Tax Tracking Tune Ups for Real Estate Investors

Ive seen this time of year continually be a time where we get in a "vacation mode" One of the areas to not get in a vacation mode in is your tax tracking and record keeping. One of the areas that most people forget to check during the summer is their record keeping. Most new and seasoned business owners need to analyze their record keeping as a mid year evaluation. Some common questions to ask yourself pertaining to your business record keeping are:

• Have I captured large one time purchases? An example of this would be a laptop purchased for the business, educational costs, professional fees, business entity formation, and office furniture
• Have I captured my monthly recurring fees? Examples of monthly recurring fees are phones, internet, web hosting, property management fees and monthly business maintenance fees
• Have I captured business travel? Examples of travel expenses are flights or travel to seminars, hotel rooms when away for business travel, going to the post office for business purposes, going to check up on a product or a rental unit.
• Have I captured the smaller items? Office supplies are the most common overlooked small item we see in our office. Paper, pens, ink cartridges, paperclips all add up over the course of the year.

As the end of the year approaches we encourage you to make sure you are keeping track of these expenses. If you have these purchases and forgot the amount you spent: don’t worry. Most people create an automatic electronic paper trail, it is called a Credit Card Statement. In case of an audit it is beneficial to keep your original receipts. 

Most of our clients chose to track expenses in different ways. Some chose to use electronic systems that are fairly advanced and some chose to use a shoebox full of receipts (please don’t do this). You can chose to use a system that you are comfortable with as long as its not the shoebox. You can track your expenses with something as simple as a pen and a notebook or a more advanced program such as quickbooks. 

One of the most advantageous ways to help your CPA and maximize your return is to total up expenses.I normally suggest my clients to total their expenses at least monthly. For example if my phone bill was $100 a month, I would send in a total expense of $1200 annually. Most people that run of a "shoebox" system do not receive their maximized tax benefit. A good mantra to adopt is "my business is only as good as it records" 

Below is an example of a simple tax tracking system: (This is a very simple, antiquated tracking system. Its an example that I give my clients so they can have a starting point) 

Monthly Expense (Example) One Time Expenses (Example) Travel (Example) Supplies (Example) Other Expenses (Example) Phone (Ex)= Amount Paid monthly x Months In Business Use= Total The entry would look like this. $100 a month for a phone which I used for 6 months in business would be

$100x6= $600

Entity Setup (EX)= Total Amount. You would take the nature of the expense and place the appropriate amount beside it. Example would if I spent $6,000 on an entity setup . I would record it as Entity Setup= $6000 Flight to a business conference (Ex)= Total Amount. If I flew to Des Moines Iowa to go to a conference and the plane ticket was $1,708.21. I would document that as

Airfare to Conference= $1708.21

Paper (ex)= Amount Total. If I went and purchased paper that Im using for my home office I would record that as- Paper= $47.00 Advertising= Total amount. If I go and run a newspaper add for the new business Ive started and it totaled $150. I would document it as- Advertising=$150

Please remember that a little record keeping tune up will go far come tax season.