Tax return review
originally posted: 11/22/2006 reposted: 2/18/2011 This post has not been recently reviewed or revised by the author and may be out of date. If in doubt, please send a new question or ask for an update.
Q: Our tax preparer said that most of our real estate deductions were disallowed because of the "passive loss" rules. But this is an active activity and in all other years we were able to deduct up to $25,000 or losses on real estate. We think the tax preparer may have made a mistake. Can you give a second opinion?
A: Yes, it pays to get a second opinion on more complicated tax issues. You may save taxes, or, at the least, you will better understand the situation so that you can plan more effectively for this current year. The small cost of a review of the tax return is definitely worthwhile. If adjustments are warranted, you can file an amended return after April 17. The cost of a review is $150, which would cover the 2004 and 2005 returns if available. The tax return can be faxed to my private number 866-271-5344 or if you have it in electronic format, e-mail it to onlineadviser@tonynovak.com. Keep in mind that if you have six CPAs prepare your tax return, you will have six different results and six different amounts of tax due (or refunds). In most cases, all are acceptable so make sure that your understand and are comfortable with the key issues affecting your income tax return. Finally, you should be aware that the limitation may be caused by the alternate minimum tax rules that interplay with the passive loss rules. More middle income taxpayers than ever are affected by these rules. Basically anyone with total income over $150,000 who takes measures to reduce taxes will hit a barrier under AMT that prevents income taxes from dropping below about 8% of income.
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