The Real Estate Encyclopedia
Tax Preparation Tips
Category - Real Estate Information Sources - Real Estate Articles
Tax filing season is now upon us, and everyone and their brother has a tax tip to help you save money on your returns. Of course, we should all be prudent and take advantage of every legitimate tax deduction that is available. But how does a real estate professional keep up with the ever-changing tax code that now stands at 61,224 pages? Read on as William Shue, co-founder and Chief Operating Officer of, offers the following plan to help you wade through the tax season quagmire without getting stuck.

Hire an Expert – Real estate professionals expect consumers to engage their services to help buy and sell their homes because they, as professionals, have the knowledge and the expertise of the real estate industry. Why, then, would a real estate professional not seek out the services of a financial expert to help them prepare their taxes? Without an expert, the potential for mistakes and errors increases tenfold, which also increases the odds of receiving that dreaded IRS tax audit letter, sent to one out of every 600 tax filers. Even if a businessperson manages to escape an audit, how can they be sure that they’re not overpaying on taxes or missing out on one of the myriad deductions available? The U.S. General Accounting Office reports that taxpayers who could have itemized their deductions and save money in the process actually overpaid their taxes by $945 million last year.

Plan – There is no substitute for good planning. Get with a financial advisor and tax accountant and analyze your business as a real estate agent to determine a plan to maximize your net income. Do you need to be a sole proprietorship or a corporation? If a corporation, then is it most beneficial to be an S corporation, a limited liability corporation or just a regular C corporation?

Keep Good Records – Accurate record keeping is essential. Not only will it help you to account for all the deductions that you may have forgotten about or can’t remember, it is also necessary if you have ever had that IRS audit. Keep all your receipts for every expense and note on each receipt how you paid for it, along with the check number (if applicable). For your business automobile, keep a logbook in your car to record your mileage usage and associated expenses. In addition to keeping your receipts, use an accounting package that will make it easier to review your records every month and at the year’s end. The two most prominent and inexpensive accounting software packages are QuickBooks and Peachtree Accounting. Both are available at most computer stores and are easy to use and set up.

Avoid Scams - The big question here is “What is a scam?” If it does not pass your smell test (smells fishy!), then pass on it. You may hear commercials or see websites proclaiming how a particular person hasn’t paid taxes for 20 years, or that the tax code itself is illegal and you don’t really have to pay taxes at all, or that you can avoid them by just stashing your money in a creative fashion. Don’t get caught up in trying to avoid taxes with elaborate paperwork filings or offshore companies and bank accounts. We all have enough stress in our lives simply running our real estate businesses - we should be careful not to lose focus on what makes us money.

Stay Informed – Most taxpayers wait until the end of the year to ask questions about tax deductions. Don’t wait until the end of the year. Know your business and what deductions are available to you. The best place to start is to look at Form C (1040), which lists many of the typical deductions that a business will use. The key thing to remember is to ask questions about various options available to you and plan accordingly with your tax accountant. Some popular year-end tax questions your accountant can answer are:

  • How can I pay my children to reduce my tax burden?
  • What is the self-employment health insurance deduction?
  • On my federal return is it best to deduct my state income taxes or the new allowable sales taxes?
  • How do I maximize my retirement funding deduction with a 401K or similar plan?
  • What does the Tax Code specify regarding deductions for use of my home as an office?
  • How can I deduct the use of my auto for my business?

File Your Return - Whether you file as an individual, a corporation or both, you must file your return or an extension for your return in a timely manner. All calendar year corporation returns are due on March 15th. You can file an automatic extension for six months with Form 7004, but you must pay the estimated taxes to avoid penalties and interest. Individual tax returns must be filed by April 15th. You can file an automatic 4-month extension with Form 4868 if you can’t make that deadline, but you do have to pay your estimated taxes to avoid penalties and interest.

William Shue is the co-founder and COO of iSucceed, Inc. Bill holds a BS in accounting from Rider University and a MBA in finance from the University of Houston. He has also held various professional licenses including CPA, insurance license, and Securities licenses 7, 24, and 27.


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