Congress should consider making all taxpayers reporting rental real estate activity subject to the same information reporting requirements as other taxpayers with a trade or business, according to the Government Accountability Office.
A new GAO report found that 53 percent of individual taxpayers with rental real estate misreported their rental activities for tax year 2001, resulting in an estimated $12.4 billion of net misreported income. The GAO said that this amount is understated because the Internal Revenue Service knows it does not detect all misreporting during its National Research Project examinations and adjusts the amount of misreporting it detects to estimate the tax gap. Reporting of expenses was the most common type of rental real estate misreporting.
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