What is the Augusta Rule? (Section 280A)

The Augusta Rule, known to the IRS as Section 280A, allows homeowners to rent out their home for up to 14 days per year without needing to report the rental income on their individual tax return.

Why is it implemented? (Overview)

Originally created to protect residents of Augusta, Georgia who would rent out their homes to attendees of the annual Master’s golf tournament.

Applies to Whom?

Augusta Rule applies to any taxpayer who owns a home in the United States, provided that your home is not your primary place of business.

How Does it Work for the Homeowner?

So long as the home you own is not your primary place of business, you can rent it out for up to 14 days and not report that income on your individual tax return. The rent you charge must be reasonable and in line with what the rental market supports.

Example: Charging $8000 per night when comparable houses rent for $200 per night is not considered reasonable!

Note:- Homeowners can rent their house to individuals looking for vacation opportunities or they can rent their house to a business owner who intends to use it for business purposes.

Shifting Income from Your Business

If you are a business owner and do not use your home as your primary place of business, employing the Augusta Rule can be an effective strategy for moving income away from your business and shifting it to personal income, where there would be no tax consequence.
For example, as a business owner, you host a monthly meeting with your Board of Directors. Under the Augusta Rule, your business can pay you a reasonable amount to rent your house to conduct the once-per-month meetings. Provided that the total rental period doesn’t exceed 14 days and the rent charged is reasonable, your business is able to deduct the rent payment on the business tax return and you won’t have to report this as income on your personal taxes!

Documents:
Having documentation to support your claim as a business deduction is critical to prove the rent was reasonable, you could print rental quotes for similar meeting locations. To document that a meeting occurred, you could keep minutes or other records of business discussions.
If all of this has overwhelmed you and you still need help, we can take care of all your tax-related issues. Reach out to us by writing at info@evolutiontaxcenter.com 

Why are so many Americans upset with the IRS?

There are few things as heart-stoppingly awful as receiving a notice from the Internal Revenue Service (IRS). What could be worse than that, right?



Let us tell you what would be worse: you could get an entirely incorrect notice!

That’s exactly what has recently happened to more than a quarter million taxpayers.

The IRS acknowledged sending out approximately 260,000 notices to taxpayers for failure to file. Some, and perhaps MANY, of those notices are likely incorrect.

Here’s the official IRS statement:

Earlier this month, the IRS issued notices to approximately 260,000 taxpayers stating they haven’t filed their 2019 federal tax return. These notices, referred to as CP59 notices, are issued yearly to identified taxpayers who have failed to file a tax return that was due the prior calendar year (Tax Year 2019). Due to pandemic related shutdowns, the IRS has not completed processing all 2019 returns at this time. Therefore, the CP59 notices should not have been sent because some portion of the recipients may actually have filed a return that is still being processed. People who filed their 2019 return but nevertheless received the CP59 notice, can disregard the letter and do not need to take any action. There is no need to call or respond to the CP59 notice because the IRS continues to process 2019 tax returns as quickly as possible. The IRS regrets any confusion caused by this mailing.

And what’s the reason for that? If you guessed COVID-19, you would be correct.

And taxpayers are not the only ones annoyed because of these notices they received…

Two leaders of the House Ways and Means Committee have actually told the IRS Commissioner,
“Enough is enough.”

See their statement below:

“We are dismayed that the IRS continues to send incorrect notices to hard-working Americans, many of whom are struggling through severe health and economic crises as a result of the pandemic. The IRS must immediately cease mailing erroneous notices that impose unnecessary and confusing burdens on taxpayers. Yesterday, we learned that the IRS sent approximately 260,000 CP59 notices to taxpayers who the IRS claimed did not file a 2019 tax return. The IRS continues to have a staggering backlog of unprocessed 2019 tax returns that, most recently, was reported to include nearly 7 million unprocessed individual tax returns. In light of these severe processing delays, it is very likely that many taxpayers receiving CP59 notices already filed the returns that the IRS claims are outstanding. For taxpayers who have dutifully complied with their filing obligations, these notices impose unnecessary stress and sow confusion. For IRS employees, these notices create unnecessary work while they struggle to meet the current demand.”

If you still haven’t filed a 2019 tax return, the IRS has asked you to do so promptly. Even though the IRS is backed up, they are processing 2019 returns as quickly as possible.

As for 2021, a shout out and a BIG thank you to many of our clients who have successfully filed their return early and ALREADY received their refund too!

If you haven’t filed yet, what are you waiting for? Our calendar is filling up fast.

We can help you get your maximum tax refund as soon as possible! Our Tax Advisors are waiting to help you. Setting up an appointment is simple. We are offering both virtual and in-office appointments.

Contact us today for a FREE appointment! Click the link: tax preparation appointment.