Donna Genie explains why most campgrounds shouldn't use Schedule E for taxes. Schedule E is for passive rental income, but campgrounds are active businesses because owners and staff check guests in, empty trash, and interact with customers. Using the wrong form can trigger large penalties and misses self-employment taxes for Social Security and Medicare.
Campgrounds can be taxed in many different ways depending on the elections, the owner's personal taxation strategies, and how the entity was formed. Schedule E is a form that is used for rental properties mostly or royalties, and has its place in the tax code. However, an operating campground is not one of those. Schedule E is for passive activities and in most cases operating a campground will not qualify as a passive activity. There are some specific rules you have to look at, but if you have someone who is checking guests in and out, who is emptying the trash or maybe visiting with people, those are all aspects of an operating business. A passive business would not have any employees or have owners who are working in the business. So the problem is that the taxation is incorrect and this could result in a large penalty or assessment if you're audited. Most other forms of that entity would be subject to self employment tax or Social Security and Medicare taxes, and a Schedule E is not. So there's a big difference when it comes to the bottom line of tax taxation. If you're a campground who is operating on a Schedule E, I'd love the chance to talk with you to help you remedy that situation and determine what truly the best way is for you to be taxed. I'm Donna Bordeaux with campgroundaccounting.com if you have that situation, please shoot me an email@donnaampgroundaccounting.com RAM.
