How You Should Handle the IRS (and how to get an accountant)
Last week I got a letter in the mail from the IRS. Of course, when I saw the envelope I thought two things: “Crap, I’m getting audited” and “crap, I owe them more money.”
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When I opened the envelope there were several documents, which I didn’t really understand (or have the patience to understand) and for some reason there were multiple copies of each document. I still haven’t figured out the reason for this and don’t really care.
Anyway, as soon as I read the letter I faxed it off to my accountant so he could read it and take care of the problem. Which brings me to the main point of this article. If you’re a serious real estate investor and don’t have an accountant you’re nuts. With the rental properties and the flipping of houses and all the other things I do, I would never in a million years want to do my taxes myself.
Plus, I don’t trust the government…
I used to work for the CIA so I know the things the U.S Government does, and the last thing I would want to do is call the IRS first and get myself into some kind of jam by saying the wrong thing or having them record my conversation while I unknowingly made damaging omissions.
Obviously, I will never do anything illegal when it comes to paying taxes. I think anyone who doesn’t pay taxes is a fool. Look at Wesley Snipes who refused to pay taxes and he’s probably going to end up in jail for a few years. But, the thing is, you still don’t have to do anything illegal for the government to figure out some way to screw you.
Luckily, my accountant got right back to me and the problem was quickly resolved. Somehow the IRS had duplicate copies of my tax return but all of my taxes were paid and everything was good. Then they gave me some type of reference number, which of course I wrote down and will be waiting for the day when they contact me again saying I never resolved the problem.
But what if you don’t have an accountant yet?
Well, most importantly, I recommend getting an investor friendly accountant who understands the real estate investing business. My personal accountant is a landlord with multiple properties and used to own one of the REIA’s in my area.
You should definitely go to your REIA’s and ask all of the successful investors who they use. When the same name starts popping up often, that’s your clue that you might want to use that person. And whatever you do, don’t be cheap when it comes to your accountant. There are certain things you don’t want to skimp on in life and your accountant and lawyer are two of those things.
Also, to make it easy for your accountant to do your taxes at the end of the year I’d use a software like Quickbooks or Quicken Rental Property Manager. This is the smart way to save money –by making it easier on your accountant, not by going to some place like H&R Block to save money.
To sum it up, get an accountant now before tax season gets closer. They’re one team member you don’t want to live without.