Four Rentals

[Gary]

I have a client that has four rental houses. An accountant prepared her return for the last two years. She has a management company that issued her a 1099-misc with the total rental income four all four properties. The accountant attributed 0 rental income for each of the properties and then entered another property called "Rental Properties 1-4" with no expenses because they were attributed to each of the properties. I'm sure this is not correct, but she did not receive any letters from the IRS. Any thoughts?

[appelman]

Why?

That would be my question. I guess it would all wash out, but I sure wouldn't continue doing it that way.

[BOB W]

IRS has no adjustment if questioned.

[Burke]

Makes no difference in the bottom line for last year, but I would break it down by property if I had the info. The accountant just didn't want to get into it. It was faster/easier to just use the 1099 figure for all. If one property is sold, he would have to do it to determine the individual loss/gain in that year. If passive losses are being suspended, and income is not being allocated separately, how will the TP ever determine what amount of suspended loss to apply to that particular property at sale, or even if there WAS one attributable that property?

[Kram BergGold]

Good Question

I think the Tax Pro from last year wanted a clean match up between the return and the 1099.
I would think where rents are totalled on Schedule E that IRS would match the 1099 to total rent and not one property. So I would allocate the total among the 4 properties.

[Gary]

More Questions

I am going to amend the 2010 and 2011 returns because they were not done correctly. The taxpayer's name was correct on the 2010 return (she filed MFS). She got divorced in 2011 and her 2011 return has her maiden name. She did not change her name on her Social Security Card, but apparently the 2011 Return was not rejected (according to her). When I amend the return, can I change the name to what it should be (same as on the 2010 Return)? Will the IRS be confused, or is the SSN good enough for them to connect the Amended Return with the original? Along with all the returns which can not be filed yet, and all AZ returns in the state being rejected because of some computer glitch, this is turning out to be a frustrating tax season.

[taxea]

I have a client that has four rental houses. An accountant prepared her return for the last two years. She has a management company that issued her a 1099-misc with the total rental income four all four properties. The accountant attributed 0 rental income for each of the properties and then entered another property called "Rental Properties 1-4" with no expenses because they were attributed to each of the properties. I'm sure this is not correct, but she did not receive any letters from the IRS. Any thoughts?

1. if the rental mgmt company sent one 1099 for all the rentals then I would have the client request a separate one for each rental
instructions for a form or worksheet that would accomodate three separate rentals and if there were more than 3 one would use a second form and so on until all income and expenses were separately input on these forms The actual Sch E would list them on pg 1 as properties 1, 2, 3 showing only the rental ID (address). Sch E page 1 instructions were-combine the total income/expense from the form/worksheet on the appropriate lines of Sch E pg 1.

Makes no difference in the bottom line for last year, but I would break it down by property if I had the info. The accountant just didn't want to get into it. It was faster/easier to just use the 1099 figure for all. If one property is sold, he would have to do it to determine the individual loss/gain in that year. If passive losses are being suspended, and income is not being allocated separately, how will the TP ever determine what amount of suspended loss to apply to that particular property at sale, or even if there WAS one attributable that property?

the accountant that did the return was either being lazy or was trying to lower the prep fee (laugh)

[Gary]

Got the Data

I have received the income for each of the properties. The accountant that prepared the returns did not take depreciation in 2010 for any of the properties. The reason he isn't preparing this year's return is because the IRS will not allow him to do so (according to her). Maybe he didn't renew his PTIN, or maybe he just doesn't want to deal with her.

[taxea]

I think the Tax Pro from last year wanted a clean match up between the return and the 1099.
I would think where rents are totalled on Schedule E that IRS would match the 1099 to total rent and not one property. So I would allocate the total among the 4 properties.

It takes more time but I input the 1099 into each Sch E then I adjust the amounts to the other rentals separately (with explanation) to the other rentals. i.e.
rental income box for rental 123 Main St 20000. from 1099m xx-xxxxxx
adjustment allotted to rental 1 Bay St - 5000.
adjustment allotted to rental 23 C St - 7000.
adjustment allotted to 1 Elvis Ave -2000.

The income line on Sch E pg 1 of the 123 Main would change to 8000. which is the correct rental income for that address.
I do the same on each Sch E pg 1
I tend to think it was the preparer who combined everything. In my experience rental mgmt personnel do issue separate 1099's for each rental.

[taxea]

I have received the income for each of the properties. The accountant that prepared the returns did not take depreciation in 2010 for any of the properties. The reason he isn't preparing this year's return is because the IRS will not allow him to do so (according to her). Maybe he didn't renew his PTIN, or maybe he just doesn't want to deal with her.

Or, more likely, he doesn't have experience and training in rentals and knew he was in over his head. These are the people we need RTPR regulations for. On top of he is really even dumber to admit the IRS stopped him. It would not have been for PTIN because they are still taking registrations and renewals due to the court slowing them down and the system not being available all the way up to 12/31/12

[Roland Slugg]

Apparently the taxpayer didn't even look at his own return before filing it.

If I inherited this client, I probably would not recommend that he file amended returns for 2010 and 2011 based on the rental income grouping issue alone. I would, however, insist that he allow me to recalculate the rental income on a property-by-property basis because, as someone else has already pointed out above, you will need that breakdown in order to track the PALs ... if there are any.

However, it also turns out that there was missed depreciation for some or all the properties and for one or both years 2010 and 2011. In that case amended returns are the only viable way to get everything corrected.

Finally, I would suggest to the taxpayer that he consider demanding that the previous preparer reimburse him for the amount of my fee to prepare the amended return(s).

[Gary]

Green Card

Thanks again for you ideas. The taxpayer has a green card and has been in this country for about six years,so she really doesn't know much about our tax system. She was depending on the accountant who obviously doesn't know much more than she does.

[mactoolsix]

Form 3115

However, it also turns out that there was missed depreciation for some or all the properties and for one or both years 2010 and 2011. In that case amended returns are the only viable way to get everything corrected.

Have you considered using form 3115 to pick up the unclaimed depreciation? Might be simpler and cheaper than 2 amended returns?
Mike

[Gary]

8582

I want to make sure that Form 8582 is correct so that when she sells the properties, she gets proper credit for the passive loss carryovers.

[taxea]

Have you considered using form 3115 to pick up the unclaimed depreciation? Might be simpler and cheaper than 2 amended returns?
Mike

That's what I would do.
Other than Mike:
It has been my experience that very few clients review their returns before signing and filing them.