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Turbotax and Airbnb income, with no 1099-K form advice needed

#1

Hello,

Can anyone help me figure out how to report my Airbnb income in Turbotax? Airbnb says that only people who make $20k or more will get a 1099-K form, so since I only made $1700 last year via Airbnb I won’t be getting one.

Last year when I did this with Turbo Tax I found advice online on how to do this and filed just fine. But, over the summer my laptop died and I lost the turbotax files. My printout of my 1040 form from last year doesn’t show anything about the Airbnb income so I cannot figure out how I did this before.

Would I call it “Paypal income” and put it under selling things since I can’t claim what I did as “Rental property income”?

Any help would be greatly appreciated!

Cheers.

#2

I’m an enrolled agent, so I cant answer specifically on how Turbo may lead you down the path, but if you rented the space for 14 days or less in 2015, then the income will go on line 21, other income, and best to add a note on the line that it was short term rental income of x days. You’ll then take a deduction on line 36 of the same amount, so in the end its not taxed. You don’t get to deduct any expenses or show a loss. If you rented for 15 days or more then it’s considered self employment and goes on schedule C. You will report all income and all legal expenses, and you can show a loss. Items purchased that have an expected life of more than 1 year need to be depreciated. IRS laws state that all income from all sources worldwide is to be reported along with all expenses. Small businesses are more heavily audited than the general dip into the barrel, so have good records to document all income and expenses. Small businesses can be a complex topic, go to a professional if you’re not entirely comfortable, its worth the extra cost and you can deduct the schedule C portion of your tax prep fees on 2016’s schedule C as an expense.

#3

Thanks Coykoi. You made that very clear. I was wondering about depreciation since we have a lot of new-business expenses like towels, dishes, blankets; all the regular items.

I guess we also have to think about how long we do expect things to last and appreciate accordingly? For instance I may add up all the soft goods and depreciate them over 2 years, while hard goods such as adding the bathroom, kitchen items, over 5 years?

We are hiring a tax guy for our first year’s reporting to be sure we have it very clear. Do you think that’s necessary? We didn’t file self employment quarterly last year, but on paper, we just broke even. I thought it would be complicated but now that I think about it, it’s actually pretty simple - income made less money spent.

#4

Things like towels, blankets, etc wouldn’t be depreciated, they’d be expensed directly. Things like a kitchen remodel will be expensed over 40 years, as the portion of the remodel attributed to business use is an improvement to a business property. There are strict schedules for depreciation, depending on what the item is, and depending on the percentage of business use. There’s also rules as to when the items went into service. Depreciation is also not optional, if you stop doing the business later, or sell the property, you have to recapture the depreciation, whether you took it or not. If you rent instead of own you will not be able to depreciate the property or improvements, but you would the equipment purchased. Depreciation is a very complicated area. I have taught income tax preparation to beginners as well as experienced professionals and its a topic that confuses even the professional.

The profit or the loss is what is transferred to the 1040, so it does add to or take away from your other income to determine your taxable income. In the first year you’re not going to get penalized for not making quarterly estimated payments, as there was no reference point on which to estimate. Each year will determine the base for the next year’s estimated payments. The rule is 100% of the tax paid the previous year or 90% of what you will owe this year. It may be until you really get going that your withholding from your job will cover any estimated taxes that you need to make.

There’s so many ways that taxes can be done wrong. I’ve straightened out the mess that other preparers have made so many times that I cant count. I also expect that the IRS will determine to watch shared economy returns closely. So far I haven’t seen an official statement about it but that could come about any time. Make sure that your preparer knows Schedule C backwards and forward and is up to date on current regulations regarding what’s going on with shared economy in the eyes of the IRS and your state. Also be aware that your Board of Equalization (sales tax) may expect that you have a sellers permit. Here in California, they do for hotels, of which Air would be categorized, because we perform services such as maid service, food, etc., therefore its considered a hotel and needs a seller’s permit. You may not have an actual taxable amount due, but you may need a permit and file timely returns.

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#5

Super helpful. Thanks Coy. I’m planning to take mine Schedule C and it looks like I will have two schedule Cs this year. One for my writing business which has always used the home office deduction, etc. and one for my Air business. I’m fully compliant with Hawaii’s excise license and TAT requirements so that’s a relief. Excise and state income tax accounts are linked here in Hawaii which is why you have to be compliant as there’s no place to run, no place to hide with even one cent of extra income. Have already paid in my excise and TAT taxes semi annually as required. I’m pretty sure I will have a truckload of expenses, and will let my CPA sort out which ones should go to the writing business and which should go to the Air business.

With two boys in college full time and as a single mom with a mortgage, I’ve been in good shape tax wise for a while now.

Poverty is the best tax shelter. Lolz.

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#6

Thank you for being so generous with your knowledge, Coykoi!! That saves me some time and gives me some direction for research!

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