my house not being personal property.

Hmm. "Might get away". Sounds hopeful. I imagine that I will be taxed the same whether I list the income on line 21 of 1040 or line x or schedule E. Yet I don't want to put up a red flag and attract attention.

In any case, I doubt $3600 will qualify for a "small amount" if it's

100% of my reportable (cash gifts made up the balance) income !

Steve

...

I'd suggest reporting rental income on Line 21 is more of a flag than Sch E as well as losing justifiable deductions as others have noted. I simply mentioned that its possible w/ a low-dollar-value return there's insufficient interest that it would get flagged, but certainly no guarantee.

In absolute terms that's pretty small which was my point...but I still don't see the reason desire to throw away the allowable deductions simply for the sake of a few algebraic calculations?

Um, if your total reportable income is only $3,600 then it would seem that you might not even need to file an income tax return at all. Perhaps you should look at the "Do I Need to File?" instructions.

O.K. I finally signed up with TaxBrain, went to prior years filing, filled it out for 2005 and it came up as a 2007 form when I went to print it out, not 2005.

I tried going back at it a different way and came to this:

quote: IMPORTANT » 2005 Returns are no longer accepted by the IRS electronically. » 2005 Returns must be printed and mailed.

So, I went into a chat session:

Ben: Hello. How may I assist you? me: I want to clear up if Taxbrain is doing a bait and switch or simply discontinued a service me: "Prior Year State & Federal Income Tax Return Preparation, and Filing." This is what your prior year page says me:

Yes, you can print and mail it, the IRS doesn't accept electronicfiling Ben: A lot of sites do not allow you to print out a prior year return or prepare one. snipped-for-privacy@yahoo.com: So why does the site say you do? Ben: It doesn't say electronic filing, it might be poorly worded, but it means that you are able to print and mail your return. Ben: On the beginning page for a prior year site, in big red letters at the top it does say that the IRS does not accept e-filing from prior year returns. Me: Yes. I think it's deceptive. The statement: "Prepare Prior Year Taxes Online Income Tax Return & e-File" is clearly wrong. I suggest you inform your marketing dept that people are complaining about their bait and switch style marketing. Meanwhile I'll inform people on the Tax group I'm in, as your site was being discussed as to whether it was a legitimate claim or not. It clearly makes the claim. Ben: On which page are you finding this? So I can speak to our developers Me: Just clarifying and letting "you" know. Have a good one.Ben: I'll be sure to tell someone right now. Thank you.