Anonymous
Anonymous asked in Business & FinanceRenting & Real Estate · 1 month ago

Is this tax evasion?

I have 2 roommates that help me pay for living expenses. We split the cost 33 percent, 33 percent, 33 percent. I own the home. I was just informed that I’m actually qualified as a “landlord” and the cost being split is actually “rental income” and since I never claimed this on my taxes, it’s “tax evasion.” Super confused here. Please help

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  • A.J.
    Lv 7
    1 month ago
    Favourite answer

    You are only evading taxes if you are not paying taxes owed.

    As homeowner, and they pay money, you are their landlord, and they are tenants.

    In splitting costs, do you have a mortgage and they are paying towards principal rather than just Interest? Are you itemizing deductions on taxes and deducting money you are being reimbursed for?

    The IRS agents have more important things to do than bother you about accounting if you don't owe them a notable amount of money. Presidents have reduced the IRS budget and they have enough to do without bothering you.

    I cannot advise you to do illegal things here on Yahoo Answers, but I can say that if collecting rent, there are offsetting expenses. Are you renting out bedrooms, or do they have full access and use of the home and its grounds also? Rental property has a depreciation schedule. Depending upon the numbers you either owe no taxes, or the amounts involved are so trivial, agents would rather not even know about you.

    I think you need to speak with someone about all the numbers and your records that understands accounting and rentals and tax laws.

    If they are your guests, you might have issues evicting them by local and state laws, but as guests they could give you a cash gift that covers a share of utilities and food.

    It's really very flexible and complex, as something I can't get into here without a lot more of your information. I am not providing any legal recommendations at all here, and only pointing out some public information.

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  • not at all in my opinion

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  • Eva
    Lv 7
    1 month ago

    Not true, There is an exception for a roommate situation.

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  • 1 month ago

    The IRS defines rental income as "any payment you receive for the use or occupation of property."  You may want to file amended tax returns before you get audited and fined for unpaid taxes.   This is literally "Real Estate 101" stuff.

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  • 1 month ago

    Yes, you're a landlord because you own the property. Your tenants may pay for shared expenses, but rent you collect from them is considered "rental income". Splitting utility costs is not income. 

    You can file an amended return to reflect your situation. Also note: since you own the home, all interest paid on your mortgage is deductible--and so are any expenses like repairs, and some maintenance--get a competent professional to help you decide what you can deduct as a landlord. 

    Mistakes are not considered "tax evasion."  They are mistakes, and you are allowed to correct them. NOT correcting the errors WILL be considered tax evasion and carry a penalty and fine. So get that return amended now. 

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  • Maxi
    Lv 7
    1 month ago

    Any income needs declaring and depending on where you live and the laws in place will depend on how the tax man treats this income, but it still needs declaring as if you have lodgers/tenants living in your home and 'sharing' the cost of living then you are a landlord

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  • Amy
    Lv 7
    1 month ago

    It's fine if the three of you are splitting the cost of electricity, heat, groceries, etc.

    But if two people are paying your mortgage or paying you to let them live in a home you own, that's rent. And rent is taxable income. 

    It's not "tax evasion" to make a mistake, but now that you know about it, you do need to correct your tax returns for every year that your tenants have been paying you.

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  • Anonymous
    1 month ago

    I am with the IRS criminal investigation division. Yes it is and we would appreciate you turning yourself in by 11am tomorrow.

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  • 1 month ago

    We don't need to call it "tax evasion" but you did file inaccurate tax returns.

    you are a landlord and you need to report your rental income. 

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  • Nancy
    Lv 7
    1 month ago

    Yes, if you're not claiming that income, it's tax evasion. If either of your roommates claim, say, a home heating credit or property tax credit as a renter whose heat bills or tax bills are included in their rent (i.e., not in their name but their landlord's name), they will then have to put their landlord's name, and you will quickly see yourself get audited and be charged for not just up to 7 years of back taxes but also interest and penalties charged retroactively. If I were you, I'd start claiming the income this year but not worry too much about filing amended returns for past years because doing that will result in the same interest and penalties, so you may as well hope that the reason you haven't been audited so far is there was nothing that tipped the IRS off and not simply because of backlog of processing audits.

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