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Moving forward, I think it will be best then to cash the funds, then deposit them as cash. That way, there's no record of personal checks (besides the first month's). That way, if they ever rat me out I'll just act dumb... Hmm... not sure what you are talking about? That's just a payment for [piano lessons] or any other random side gig haha
Seriously, thanks for the heads up. I'm not trying to be sketch although I know it looks that way, but after filing my 2014 taxes and having to OWE, it's made me a little weary about claiming any additional income. The whole point is for me to make extra side income, and thus far it's worked beautifully. I guess I'll just have to look into some more options then. Maybe my current salary would qualify me, it would just be nice to have the extra $1200/month of course show up as part of my salary. I guess I can't have my cake and eat it too.
Either file taxes with the information, so they can count it. Or, deposit as cash, and then they will not be able to trace where the money is coming from and therefore not consider it rental income.
Thanks again!
When you apply for a mortgage, they want a paper trail for EVERYTHING. You can't make cash deposits without proof of where they are coming from. A mortgage company will NOT accept those deposits as your income. It looks shady to them.
I signed paperwork to build a house. They needed a $99 downpayment for the paperwork. It was a house in a development. I didn't have my checkbook with me as we were out of state. I took cash out of the ATM and purchased a money order from WalMart to pay the $99. For months, they could not prove where that $99 came from. I had the ATM slips, the bank statement, and the money order receipt. The money order receipt was for like. $99.99 because of the fee for a money order. Obviously, the ATM receipt was for $100 and not $99. They had such a hard time with this simple little thing. At the closing, the builder gave us back the $99 because it could not be reconciled into the closing paperwork.
A second home has completely different income requirements than a personal residence. Also have you looked into the property tax an insurance ramifications of owning rental property?
Quote:
Originally Posted by harrisce4
What do you mean refiling my 2014 taxes?? I bought my house a few months ago, ya know in 2015? As in this year? My 2014 taxes were filed correctly, and a lot of my NYC side gigs screwed me over by giving me a 1099 and therefore I owed this year. I pay my property taxes on my house, insurance, HOA, mortgage, etc. which is what I owe.
A 1099 is not to ********* over. It's the law! Businesses are required to file these with the IRS. It's clear you don't know much about taxes. A business should break the law to keep you from paying taxes? A business owner should put his livelihood in jeopardy so you can avoid the tax man? What makes you so special and you are exempt from taxes?
Please do not be condescending towards me. Newsflash: I AM a homeowner. I've been through the lending process and know how mortgages work and I know they scrutinize every detail. I had plenty of cash deposits in my account from my side gigs in NYC. I had to show where those funds came from. What I'm unfamiliar with is investment properties, which is why I started this thread. I know there will be taxes I have to pay on them and that's fine because it's just that- an investment property. Property I am not occupying at all and just renting out.
I also know businesses have to file taxes. I've been filing taxes for years- with W2s, not 1099s. Businesses use 1099s so they can act like you are an independent business owner, even though you are NOT and have NO expenses for your "business" because you are simply a cater waiter for their business that they own. I would prefer they give me W2s and take out taxes in my checks. That's the point I'm trying to make. Not that I don't want to pay anything. Please spare me your lecture.
As for my parents not paying me rent, it wouldn't happen. As I mentioned in a previous post (which I know there are many so it's fine if you skipped it), my Dad gets paid $1400/month automatically from being a retired veteran. That entire check pretty much goes to their current rent for a 2b/2ba apartment. On a small 3 bd house here, I wouldn't charge them more than $1,000/month on rent. They would be saving money and I would be making money (assuming my mortgage is around $900/month or less). Again, win/win.
I never meant to say my parents are old. lol I said they are in their 50s and 60s. My Dad is 61 and is diabetic. The statistics alone are not good, especially as a black male. I'm not saying he's going to croak any minute. I'm saying they are getting older (which is TRUE! We all are) and I want to be close to them if they need me for anything. His vision is starting to decrease and he has trouble driving at night. Things like that.
As for my sister, trust me, you're preaching to the choir. I realize she is a leech but if that means my nephew is not a latch key kid and has someone to get him on/off the bus each day, then so be it. My parents are there to make sure he does his homework and get good grades. So hopefully HE will go to college and doesn't have to follow in his mom's footsteps. Who knows what he'd do when he got home? Just play on XBOX all day?
Ncole- you and I can agree to disagree about renting vs. owning. You can't convince me that renting is not throwing away money. Anyway you look at it. I know I can't convince you otherwise, so let's just agree to disagree on this one
So, to sum up, your parents stuck the bank (i.e. the rest of us, via higher interest rates and fees) w/the bill instead of paying their mortgage payments and now you expect the rest of us to pay your share of taxes. How fun! I guess it's true the apple doesn't fall far from the tree.
I also know businesses have to file taxes. I've been filing taxes for years- with W2s, not 1099s. Businesses use 1099s so they can act like you are an independent business owner, even though you are NOT and have NO expenses for your "business" because you are simply a cater waiter for their business that they own. I would prefer they give me W2s and take out taxes in my checks. That's the point I'm trying to make. Not that I don't want to pay anything. Please spare me your lecture.
That part of your complaint I can understand. Too many employers like to pretend that their employees are "independent contractors" in order to get out of some of their business obligations.
So, to sum up, your parents stuck the bank (i.e. the rest of us, via higher interest rates and fees) w/the bill instead of paying their mortgage payments and now you expect the rest of us to pay your share of taxes. How fun! I guess it's true the apple doesn't fall far from the tree.
When did I EVER say I expect the rest of you to pay my share of taxes?
No my parents did not stick the mortgage payments for funsies. My Dad took a pay cut and could not afford the payments any longer! There is a huge difference, not that I need to explain it to you all high and mighty behind your computer (or tablet/phone) screen.
That part of your complaint I can understand. Too many employers like to pretend that their employees are "independent contractors" in order to get out of some of their business obligations.
Thank you for getting it.
I never meant to come across like I was upset for having to pay taxes. I was upset because companies relieve a lot off of themselves when they make you file a 1099 and really it was not the correct document for me. If I truly was a business owner and had plenty of expenses for my business it would make sense but I was a cater waiter working for someone else's business making $20/hour and did not expense 1 penny. It really is unfair. Not only do you pay more taxes, but H&R block also charges you per 1099 form as well and they are not cheap. Which is why I decided that most of my side jobs there would be straight cash.
SN: I had dinner with a guy last night who is also renting 1 room out of his house he just bought and also has no idea about paying taxes for his rental income. So sorry bufflove, it's not that the apple doesn't fall far from the tree it's that these things are just not generally known by first time homebuyers.
Last edited by harrisce4; 05-08-2015 at 02:33 PM..
I spent a lot of time in NYC as a performer and did a lot of side gigs with 1099s. It's a very, shall we say, informal market in many parts of that business. For the amount of money changing hands, it often doesn't matter a heck of a lot.
I'll leave the ethical argument to others, but appeal to your sense of practicality. You aren't doing side gigs anymore; as you said, you're a homeowner and you want to leverage your status as a homeowner to provide for your family. That's very decent.
It is also an unfortunate side effect of renting out space in your own house that you don't have a clear expenses/income picture. With a 100% rental property, you only pay taxes on your profit - that is, rent - mortgage - upkeep expenses - depreciation, so it's not usually a heck of a lot of money. When it's your own home, it doesn't really work out that way, because there are very few expenses dedicated solely to the 'business' side of your home. You can (and should) talk to a local tax person in your state to determine if there is a way to set this up, because if part of your house is routinely rented out and will be for a long time, your risk factor grows as tenants come and go and the amount of money you're taking in approaches considerable amounts. The IRS may not care much if you rent out a couple rooms for a month out of the year (there is, in fact, a formal rule permitting you to do this for 15 days each year without paying tax) but if you have 12 months of tenants and $1200/mo for years, all it takes is one person to rat you out - a tenant or an annoyed neighbor - or for your to be randomly audited for any other reason and you'll have to explain why you give $1200 worth of cash piano lessons every month. The shrug-off tricks that worked in NYC for gigs won't work here: you're a homeowner now and that means more paper trails. Much tougher to imagine that you're off anybody's radar.
Another risk is your lease with your tenants. If you don't have one, and something bad happens, your homeowner's insurance company might ding you, your tenant might ding you, or a proceeding that would otherwise be routine could become a nightmare if you don't have formal records of security deposits, rents, and other accounting. Individually, these things are each unlikely; in the aggregate, sooner or later you're gonna need those papers.
At any rate, you can and should separate personal vs. rental expenses to avoid paying the tab on the whole $1200. See here:
Your situation is coming up a lot now for people who use AirBnb to rent out extra rooms. Don't expect much leniency from the tax man if you plead ignorance. :-/
Thank you Aquitaine for the sound advice. I will read the blog you posted. You've given me a lot to consider.
I plan on setting up an appointment to talk with my H&R block rep. I'm not sure they are the best professionals, but I've used them the last 4 years and trust them. Maybe they can input some numbers based on my full time job salary and rental income.
I was actually wondering about how people declare income from AirBNB because there's this HUGE race coming to Richmond, VA for a week in the fall. It's call the UCI Road World Championships. It is the third largest biking event following The Olympics and Tour de France. It's estimated to bring in 450,000 spectators according to this article. Hotels are quickly filling up, so I was hoping to put my house up for rent that week and try to get $3500 from it. People are already putting their houses up for rent on Craigslist for about that price. Luckily, I'll be able to work from home that week since I work downtown where the race takes place, so I can be there to "supervise" and make sure nothing crazy happens to my home. But yes, I guess I have to read the terms and see if this is also something I would have to pay towards.
I never meant to come across like I was upset for having to pay taxes. I was upset because companies relieve a lot off of themselves when they make you file a 1099 and really it was not the correct document for me. If I truly was a business owner and had plenty of expenses for my business it would make sense but I was a cater waiter working for someone else's business making $20/hour and did not expense 1 penny. It really is unfair. Not only do you pay more taxes, but H&R block also charges you per 1099 form as well and they are not cheap. Which is why I decided that most of my side jobs there would be straight cash.
Businesses file 1099 for one reason. If they don't, then they have to end up calling the money they paid you as profit, and they have to pay the taxes on that as profit. In other words they paid the money out to you as a business expense, but in turn have to pay taxes on it in addition. File the 1099, and it becomes an expense, and they don't pay taxes on that amount. When the 1099 is filed, you as the person that received the money pays the taxes.
Filing a w-2 on what they pay you, makes them liable for other payments and expenses. If a 1099 is permitted then it is cheaper by far to use the 1099 over the W-2.
And straight side jobs, paying you cash and not declaring it, is also against the law.
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A business owner should put his livelihood in jeopardy so you can avoid the tax man? What makes you so special and you are exempt from taxes? 
