Bob Jablonsky & Associates Blog

Real Estate Agents – How to Handle an IRS Audit!

by | Jul 6, 2021

As a Real Estate Professional, did you realize that you are required to complete a Tax Form  that is the form most audited by the IRS?  That’s right, as independent contractors, most Real Estate Agents file a Form Schedule C.  The IRS has found that Schedule C’s contain a large number of errors compared to other forms and finds that they are very successful with audit changes to the returns, and able to bill back a higher amount of additional taxes to the taxpayer that is audited.

Hopefully, that makes you aware that as a Realtor, you need to make sure that your return is completed accurately and documented properly.  In a future blog, we will cover what you need to do to document your transactions properly.  Today, we’re going to discuss some general rules to keep in mind if audited.  Here are a few of the most important.

  1. It’s RARELY, IF EVER,  a good idea to represent yourself in an audit for a few reasons.
    1. If you don’t document expenses properly (Per IRS rules), you’re probably going to lose the deduction.
    2. Auditors are trained experts at interviewing. Some are very kind when talking to you, and others are harsh and may attempt to scare you.  Either way, saying too little or too much could hurt you.
  2. IRS auditors are well trained by industry and when going into an audit, will understand what to expect from a Real Estate Agent (and what looks unusual).  Unless you read these guides thoroughly and become experts in this area, you will be at a disadvantage.  
  3. Be aware of Financial Status questions. Questions such as what do you drive, your clothes, vacations etc…  The IRS auditor should not ask these but may.  You definitely don’t want to brag about you wealth.  Even if your tax return is accurate, it may not make sense with your lifestyle and saying too much can create problems. 
  4. You don’t want an IRS audit to occur at your home or your business. We would require them to come to our office or meet them at theirs.
  5. If you lose a deduction, expect the auditors to look back for the last few years and audit future years until you can show that the deductions are legitimate in those years. It can be very costly to lose the first audit.

Need a Tax Professional to Team up With?

If you are a Realtor or other Small Business owner, who needs professional help with your taxes, keeping your books properly, or dealing with any IRS issues, give me a call at (972) 821-1991 or send me an email at bob@jablonskyandassociates.com.  Learn more about us at https://jablonskyandassociates.com/real-estate/.

Bob Jablonsky is the founder of Bob Jablonsky & Associates. He has spent his career helping taxpayers resolve tax issues and get back on track with the IRS. In addition to tax resolution his firm also prepares hundreds of tax returns every year for both individuals and small to mid-sized businesses.

Bob is an IRS Enrolled Agent (EA), which is an elite credential issued by the Internal Revenue Service to professionals who demonstrate special competence in federal tax planning, individual and business tax return preparation, and representation matters. An Enrolled Agent license is the highest credential awarded by the IRS and is recognized across all 50 states. Additionally he is a CMA, or Certified Management Accountant, a designation for financial controllers and CFOs (Chief Financial Officers), as well as an Advanced Certified Quickbooks Pro Advisor.

Get in touch

1900 Jay Ell Drive
Richardson, TX 75081

Bob@jablonskyandassociates.com

(972) 821-1991

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