General Tax Question

8 Replies

Hello Everyone. Can anyone speak to the types of items which I should buy or expense in preparation for next year's tax return? I started my LLC last month and have 2 properties in Memphis in it, but not enough to merit paying for CPA consult just yet. I expect to have a total of 5 properties in my portfolio by the end of this year. My LLC's taxable operating months will be Oct 2016 - Dec 2016 for this year. Am I over thinking this, or should I start acquiring things/services to write off?

@Fernando Parker  

At a certain point, you might want to consider options such as accelerating expenses, deferring income, IRA's, solo 401k, etc.

There are many options when planning for taxes, and it all goes back to your individual situation and your specific goals, so its always best to consult with a pro. Get with CPA who won't charge you an arm and a leg for an initial consultation and take it from there.

@Fernando Parker

I agree with @Daniel Hyman . You're likely thinking it doesn't make sense to consult with a CPA because you only have two (soon to be five properties), or don't have that much income. In many cases, however, the amount of money you can save on taxes can be surprisingly high relative to your expectations. Even if that's not the case, say because income is so minimal now, it can really be a good idea to learn how you might want to start structuring investments and expenses now so you're ahead of the game rather than trying to retroactively fix things which isn't always possible.

I suppose I'm a little biased on this....I'm a big advocate of finding a good CPA to work with from the start. 

While things are new and simple they  can make sure you're doing everything right, and set it up for best tax benefits moving forward. An up-front consultation will be less expensive than bringing it to someone once it's grown and them having to clean it up, make corrections, ect 

Dear Fernando:  You need a new mind set and good record keeping.  The new mind set: "Is the activity and cost of what I am doing right now an investment activity with an investment expense associated with it?"  A mile driven or a trip taken then becomes a search for real estate.  You need to start logging your mileage immediately, and ALL expenses of your investment activity.  You should have a credit card that is ONLY used for business.  I know this may sound crass but this kind of thinking is critical as you will find that if you are successful the buggest expense that you face is taxes.  

@Steven Hickox thanks for that. I do have a credit card for my LLC, and I've already been working that angle. Is there a specific method that you use for keeping your miles logged?

@Fernando Parker There are apps you can use.  Google maps will also hold up- You can google map your route for your business related driving for the day. Then just copy the miles into a log. 

It is wise to meet with a CPA. You can get confirmation or corrcetion of how you are operating and recording transactions and activities. Are you running all of your expenses thru a company acccount? What about credit cards? Is your operating agreement executed? What is the basis for your rental units? And so on and so on. I am a buy and hold investor in NJ, but I am also a partner in a CPA firm and I specialize in real estate tax and accounting. Understand that once 12/31 goes, theres little me or any other CPA can do - where accountants not time travelers. The 5 P's of the Marines teach us Prior Planning Prevents Poor Performance. Dont look at it as an expense. Look at it as in investment that will pay you back in tax savings.

I just now see you scheduled an appointment. Good for you. You should leave that meeting feeling good and feeling empowered. Please let us know how it went.


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