Most people who buy and sell property pay the income taxes on their profits but do not think about self-employment taxes for Social Security and Medicare. If the IRS audits you and successfully argues that you are in the business of flipping properties, it might assess the self-employment taxes, plus penalties and interest. There are no clear-cut rules regarding when you are an investor and when you are in the business of flipping properties.
Obtain good tax advice from someone you trust, preferably a paid professional and not your cousin’s friend who is in business school.
