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IRS cracks down on real estate agent classification

Guest perspective: Are you a real estate pro? Does the IRS agree?

Recently, the Internal Revenue Service has stepped up its enforcement action against individuals who represent themselves on their tax returns to be real estate professionals. The IRS has been aggressively auditing individual tax returns of real estate professionals and reclassifying many of these individuals as passive real estate investors. According to IRS studies of tax compliance, many people are inappropriately deducting losses from real estate activities. If you are taking losses from real estate activities on your federal income tax return, your chances of an IRS audit have risen dramatically over the past year. Among those selected for audit are individuals who are in fact bona fide real estate professionals within the meaning of the law, including licensed real estate brokers and agents. Based on our office's experience, not all real estate professionals keep good records for the time they spend on real estate activities and, when confronted by the IRS, they oft...