I used TurboTax for my 2021 Income taxes and was able to attach the Rental Real Estate Enterprise Statement. I was not able to sign it but according to Rev. Proc. 2019-38 a signature is no longer required. I did however edit the form to include the following on the signature line “{my full name} digitally signed 4/4/22”, just in case.
I’m confused by what you are asking in regards to the 250 hours. This is a REQUIREMENT each year in order to claim the safe harbor. What exception are you referring to? In order to take the safe harbor you have to affirm that you spent 250 hours or more on the Real Estate Enterprise. Since you are aggregating it is 250 combined for all of you properties not 250 for each. Also, time spent on numerous things can qualify. See the end of my post as to what qualifies. Also, all services DO NOT have to be performed specifically by you to qualify.
Rev. Proc. 2019-38 does allow leniency in regards to the 250 hours IF the enterprise has been in existence for at least 4 years. Below is per Rev. Proc. 2019-38: Performance of 250 or more hours of rental services – for a rental real estate enterprise in existence for at least four years, at least 250 hours of rental services must have been performed annually in any three of the five preceding tax years.
Yes, your chances of getting audited are greater if you paper file. When you electronically file your tax data gets transferred automatically into the tax authorities system avoiding data input error. When you paper file all of your tax data has to be manually inputted into their system. As your tax return is comprised of numerous pages this provides greater chance that something will be entered incorrectly which may trigger an alert where your return has to be reviewed.
I am attaching some information which may be useful. I am also attaching the Aggregation & Enterprise forms I used with personal information X’d out.
Good luck.
The IRS previously released Notice 2019-07, which provided a proposed safe harbor under which a rental real estate enterprise would qualify as a trade or business solely for purposes of section 199A. The IRS finalized this guidance on Sept. 24, 2019 with the release of Rev. Proc. 2019-38. While substantially similar to Notice 2019-07, the new revenue procedure does deviate in some notable areas
- Performance of 250 or more hours of rental services – for a rental real estate enterprise in existence for at least four years, at least 250 hours of rental services must have been performed annually in any three of the five preceding tax years. For enterprises that have been in existence less than four years, the hour requirement must be satisfied in the tax year under consideration.
- Triple net leases – the safe harbor is not available to triple net lease arrangements. Under the new guidance, a triple net lease is defined to include a lease that requires the tenant to pay taxes, fees and insurance and to pay for maintenance activities, in addition to rent and utilities. The previous guidance defined triple net leases in a similar manner, but referenced lease agreements where the tenant was responsible for maintenance activities. The revised guidance clarifies that the key factor is who pays for those activities.
- Maintenance of separate books and records – for each rental real estate enterprise, the enterprise must maintain separate books and records. If an enterprise consists of more than one property, this requirement may be satisfied if books and records are maintained for each property and are subsequently consolidated.
- Maintenance of contemporaneous records of rental activities – the enterprise must maintain contemporaneous records documenting the hours, description and dates of all services performed, as well as who performed the services. This requirement is now applicable to tax years beginning after Dec. 31, 2019.
- Attachment to the taxpayer’s timely filed tax return – a taxpayer relying on Rev. Proc. 2019-38 must attach a statement to the return that describes all rental real estate properties included in each rental real estate enterprise for each taxable year in which the taxpayer relies on the safe harbor.
- Taxpayer signature - The revenue procedure eliminates the previous requirement that the taxpayer sign, under penalty of perjury, a statement confirming that all requirements of the safe harbor have been satisfied.
250 Hours of Real Estate Rental Services
- advertising to rent the real estate
- negotiating and signing leases
- verifying information in tenant applications
- collecting rent
- daily operation, maintenance, and repair of the property
- managing of the real estate
- purchasing of materials, and
- supervising employees and independent contractors.
Such services don't all have to be performed by you, the property owner. They may also be performed by your employees, agents, or independent contractors. For example, if you hire a real estate management company, the time they spend managing your property counts toward the 250 hour requirement.
The following types of activities do not count toward the 250 hours:
- financial or investment management activities, such as arranging financing
- procuring property
- studying and reviewing financial statements or reports on operations
- planning, managing, or constructing long-term capital improvements to your property, or
- hours spent traveling to and from the real estate.
