Filing Taxes

9 Replies

Hi There,

Just wondering if there is an advantage or difference between filing taxes using a Schedule E vs using a Schedule C.  Could someone please help clarify?

Thank you in advance for all your help!

Rich

@Rich Semakula its not a matter of one or the other. They are different forms for different purposes. A Schedule E is used to report income and expenses for a single investment property. A Schedule C is used to report the income and expenses of a business you own. 

Rob,

I appreciate you providing some clarification!  The reason I posed this question is because, I own 4 rental properties and I manage every aspect of this portfolio and do consider this a business.  So as a business, I believe for tax purposes, I can file a Schedule C, but also because these are rental properties I believe I can also file using the Schedule E.  Not sure which one would make the most sense.

@Rich Semakula all property specific data must go on the Schedule E. Each property has its own Sch E. Business expenses that dont relate to a specific property would go on the Sch. C such as money you spend researching a property that you dont end up purchasing or office expenses. 

Rich, rental income is not active income and should be reported on schedule E, regardless of how many properties you own.

Schedule C, as @Rob Beland mentioned, is for business income (active income). The only time you would really report rental income on schedule C is when you operate as a hotel (short turnover, providing maid services, cooking meals).

If you do erroneously report rental income on schedule C, you will subject that income to self employment tax. So be careful, and better yet, hire an advisor. My typical client has a situation similar to you and when I review their self prepared returns, I usually find plenty of mistakes. 

@Rich Semakula

I would highly recommend using a good CPA at this point.  Trust me saving a couple hundred bucks isn't worth it.  If you report something incorrectly and then try to refinance one day it will be a nightmare!!!

Rob, Brandon & Shaun,

I really appreciate your guidance and advice!  I guess, I was confusing myself and now I'm much more clear on how to look at this issue.  

Thank you so much and have a wonderful Sunday afternoon!

Rich

It's not all that hard using software like turbo tax plus reading the IRS Publication plus some googling. If you don't feel comfortable doing it yourself you could split the baby and use a CPA for the first year or two, ask lots of questions and get all the detailed forms and schedules he or she is filing, and then switch to doing it yourself later on. If you have a high volume or don't like doing taxes it makes sense to hire someone. IRS used to be much more customer friendly and you could call their help line and have a good chance of getting an IRS employee working whatever area you had a question on answer some questions, but it's been years since I've had to do that and I believe their customer service is hurting dramatically with recent budget cuts. So I'm guessing it's much harder to get that now a days but I don't know. You could always try.

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@Chin P. The value of a CPA isn't realized from simply tax preparation. Of course you can use TurboTax, and probably have somewhat accurate returns, however TurboTax doesn't evaluate your financial and real estate goals. TurboTax doesn't help you plan for the future. And if you get audited, you can't run to TurboTax for help.

Regardless, I highly recommend reading up on various tax laws and publications that will affect your unique situation as it's always beneficial to be informed.