GAO Report Finds Rental Income Is Misreported

By Alistair M. Nevius, J.D.

A report by the Government Accountability Office (GAO) has found that at least 53% of individual taxpayers with income from rental real estate misreported their rental income for tax year 2001 (GAO, Tax Gap: Actions That Could Improve Rental Real Estate Reporting Compliance (GAO-08-956) (August 2008)). This resulted in at least $12.4 billion in misreported income, according to the report. The GAO believes that this number understates the actual extent of the problem because the IRS does not detect all misreporting and the study relied on data from the IRS's National Research Program.

The report found that 43% of taxpayers with rental income misreported their expenses, and 15% misreported the amount of rent received (some taxpayers misreported both).

The GAO recommended that rental real estate activity be subject to the same information reporting requirements as other trade or business activities, such as requiring owners of rental real estate to file Forms 1099-MISC when paying expenses and to provide property addresses on Form 1098.

The GAO also recommended requiring more reporting on tax returns. This would presumably require return preparers to obtain more accurate information from their clients and therefore increase compliance.

Newsletter Articles

50th ANNIVERSARY

50 years of The Tax Adviser

The January 2020 issue marks the 50th anniversary of The Tax Adviser, which was first published in January 1970. Over the coming year, we will be looking back at early issues of the magazine, highlighting interesting tidbits.

TAX RELIEF

Quirks spurred by COVID-19 tax relief

This article discusses some procedural and administrative quirks that have emerged with the new tax legislative, regulatory, and procedural guidance related to COVID-19.