Forgot to enter $4k in HOA fee expenses last year. Should I amend or lay low?

Question

For some reason, the $4k in HOA fees I write off every year are not on the 2021 return, as I'm reviewing them and doing 2022. It appears to signify $800 additional taxes out of my pocket for 2021. So which is a bigger red flag: filing 2022 with a big discrepancy between the two years' expenses or amending a prior years' taxes?

Ryan Gillette · Answer

Maybe HR Block will do it for free if it's their mistake. The 1040X is below if you're curious. You just put a few numbers from your old return on the left side, your updated numbers ( "X" - $4000) on Sch E and updated (lower) tax due off the tax table. Explain the change in the comments. Pop it in the mail.

https://www.irs.gov/pub/irs-pd...

Jeff Nash · Answer

I would go back to the original preparer for sure and explain the situation and hopefully they will not charge you so much that the cost outweighs the benefit. If it’s an innocent omission and an expense that you can easily substantiate I would not be dissuaded from amending the return due to any perceived audit risk if all else is good and you are confident in any tax positions taken, as applicable.

It looks like you both share responsibility in this situation - you didn't provide the information and the tax preparer neglected to do a simple comparison of the prior year to the current year and ask you the question about why there were no HOA expenses.

The original preparer already has the inputs in the tax software and presumably did the other required due diligence. If you have another preparer do it, it’s almost as if they are redoing the return and having you complete an organizer, collecting your tax documents, making inquiries and documenting. entering data into their software, etc so the cost should be more. You could also do it as well if you believe you are competent enough and think it’s worth your time. My guess is that this is not really a good option though, but it’s an option.

Perhaps this tax year you consider other alternatives if you don’t have a long-standing relationship with the tax professional or organization. You might just chalk this up to a minor mistake though and don’t believe it is indicative of other potential issues based on your tax situation.

Bill B. · Answer

The last time I knew someone who used H&R Block (they were trying to become a professional motorcycle racer and wanted to write everything off.). They were told any errors or audits would be covered for free. (Not the taxes, just the paperwork.). It’s certainly worth asking.

In the future I would have an expenses form for each property you will out. (My cpa gives me one with last year’s numbers but you can certainly make one up yourself.) it should have every expense you’ve ever had on any property. Services< taxes, fees, Hoa, utilities, insurance< etc etc. Then you have to specifically write zero.

Ps. Anothe cheap/easy solution is some simple accounting software like quicken. It’s $50 year and auto downloads all bank transactions and forces you to allocate the expenses to each property. Then a simple report at years end does the same.

Bill B. · Answer

Why not pay someone to amend last year’s taxes and do this year’s. Will probably cost less than the extra $800 you get back.

You’re obviously going to be deducting the $4k the rest of your life. So the $4k missing is the discrepancy, not adding it this year.

Get your money back…

Basit Siddiqi · Answer

I would look to file an amended return to include that Expense.It shouldn't increase your risk of an audit.

Maggie W. · Answer

@Bill Brandt The quotes I've gotten for tax service are always much more than $800...I have properties in several states and w-2 as well, maybe that's why. I paid HR Block extra for a 'tax pro' to look over my taxes for me and even she missed this. Thanks everyone for your suggestions, very helpful.

Ryan Gillette · Answer

If it's a rental, file a 1040X. It takes less than an hour. Amend your State as well. Unless you make $1000+ per hour, great ROI.

Anecdotally, it's pretty common. We see it a lot on the lending side where people will miss writing off taxes, insurance, HOA, etc on their Sch E. Sometimes there are reasons (tax disbursement wasn't until Jan 15, etc) but there are more cases than people think where it's oversight. I made a similar oversight once, amended, and a $700 check came maybe 6 weeks later.

Forgot to enter $4k in HOA fee expenses last year. Should I amend or lay low?

Forgot to enter $4k in HOA fee expenses last year. Should I amend or lay low?

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