[ Thread is unlocked ] Megarenter Rap Lawsuit

[SmithOp]

On top of that, you have to pay the "self employment tax". Self employment income is, in fact, considered business income. It's even taxed higher because of that.
.

SE income is taxed at the same rate, income is income.

The additional tax you are referring to is Medicare and Social Security taxes, which are paid 100% by self employed when they file taxes.

W-2 workers pay 1/2 of Medicare and SS taxes as payroll deductions, the employer pays the other 1/2. So its the same tax, just collected as its earned instead of at filing time.

 

[VacayKat]

Sounds like you need a vacation. Have you tried a timeshare

There's a completely legal way around these limitations, though. As long as you rent your timeshare out for 15 or fewer days per year, the IRS turns a blind eye to it. You won't be able to write off any rental expenses, but you won't have to report the rental income that you get either. While it's not a tax break if you lose money on the rental, it is if you can rent it out profitably. Either way, the whole transaction is tax-free, as described in the IRS' own Publication 527 on Residential Rental Property rules.

Tax Breaks on Timeshares (zacks.com)

Not sure this is true (or if it is, it's state dependent) - our tax guy said that without actual real property attached, timeshares do not get this loophole. That's for real property, like renting your home on airbnb.. It's $600 (per year), anything above you report, anything below you should still report, but IRS isn't coming after you for it. (edited to add, also you can't deduct anything from this, because IRS doesn't consider timeshare to be property for these purposes, so no tax loss credits to the income, and any income gotten from the rental is reportable as there are no tax shelters for time share rentals at all)

 

[Mongoose]

Not sure this is true (or if it is, it's state dependent) - our tax guy said that without actual real property attached, timeshares do not get this loophole. That's for real property, like renting your home on airbnb.. It's $600 (per year), anything above you report, anything below you should still report, but IRS isn't coming after you for it. (edited to add, also you can't deduct anything from this, because IRS doesn't consider timeshare to be property for these purposes, so no tax loss credits to the income, and any income gotten from the rental is reportable as there are no tax shelters for time share rentals at all)

I'm certainly not a CPA, but look at post 225 and the linked article.

 

[Eric B]

SE income is taxed at the same rate, income is income.

The additional tax you are referring to is Medicare and Social Security taxes, which are paid 100% by self employed when they file taxes.

W-2 workers pay 1/2 of Medicare and SS taxes as payroll deductions, the employer pays the other 1/2. So its the same tax, just collected as its earned instead of at filing time.

Not sure what you're replying to, but SE taxes are a bit more complicated than that. Here's one part of the guidance the IRS provides at https://www.irs.gov/businesses/smal...oyment-tax-social-security-and-medicare-taxes:

If your wages and tips are subject to either social security tax or the Tier 1 part of railroad retirement tax, or both, and total at least $137,700, do not pay the 12.4% social security part of the SE tax on any of your net earnings. However, you must pay the 2.9% Medicare part of the SE tax on all your net earnings.

Bottom line is that if you rent out a timeshare and actually have earnings from it, you don't pay the social security side of it unless your other wages are less than the limit ($137,700 in 2020, just moved up to $142,800 for 2021). You're still supposed to pay the Medicare portion on your net earnings.

As always, consult a tax attorney or CPA if you have any issues for which you would like legal advice. This post (and most of the others on the internet) is not intended as and should not be considered legal advice.

 

[clifffaith]

yep... but if you got that lawnmower from a neighbor moving and sold it for $50 at a garage sale, it's taxable. IRS laws are special. (also, I may have resembled your wife at garage sales, lol)

Have to start saving receipts for everything now. Starting next year eBay will be issuing 1099s for cumulative sales over $600. Supposed to be keeping track of garage sales too.

 

[Mongoose]

Have to start saving receipts for everything now. Starting next year eBay will be issuing 1099s for cumulative sales over $600. Supposed to be keeping track of garage sales too.

That really sucks. I often make small sales on ebay every year, typically selling items at a loss that I no longer want to need. I'll have to learn more about that. This could really hit their sales. Small sellers just won't want to deal with it.

 

[VacayKat]

I'm certainly not a CPA, but look at post 225 and the linked article.

I don't see the link- if you get a chance can you pm me it?
However, what I wrote is what my CPA did tell me after he dug into the tax laws because I wanted to be sure I was reporting to the IRS everything we had to, but also not paying taxes we didn't have to. He said it did not apply. And since he was preparing our taxes, he won't file them unless everything complies with the law - if he did he could go to jail. Long story short he said in the future if we don't want to pay taxes it has to be under the $600 total for ALL non-w-2 income. Basically what he intimated was, if you want to rent any of them, suck it up and pay the taxes, so we do. It's sucky though, because what we rent is at most 1/15 to 1/20 of what we pay in MF and I only charge the MF cost plus the tax cost that I'll pay to renters, so it's not like I'm making an actual profit.

 

[Mongoose]

I don't see the link- if you get a chance can you pm me it?
However, what I wrote is what my CPA did tell me after he dug into the tax laws because I wanted to be sure I was reporting to the IRS everything we had to, but also not paying taxes we didn't have to. He said it did not apply. And since he was preparing our taxes, he won't file them unless everything complies with the law - if he did he could go to jail. Long story short he said in the future if we don't want to pay taxes it has to be under the $600 total for ALL non-w-2 income. Basically what he intimated was, if you want to rent any of them, suck it up and pay the taxes, so we do. It's sucky though, because what we rent is at most 1/15 to 1/20 of what we pay in MF and I only charge the MF cost plus the tax cost that I'll pay to renters, so it's not like I'm making an actual profit.

Tax Breaks on Timeshares

Timeshares, which are arrangements by which you purchase the right to use a unit at a property for a period of time, remain controversial among financial advisors. On one hand, they allow you to lock in vacation property for an extended period of time at a relatively fixed cost. On the other...

finance.zacks.com

 

[Eric B]

Not sure this is true (or if it is, it's state dependent) - our tax guy said that without actual real property attached, timeshares do not get this loophole. That's for real property, like renting your home on airbnb.. It's $600 (per year), anything above you report, anything below you should still report, but IRS isn't coming after you for it. (edited to add, also you can't deduct anything from this, because IRS doesn't consider timeshare to be property for these purposes, so no tax loss credits to the income, and any income gotten from the rental is reportable as there are no tax shelters for time share rentals at all)

I'm certainly not a CPA, but look at post 225 and the linked article.

Taxation of timeshare rental income can be pretty complicated depending on the circumstances. I'm certainly not an expert on it, but it does strike me that if you are renting out a week stay that you booked at a different resort than you own using a system like CWP, you aren't doing something terribly similar to renting out a vacation home for which you could depreciate the underlying cost of the resort ownership assignable to you. If you were renting out a fixed week at a fixed resort, the analysis would probably be different - you own 1/52 of that particular unit and could depreciate and expense it. The first seems to me to be the behavior that Wyndham is trying to disincentivize, and I believe they would have a valid point if they did it properly.

 

[VacayKat]

That really sucks. I often make small sales on ebay every year. Typically selling items at a loss that I no longer want to need. I'll have to learn more about that.

It's also covered by that $600 rule - if you don't want to worry about it, keep it under that amount. Otherwise, just keep receipts - another way would be to look up what the item is currently selling for, take a screen shot of it, and then keep that with what you sold the item for, it will show a loss.

 

[Mongoose]

Taxation of timeshare rental income can be pretty complicated depending on the circumstances. I'm certainly not an expert on it, but it does strike me that if you are renting out a week stay that you booked at a different resort than you own using a system like CWP, you aren't doing something terribly similar to renting out a vacation home for which you could depreciate the underlying cost of the resort ownership assignable to you. If you were renting out a fixed week at a fixed resort, the analysis would probably be different - you own 1/52 of that particular unit and could depreciate and expense it. The first seems to me to be the behavior that Wyndham is trying to disincentivize, and I believe they would have a valid point if they did it properly.

Here is a little more. Tax Aspects of Renting Your Timeshare | RedWeek

 

[VacayKat]

Tax Breaks on Timeshares

Timeshares, which are arrangements by which you purchase the right to use a unit at a property for a period of time, remain controversial among financial advisors. On one hand, they allow you to lock in vacation property for an extended period of time at a relatively fixed cost. On the other...

finance.zacks.com

ah... I see where you're missing it. that 15 days is for property used as a home. Timeshares do not qualify. quoting from the IRS "
Used as a home but rented less than 15 days. If you use a dwelling unit as a home and you rent it less than 15 days during the year, its primary function isn’t considered to be rental and it shouldn’t be reported on Schedule E (Form 1040). You aren’t required to report the rental income and rental expenses from this activity."
Timeshare would qualify under this category: "Not used as a home. If you use a dwelling unit for personal purposes, but not as a home, report all the rental income in your income. Because you used the dwelling unit for personal purposes, you must divide your expenses between the rental use and the personal use as described earlier in this chapter under Dividing Expenses. The expenses for personal use aren’t deductible as rental expenses. Your deductible rental expenses can be more than your gross rental income; however, see Limits on Rental Losses in chapter 3." again quoting from IRS (https://www.irs.gov/pub/irs-pdf/p527.pdf )
Either way, my CPA is an expert, I'm going with his advice on this, and that is - it is income.

 

[VacayKat]

Taxation of timeshare rental income can be pretty complicated depending on the circumstances. I'm certainly not an expert on it, but it does strike me that if you are renting out a week stay that you booked at a different resort than you own using a system like CWP, you aren't doing something terribly similar to renting out a vacation home for which you could depreciate the underlying cost of the resort ownership assignable to you. If you were renting out a fixed week at a fixed resort, the analysis would probably be different - you own 1/52 of that particular unit and could depreciate and expense it. The first seems to me to be the behavior that Wyndham is trying to disincentivize, and I believe they would have a valid point if they did it properly.

I got a good giggle out of "terribly similar'. When it comes to IRS, I follow the rules to a T and recommend everyone else does too. Super sucks to do the right thing, but way better than a jail sentence!

 

[Mongoose]

ah... I see where you're missing it. that 15 days is for property used as a home. Timeshares do not qualify. quoting from the IRS "
Used as a home but rented less than 15 days. If you use a dwelling unit as a home and you rent it less than 15 days during the year, its primary function isn’t considered to be rental and it shouldn’t be reported on Schedule E (Form 1040). You aren’t required to report the rental income and rental expenses from this activity."
Timeshare would qualify under this category: "Not used as a home. If you use a dwelling unit for personal purposes, but not as a home, report all the rental income in your income. Because you used the dwelling unit for personal purposes, you must divide your expenses between the rental use and the personal use as described earlier in this chapter under Dividing Expenses. The expenses for personal use aren’t deductible as rental expenses. Your deductible rental expenses can be more than your gross rental income; however, see Limits on Rental Losses in chapter 3." again quoting from IRS (https://www.irs.gov/pub/irs-pdf/p527.pdf )
Either way, my CPA is an expert, I'm going with his advice on this, and that is - it is income.

Probably a good idea!

 

[comicbookman]

Assuming an average points per reservation of 150k per transaction - that would equate to 467 rental reservations that were denied to actual Wyndham owners.


Sent from my iPhone using Tapatalk

Not a mega renter myself, nor a supporter, but Since these reservations are being made by people who own the points involved, no reservations are being denied to actual Wyndham owners.

 

[troy12n]

SE income is taxed at the same rate, income is income.

The additional tax you are referring to is Medicare and Social Security taxes, which are paid 100% by self employed when they file taxes.

W-2 workers pay 1/2 of Medicare and SS taxes as payroll deductions, the employer pays the other 1/2. So its the same tax, just collected as its earned instead of at filing time.

You have to pay additional "self employment tax"... look it up. All self employed or contractors (1099) employees have to pay this. I know because I was a contractor for several years, and while the base tax rate is the same, you have to pay additional "self employment tax" because your employer isn't paying payroll taxes on you/for you... Look it up.

 

[troy12n]

Either way, my CPA is an expert, I'm going with his advice on this, and that is - it is income.

There is "letter of the law", and there is "spirit of the law".

While, from a "letter of the law", you are probably right to say that someone making $150 total at a garage sale selling their own junk may in fact owe on that. The IRS certainly is not going to enforce it.

Whereas, people making tens of thousands of dollars by renting timeshares is certainly something the IRS, if it had knowledge of it, would actively enforce. I know people who have had rental homes who didn't claim the income and got stuck with huge back tax bills, and penalties. It's not something they would enforce with jail time, but they want their money.

Ignoring this isn't smart.

 

[paxsarah]

You understand how there will be more "regular" owners reservations and fewer renter reservations, but you do not see how it benefits existing owners?

Yes, that's what I said. I understand that there will be more "regular" owners in total, as some number of megarenters will be replaced by some (presumably much greater) number of "regular" owners. Thus, a greater number of "regular" owners will be able to book reservations. However, I'm still up against the same total number of points chasing the same amount of availability, so I don't see how any existing current "regular" owner is any better off once we've replaced some megarenters with regular owners. In fact, because we can assume each megarenter is replaced by numerous regular owners, for instance at 13 months, instead of one megarenter trying to snatch up 10 reservations at a lucrative location but who has to do so consecutively, I'm up against multiple regular owners who can all book right at midnight simultaneously.

So again, I don't see how I, as an individual existing regular owner, gets any benefit in terms of availability once the points from megarenters have made their way into new "regular" owner hands.

 

[paxsarah]

Unlike a private sale, Wyndham's use of its share of that 700 million points is restricted to 60-days, so >60-day availability definitely increases and especially in the short term until all of Wyndham's share of the 700 million points are sold.

I don't think this is true, according to the VOA docs posted in the sticky.

11.08 Wyndham Use. In addition to the right of Wyndham, as a Member and owner of Points, to make reservations using those Points at any time, Wyndham, in its capacity as the developer of resort communities and Vacation Plans, may reserve available Accommodations up to 60 days in advance of the first day of anticipated occupancy, for its own purposes, including renting to the public, provided it pays or otherwise causes a third party to pay the occupancy related expenses of such Accommodations for each night to be used. All such occupancy related expenses shall be determined by the Trustee. As a result of Wyndham’s use there will be less space available for Member use; however, Wyndham may not reserve the last 10% of available occupancy for a type of Accommodation until 30 days prior to the first day of intended use.

I'm not a lawyer so I could be reading this wrong, but as I read it, Wyndham can book with the points it owns itself at any point as any owner could. The 60-day use is of any remaining accommodations that Wyndham can just take for rental or whatever, which it has to ensure is paid for, though it cannot book the last 10% of occupancy until 30 days.

 

[Eric B]

I got a good giggle out of "terribly similar'. When it comes to IRS, I follow the rules to a T and recommend everyone else does too. Super sucks to do the right thing, but way better than a jail sentence!

I do try to be circumspect and avoid jumping to conclusions about people’s circumstances. Might be a weakness, but I’m okay with that.

For dealing with the IRS, I follow the same principles. When my house burned down 15 years ago, my tax filings weighed about 5 pounds because I had to list every item, the purchase prices, fair market values and what the insurance paid me - all for a net loss/gain of zero.

 

[paxsarah]

I will concede, the one way I think a current regular owner would see benefit is from the principle behind fitness memberships - it only works if some people never show up. So unlike a megarenter who we know was eking use out of every single point of their ownership as much as possible, of the 25 or 50 or 100 or whatever number of regular owners replace them, some of them are going to be slackers who don't use or underutilize their ownership. On FB there are plenty of people who say, "I bought three years ago but I've never taken a trip," or "My dad has owned for 20 years but hasn't used his points in the last 10," etc. Those people are how we benefit. Yay.

 

[Mongoose]

There is a sale on ebay right now for 1.6M points with 3 hours left. The current bid is $102.00. The MF are $10K annually. Maybe a MR selling off his points? I can only image what the develop cost was on this maybe $250K.

 

[vv813]

ok i havent read all conversation posts but I thought lawsuit said she has 67 million points. somehow I have missed how this became 700000 million.

 

[Eric B]

ok i havent read all conversation posts but I thought lawsuit said she has 67 million points. somehow I have missed how this became 700000 million.

Someone’s guess as to how many are owned by megarenters. Don’t know the provenance.

Does anyone know how many CWP points there are in existence? Is 700 million a significant percentage?

 

[CO skier]

ok i havent read all conversation posts but I thought lawsuit said she has 67 million points. somehow I have missed how this became 700000 million.

Wyndham forum threads typically go off-topic within the first page. This thread is one of the worst for wildly off-topic posts. The last post related to post #1 was on page 6.

The 700 million points was some random number in an off-topic post on page 1 completely unrelated to the 67 million points.