Treatment of rental application fees (tax, LLC)

10 posts by 5 users

Medium 1399362745 avatar bienesraices Bienes Raices
Orlando, FL
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Bienes Raices

from Orlando, Florida

Dec 30 '12, 04:25 PM


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.



Medium 1399315588 avatar jonk Jon Klaus
Investor from Garland, TX
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Jon Klaus Verified Moderator Donor

Investor from Garland, Texas

Dec 30 '12, 04:38 PM
2 votes


They would be taxable like rent, but you can deduct expenses against them. They don't need to go into your LLC account.



Jon Klaus, SellPropertyFast
E-Mail: [email protected]
Telephone: 214-929-6545


Medium 1448386327 avatar financexaminer Bill Gulley
Investor, Entrepreneur, Educator from Springfield, MO
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Bill Gulley

Investor, Entrepreneur, Educator from Springfield, Missouri

Dec 30 '12, 04:58 PM
3 votes


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
Website: https://generalrealestateacademy.com


Bienes Raices

from Orlando, Florida

Dec 30 '12, 05:01 PM


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.



Medium 1399502465 avatar stevenhamilton Steven Hamilton II
Tax Accountant from Lake Villa, IL
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Steven Hamilton II Verified Moderator

Tax Accountant from Lake Villa, Illinois

Dec 31 '12, 02:12 AM


That is precisely correct. Payments get deposited to the LLC and expenses are deducted by the LLC.

-Steven



Medium hta logoSteven Hamilton II, Hamilton Tax and Accounting
E-Mail: [email protected]
Telephone: (224) 381-2660
Website: http://www.HamiltonTax.Net


Bienes Raices

from Orlando, Florida

Dec 31 '12, 06:32 AM


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.



Medium 1448388825 avatar stevebabiak Steve Babiak
Real Estate Investor from Audubon, PA
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Steve Babiak Verified

Real Estate Investor from Audubon, Pennsylvania

Dec 31 '12, 05:03 PM


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?



Jon Klaus Verified Moderator Donor

Investor from Garland, Texas

Dec 31 '12, 05:07 PM
1 vote


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.



Jon Klaus, SellPropertyFast
E-Mail: [email protected]
Telephone: 214-929-6545


Bienes Raices

from Orlando, Florida

Jan 01 '13, 06:47 AM


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.



Steven Hamilton II Verified Moderator

Tax Accountant from Lake Villa, Illinois

Jan 01 '13, 09:56 PM


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, Hamilton Tax and Accounting
E-Mail: [email protected]
Telephone: (224) 381-2660
Website: http://www.HamiltonTax.Net


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