Those renting their homes and yards during Masters Week could receive a bill someday from the Internal Revenue Service.
The provisions that allow a windfall of tax-free income to local residents are once again under fire from IRS sharpshooters because of the many people who are abusing the rule.
Home renting and front-yard parking lots are among the red flags identified by the IRS, agency spokesman Mark Green said.
"We have seen a number of tax abuses," he said. "The majority of that centers around people who do not comply with the voluntary system in place."
IRS code section 280A allows taxpayers to rent their principal residences income-tax free for fewer than 15 days per year. The tax-free provision is not limited to homeowners - apartment and condo dwellers can also earn tax-free income by subleasing.
But the IRS suspects too many taxpayers are going beyond the 15-day period and not reporting the income. It also says too many taxpayers are incorrectly claiming rental expenses as a deduction.
"Every year, this law is under attack to try to take it away entirely," said Karen Stinson, an IRS-enrolled agent and tax specialist for H&R Block in Augusta. "Our tax laws are designed for honest people. When you think about it, you have to tell on yourself for a lot of things."
Hundreds of families in the Augusta area and even as far as Atlanta rent homes to golf fans in town for the Masters Tournament.
"It's a pretty big business," said Tim Cherry, accountant with Elliot Davis & Co. LLC in Augusta. "We have a number of clients in Aiken who are able to finance lavish vacations with the money they get renting their house. It's not uncommon to see between $4,000 and $9,000 between the week."
Those with homes near Augusta National Golf Club often allow fans of the Masters to park on their lawns for a fee. Most taxpayers do not realize this type of revenue must be reported as taxable income.
"Your yard does not qualify as your principal residence, and therefore any income you earn from it is not tax-exempt," Ms. Stinson said.
If the income is less than $600, file it on line 22 of Form 1040. Form 1099 must be filed if the sum is greater than $600.
People selling Masters badges must report that income also, but Mr. Cherry said many home renters with badges avoid taxation by selling the ticket at face value and making up the difference in the home rental price.
Mr. Cherry said those earning a little extra cash during Masters Week should be aboveboard because their return might be the one the IRS decides to scrutinize.
"They're looking for revenue," Mr. Cherry said. "They want to fund that $1.6 trillion tax cut with something."
Reach John Bankston at (706) 823-3352 or firstname.lastname@example.org.
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