IRS Form 1040 Schedule E specifically deals with supplemental income and loss throughout the year. This includes rental properties, royalties, partnerships, S corporations, estates and trusts. In essence, if you rent apartments, homes or other buildings; or if you own a business other than a sole proprietorship or have received money from a trust or estate, then you will be filling out this form. As with many other forms from the IRS, this experience can be daunting if you aren't familiar with the process.
List the type of rental property and specific address in Part I of Schedule E. There is space for three properties; if you have more than three properties, use additional forms to list all properties. Answer question 2 for each property. For questions 3 and 4, add the totals of all properties under the "Totals" column. The total needs to be shown on only one form, even if multiple forms are required to list all properties.
List expenses of rental properties in lines 5 through 18. This will include costs for advertising, auto and travel, cleaning and maintenance, commissions, insurance, legal and professional fees, mortgage interest, other interest, repairs, supplies, taxes, utilities and an open list for other expenses not shown.
Enter information on lines 19 through 26 with other financial information regarding rental properties. This section will help you to calculate year-end income or loss. If Parts II, III or IV do not apply to you, enter the amount from box 26 onto line 17 of IRS Form 1040. If the other sections apply to you, carry the amount to line 41 on page 2 of "Schedule E Form 1040."
Enter Partnership and S corporation information into Part II of the Schedule E. After answering yes or no to question 27, enter the name of each business that you are part owner of in box 28. Following the name of the business you will enter a "P" for partnership or "S" for S corporation. Check the next box if this business is a foreign partnership, enter your EIN and then check if any amount of the business is not at risk. In box 29, enter information for passive income and loss; boxes 30 through 32 will show your loss or income for the year.
Enter information in Part III concerning income or loss from estates and trusts. This information will all be entered into boxes 33 through 37. Part IV only includes two questions regarding income or loss from real estate mortgage investment conduits, or REMICs, as a residual holder. Part V reconciles all the information entered onto the form. The amount in box 41 will be placed on line 17 of IRS Form 1040.
An accountant who specializes in tax preparation will be able to maximize your tax return or minimize tax cost. If you are unsure about the information you are entering, consult a professional accountant.
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