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lapfog_1

(30,450 posts)
11. the tax laws are written such that
Mon Jan 20, 2025, 07:34 PM
Jan 20

most people that do itemized deductions run afoul of a tax ruling or other.

If you take no deductions other than the few offered by the EZ or short form you might be OK, but if not you have a good chance that, through no fault of your own or even that of your tax preparer, you could be found guilty of something.

Doesn't happen often that they come after you, but they COULD. You will spend more money defending yourself than you will if you just pay the extra tax and fine,

For example, I owned a condo in Denver when I got a job in California. I had already sunk a lot of my savings into the condo... so I thought "Hey I will just rent it out". Found a real estate person to put it up for rent. Was rented for 1 year, the renter basically trashed the place. Spent thousands more refurb. Then the market in Denver went to shit... like the rent would not even pay half the mortgage. Having had the bad experience with the renter... I left the place unrented.

I took the same deduction for my mortgage the next tax year... and I got audited. IRS claimed this was now an illegal deduction because it was NOT RENTED for the year ( I did list it for rent at my mortgage price but got 0 calls ), therefore it was now a vacation home!

So I talked to a tax attorney and he told me it would cost me another $20K to fight this in court... and I would win... or I could just pay them the tax and fine of around $18K and call it a day. I paid. If I went to court and lost... I would be out the attorney fee AND the tax and penalty and might even face jail time.

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