Treatment of rental application fees (tax, LLC)

9 Replies

I'm taking applications for a property owned in an LLC. They are always in cash. Do I need to deposit this cash into the LLC bank account in order to do things the right way in terms of the LLC, or is okay to just keep the cash? (I order my credit reports, etc. on the computer with a credit card, so the cash is not used directly).

I was also wondering if I have to declare these app fees as income on my tax return, since they are going (indirectly) towards the cost of tenant screening (i.e. not profit). Thanks.

Actually, the application fee is made by the LLC, it should be going to an account for that function, "application fees" or "other income". The expenses should be run through the company as well, credit report expense. Any difference to the good, is basically an adminstrative fee income. It is taken to income before taxes.

That is, if your honest about it.....

Medium logoscopiccroppedblue2Bill Gulley, General Real Estate Academy | https://generalrealestateacademy.com

Bill G.

Originally posted by Bill G.:
Actually, the application fee is made by the LLC, it should be going to an account for that function, "application fees" or "other income". The expenses should be run through the company as well, credit report expense. Any difference to the good, is basically an adminstrative fee income. It is taken to income before taxes.

That is, if your honest about it.....

Bill G.

The fees are being paid by the applicants to the LLC.

OK thanks. It sounds like I don't have to deposit the application fees into the bank account. That's the main thing I was concerned about.

How do you establish the "paper trail" of how that money came in and went out if you don't deposit into the LLC and have the LLC then pay the screening cost via check or debit?

Originally posted by Steve Babiak:
How do you establish the "paper trail" of how that money came in and went out if you don't deposit into the LLC and have the LLC then pay the screening cost via check or debit?

Best to deposit it in the LLC account. Otherwise, just make the accounting entry showing cash receipt.

Okay maybe it's better to put it in the account. Although I'm going to do it it in batches--I don't want to have to run to the bank every time I get an application fee.

All funds should always be deposited.

That is why you bank local to where you live. Allows you to deposit it in the night deposit when you leave or come home.

-Steven

Medium hta logoSteven Hamilton II EA, Hamilton Tax and Accounting | [email protected] | (224) 381‑2660 | http://www.HamiltonTax.Net