House Flip Tax Question

[jmcquade02]

I have normal W2 Income 150K.  I Setup LLC and Flipped a house on the side. Sale of flipped house was 200K. Profit was around 45K.  Says I have an increased chance of being audited due to Business sales over 100K. Which is really just the sale price of the flipped house. Actual profits are far less. Should I skip all the details and just list the exact profits as income instead of the flipped house sale as Income and all the subtracted basis cost of home and repairs.  This would not change my actual numbers but would reduce my audit risk since I don't show sales of over 100K on the business?   Any thoughts? 

[LeticiaF1]

Even if the program warns you of the possibility of getting audited, you should report the total you sold the house for and subtract all of your expenses.  Something important is keeping good records that back up all the income and expenses you are claiming on your return.  Keep in mind that when you file your taxes with TurboTax, you automatically receive access to our Audit Support Center and TurboTax Audit Support Guarantee.  

Also, make sure to report the sale of the house in the correct section of the return.  If flipping homes is not something that you are planning to do regularly, you can report the transaction as a capital transaction (Form 8949/Schedule D). To report this on TurboTax:

1. Login to your return
2. Continue with the section Wages & Income
3. Scroll down to Investments and Savings
4. Under this section select Stocks, Cryptocurrency, Mutual Funds, Bonds, Other (1099-B)
   
   

If this is going to become something you will be doing more regularly, then it would no longer be considered passive investing and would become "active income."  If this is the case flipping houses is now a business that has to be reported as a business and the profit is subject to self-employment tax.  If this is the case then the income would be reported on Schedule C, unless you have a partnership or become a corporation.  If you are entering it on a Schedule C you would follow steps 1 and 2 above, and enter it under self-employment income and expenses.  

When selling properties most expenses need to be capitalized into, which means they have to be added to the basis of the property.

For more information on recordkeeping, audits, and capital gains, see the TurboTax articles below:

 Keeping Good Tax Records

What Are Tax Audits?

Guide to Schedule D: Capital Gains and Losses