Improving Rental Real Estate Compliance
Individual taxpayers misreported more than $12 billion of net income from rental real estate activities in tax year 2001, which could translate into hundreds of millions in underpaid taxes or more. To improve such taxpayers' compliance, GAO made several recommendations:
- Congress should consider amending the Internal Revenue Code to make all taxpayers with rental real estate activity subject to the same information reporting requirements as other taxpayers operating a trade or business.
- The Commissioner of Internal Revenue should require third parties to report mortgaged property addresses on mortgage interest statements to help IRS identify taxpayers who may have misreported their rental real estate activity.
- IRS should elicit more accurate information from taxpayers on their rental real estate activities.
- The Commissioner of Internal Revenue should include guidance within the instructions to Part I of Schedule E to help taxpayers understand the requirements related to certain aspects of reporting rental real estate activities.
- IRS should enhance outreach efforts by evaluating whether sending notices to some or all taxpayers who report rental real estate activity would be a cost-effective way to reduce misreporting of some types of rental real estate activity.
IRS agreed with most of GAO's recommendations. No legislative changes have occurred.
^ Back to topKey Reports
- Tax Gap: Actions That Could Improve Rental Real Estate Reporting Compliance
- GAO-08-956, August 28, 2008
- Summary (HTML) Highlights Page (PDF) Full Report (PDF, 49 pages) Accessible Text Recommendations (HTML)
