No record of rental income, accountant refusing to accept income.

[Todd Groom]

I have a friend who owns one rental property and rents out a few rooms in his home. He is allowed to rent at least one room in his home legally per county rules. When he tried to report the income to his accountant when filing his 2019 taxes the account refused to accept the income. He said because he did not deposit it monthly as it came in it looks like laundering. 

I've never heard of this has anyone else? If he is not allowed to report the income then he's breaking the law by avoiding taxable income. At the same time, the accountant is saying he's breaking the law if he does try to claim the income. Any CPA's on here have some input?

[Linda Weygant]

The accountant can easily back up the amounts the client is claiming by looking at leases or even the original ads offering to rent.

Tax preparers are not auditors.  We're not required to verify every figure reported, although we do have a duty to think about reasonableness.  If the client is trying to report something ludicrous for rent, that's one thing.  But market rent, backed up by a lease is certainly fine.

Cash is still considered valid to conduct business with and there is NO requirement to deposit cash in order to claim the income.  Assuming your friend does not have a history of making stuff up, your friend needs a new tax preparer.