What notification do I need to give the IRS to claim business deductions?

Question

I purchased a rental property recently and have been doing extensive work to keep rent and maintain it. I have numerous credit card statements and milage records for work done. Do I need to somehow formally declare that I am running a business for the IRS? I will go over the standard deduction this year and wasn't sure if I needed to start a business or something. I am new to tax law and business, so the more detail the better. Thanks!!

Answer 1

There may be some issue with the type of rental property you are engaged in as the issues relates to licenses. In any case you do not need to notify the IRS. You should keep good records for every thing you do with regard to this project. You might want to seek the advise of a tax professional. Frequently they can be helpful and save you money in the long run.

Answer 2

Rental property and associated expenses are shown on a separate form (1040 schedule E). The expenses will not be part of your itemized deductions. You don't do any advance notification to the IRS that you are doing this - it will show up when you file your return for the year. You might want to consult a CPA for your return for the first year.

For the work done, save the actual receipts for the job, not just credit card statements showing the payment, since those wouldn't show what the work was really for.

Answer 3

Congratulations on your investment! Now is the time to get organized. Go to the IRS website, www.irs.gov. Go to the Forms and Publications area and download Pub 527. This will discuss rental property in great detail. Read it and organize your records as suggested. Make an appointment with an EA or CPA to do your taxes. Don't mess with JH or HRB.

Answer 4

No notification is necessary to the IRS.

All your expenses and income are reported on your return.
Don't forget depreciation on rentals.
You should be sending quarterly estimated payments to the IRS, based on all your estimated net income. In April you will make any adjustments, up or down, on your return.

After the first year, your estimated payments should be at least 80-90 % of the previous year's tax liability, unless income declines. Penalties can/may be assessed.

Estimated payments are due Jan. 15, March 15, ("April 15, Yearly Return"), June 15, September 15.
If you missed any due date, make up the missed amount on the next payment or send ASAP. I doubt any penalties will be assessed.

Answer 5

You don't need to unless you plan on running this as an LLC or an LLP which requires a new Federal EIN ( sort of like a social security number for you business). You might need to get a liscense if you are doing this often and you do need some liability insurance. When you file your tax return, if you don't use an LLP you can file it on your 1040 under business activity, I don't remember the form number.