Deducting refunds for days not rented?

Answered!
James2654
Level 2
Sarasota, FL

Deducting refunds for days not rented?

Lots of talk about this subject, but whenever it comes to asking for specifics people react like I'm asking for free legal advice.  

 

Airbnb and other sources tell us to deduct the refund from gross earnings to arrive at net earnings, but nowhere does anyone, not even the IRS it seems, says WHERE to do this on my (US) tax return, and I can see no way of doing it aside from calling it some kind of business expense (in other words, by lying).  Not matter how complicated my taxes have been (and they have been very complicated), I have never had to pay anyone to help with them, so something as simple as this shouldn't take my forking over $150 to a tax specialist to get right.

 

There can't be more than a couple of ways of doing this.. So as someone who doesn't get a 1099K (just Airbnb's informal earnings report) and who is reporting a few thousand in airbnb gross earnings using Turbotax's rendition of Schedule E, can someone please, please, pretty please tell me where I would deduct a large refund I authorized for a bipolar guest who disappeared not even halfway through the first night after he realized he'd impulsively booked a place he couldn't afford?  As a 'miscellaneous expense' in turbotax?  On line X of Form Y? On Schedule E, line 3.1415?

1 Best Answer

A cancelled reservation is not an expense. It is simply a lack of income for days not rented. And how could anyone equate money refunded with earnings, when nothing was done to earn that money? And AirBnB sending me a payout for that rental period, 8 days after they issued the guest their refund, can't be considered earnings either – just Airbnb juggling money in the background.  The amount refunded in 2022 should not have increased my gross earnings in 2022, and it should not subsequently have been used to reduce my gross earnings in 2023.

 

Yet according to the Earnings Summaries they sent me, it appears that's exactly what happened; and according to two of Airbnb's support staff, that's exactly what they reported to IRS.

 

Finally, calling refund an expense on one's Schedule E does not subtract the full amount of the refund from one's gross income. I tried this, and they only way to bring the gross earnings down by the amount of the refund is to call it a commission.  The only other way I can subtract the full amount of the refund from my gross earnings is to do it manually and enter the difference  in line 3.  But since the gross earnings Airbnb reported to IRS was inflated by the amount of the refund, the values would differ, which could trigger a red flag.

View Best Answer in original post

7 Replies 7
Helen3
Level 10
Bristol, United Kingdom

Would your accountant not be able to advise you @James2654 

@Helen3 Along with many of us I don't think @James2654 wants to pay for an accountant. 

James - I am not sure but why is calling the refund a business expense lying? At the end of the day surely any money going out is an expense?

A cancelled reservation is not an expense. It is simply a lack of income for days not rented. And how could anyone equate money refunded with earnings, when nothing was done to earn that money? And AirBnB sending me a payout for that rental period, 8 days after they issued the guest their refund, can't be considered earnings either – just Airbnb juggling money in the background.  The amount refunded in 2022 should not have increased my gross earnings in 2022, and it should not subsequently have been used to reduce my gross earnings in 2023.

 

Yet according to the Earnings Summaries they sent me, it appears that's exactly what happened; and according to two of Airbnb's support staff, that's exactly what they reported to IRS.

 

Finally, calling refund an expense on one's Schedule E does not subtract the full amount of the refund from one's gross income. I tried this, and they only way to bring the gross earnings down by the amount of the refund is to call it a commission.  The only other way I can subtract the full amount of the refund from my gross earnings is to do it manually and enter the difference  in line 3.  But since the gross earnings Airbnb reported to IRS was inflated by the amount of the refund, the values would differ, which could trigger a red flag.

According to my CPA, I am correct – Airbnb should not be reporting refunds for days not rented as gross earnings. 

 

But not knowing precisely how to best compensate for Airbnb's screwy reporting practices on my tax return is actually secondary to my primary beef, as previously outlined.

According to my CPA, I am correct. Airbnb should not be reporting refunds for days not rented as gross earnings. Yet according to their earnings summary, that's what they appear to have done; and according to two of Airbnb's support staff, that's exactly what they did.

Kia272
Level 10
Takoma Park, MD

@James2654 You do the math yourself do arrive at your net earnings. Not complicated at all. 

 

Expenses are something separate, but a refund gets deducted from your gross earnings. Super easy. 

Even though it's been some time since my university level math classes, I still remember how to add and subtract.  The crux of the problem is that Airbnb reported a refund for a cancellation as gross earnings on my end-of-year Earnings Summary, and according to two of their staff that's not only standard practice, but is also what they report to the IRS.

 

Determining how to fairly compensate for this on my tax return without setting any alarms off at the IRS is not necessarily so easy.