Telephone Scams & Vacation Homes
July 8, 2014

We are sending you this newsletter to inform you about a scam that is being made that involves individuals claiming to be Internal Revenue Service agents. In addition, we will highlight the tax rules regarding vacation homes.

 Don't Get Scammed!

 

    We have received a number of reports from both clients and friends and from other CPA sources that there are a number of "scammers" portraying themselves either by email or phone as IRS agents.  Each year, millions of individuals have their identities stolen, and these phone scams are yet another opportunity for potential identity theft to occur or loss of your funds.

 

 What is the typical scenario for these scam calls?
 

     The IRS and our firm have noted a few patterns in these calls, such as:

  • The scammers use threatening and intimidating tactics to scare you into taking action to give them either your identification numbers or money.  Please note the IRS will generally never make a first contact with an individual via phone call and if they do, they will never threaten you with jail time or monetary penalties at this first call. 

  • Scammers use fake names and IRS badge numbers.  They generally use common names and surnames to identify themselves.

  • Scammers using the phone have heavy accents making it somewhat difficult to understand their comments.

  • Scammers may recite the last four digits of your Social Security number in an effort to show "authenticity" of the phone call.

  • Scammers "spoof" or imitate the IRS toll-free number on caller ID to make it appear that it's the IRS calling.

  • Scammers sometimes send bogus IRS emails to some potential victims to support their bogus calls.

  • Potential victims sometimes hear background noise of other calls being conducted to mimic a call center.

  • After threatening potential victims with jail time or a driver's license revocation, scammers hang up; others soon call back pretending to be from the local police or Department of Motor Vehicles, and the caller ID supports their claim.

     The IRS will always send taxpayers a written notification of any tax due via the U.S. mail.  The IRS never asks for credit card, debit card or prepaid card information over the telephone.  As such, it is essential that you always be alert to potential identity theft if you receive a call or email from someone claiming to be an IRS agent or a member of the Criminal Investigation Division (CID) of the IRS.

     If you get a phone call from someone claiming to be from the IRS, hang up immediately and do not, under any circumstances, provide any information over the phone to the caller.  If you are not sure whether you have a legitimate tax issue outstanding, you should contact our firm for assistance.  We will best advise you as to how to proceed with this communication.

     If you believe you have been a victim of this scam, you may report the incident to the Treasury Inspector General for Tax Administration (TIGTA) at 1-800-366-4484.  If you've been targeted by this scam, you should also contact the Federal Trade Commission and use their "FTC Complaint Assistant" at FTC.gov and add "IRS Telephone Scam" to the comments of your complaint.

Vacation Homes

 

With summertime upon us we are out enjoying the sunshine, fresh air and warm temperatures. It may also involve taking a much-needed getaway.  For some, that means a trip to their vacation home.  Owning a second property that you treat as a vacation home has it benefits.  Not only does it provide a place to escape to but it can also provide supplemental income if it is rented out when not in use by the owner.  However, navigating the tax rules that are involved can be tricky.

Generally, vacation homes fall into one of three scenarios:

  • The home is rented out almost the entire year

  • The home is used personally almost the entire year

  • The home use is split between rental and personal use

The home is rented out the entire year:

     Rents received are taxable, but expenses associated with renting the property are typically deductible. In addition, the owner may be able to take a loss on the property as long as the personal use doesn't exceed 14 days or 10% of the time the property is rented out, whichever is greater.

     Some of the common deductible rental expenses include advertising, cleaning & maintenance, depreciation, insurance, mortgage interest, management fees, repairs, taxes and utilities.

     Remember to keep in mind that a day spent working on the property or doing repairs does NOT count as a "personal use" day. Therefore it is possible to allow for more time at the getaway without risking the loss deduction.

     Under the "passive activity loss" rules, if the property incurs a loss for the year, it is generally limited to the amount of income from other passive activities.

The home is used personally almost the entire year:

     The IRS does provide a small benefit for those people renting their vacation home for a minimal amount of time.  If the home is rented out for two weeks or less, the home owner does not have to report any rental income received during these 14 days.  Thus, it is possible to take advantage under the short-term rental rules, to receive rental income and not pay any taxes on that income if there is a special event taking place nearby, such as a golf tournament or outdoor festival.

The home use is split between rental and personal use:

     This is the most complicated scenario. Generally rent income is taxable, but deductions are limited. Deductions are first allocated between personal use and rental use. The amount of the deduction is limited to gross income derived from the rental use for that tax year.

     It is important to keep track of personal use - if the owner can keep personal use below the 14 day/10% limit, they may be able to claim a loss, subject to the passive activity restrictions.


    Please feel free to contact us with any questions you may have regarding the information above, or if there is another way we can serve you.   

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Soukup, Bush & Associates, P.C.
(970) 223-2727
www.soukupbush.com