All Things Tax

All Things Tax

Like the title says, from the filing process and tax questions to tax policy and reform, you can search and share All Things Tax here. This is the place to find answers to all your general questions that don't fall under the other categories. And just a reminder: questions about software or online filing should be posted in DIY Products.

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Pioneer
Posts: 2
Registered: ‎05-09-2018
Accepted Solution

I think I messed up - house flip loss not reported

[ Edited ]

In 2016 I formed an LLC and flipped 2 houses to try to make side income. I lost money on both houses after paying for repairs, closing costs, etc.  

 

In my frustration I abandoned the house flipping business and did not consult a tax pro about how to report the losses.  I simply did not report anything regarding the houses on my 2016 return.  

 

I am now concerned about the 1099s documents I (and the IRS) received from the title company when I sold the properties.  They show the gross proceeds of the sales. The IRS should know that I sold the properties and that I didn't report the 1099s or the profit/loss.  I have not received any correspondence from the IRS regarding this in the 2 years since.  I'm worried that they may still send me a big bill for taxes on the entire 1099s amounts that I failed to report.

 

So, could I be in big trouble for not reporting the loss on these houses?  Could I face penalties?  What should I do?  I'm worried that this will be hanging over my head.

 

Thank you for your help.

Council Member
Posts: 548
Registered: ‎04-06-2016

Re: I think I messed up - house flip loss not reported

What year were the 1099-S forms for?  You're correct in the fact that the IRS received copies of the those and is going to expect to see that "income", as far as they're concerned, reported on your return.  So, you best bet is to go ahead and amend your return for the year on the 1099-S (2016?) showing the income & expenses = loss for these flipped houses.  


If you don't, the IRS will likely contact you telling you that you owe money on what they consider "income" from the 1099-S, as you guessed.  If this happens before you file the amended return, you won't necessarily need to pay the amount they calculated.  You'd need to explain what happened and basically submit the tax forms (that you should have filed with your original return) showing the income/expenses from the flipped houses. Since there was a loss, there won't be any penalties/interest because they are only due on amounts not paid by the deadline.

 

So, the best thing is to go ahead and amend your 2016 return showing the loss from the houses and mail it to the IRS. It's always best to get straight with the IRS before they come knocking.  You don't want to be on their radar as someone who has left income off their return! 

 

Karen

 

 


@mw123 wrote:

In 2016 I formed an LLC and flipped 2 houses to try to make side income. I lost money on both houses after paying for repairs, closing costs, etc.  

 

In my frustration I abandoned the house flipping business and did not consult a tax pro about how to report the losses.  I simply did not report anything regarding the houses on my 2016 return.  

 

I am now concerned about the 1099s documents I (and the IRS) received from the title company when I sold the properties.  They show the gross proceeds of the sales. The IRS should know that I sold the properties and that I didn't report the 1099s or the profit/loss.  I have not received any correspondence from the IRS regarding this in the 2 years since.  I'm worried that they may still send me a big bill for taxes on the entire 1099s amounts that I failed to report.

 

So, could I be in big trouble for not reporting the loss on these houses?  Could I face penalties?  What should I do?  I'm worried that this will be hanging over my head.

 

Thank you for your help.


 

Pioneer
Posts: 2
Registered: ‎05-09-2018

Re: I think I messed up - house flip loss not reported

Yes, the 1099-S forms are for 2016.  It's clear that I need to be proactive and get this taken care of.  I went ahead and made an appointment with an accountant to amend the return.

 

Thank you for the advice.