All Forum Posts by: Michael Plaks

Don't pee on our parade. Taxation is theft, and we need to pay less. :)

Some of you have been looking into conservation easements as a tax shelter for doctors and other high earners.

Take notice: the IRS is in the attack mode. 

On July 9, the U.S. Tax Court struck down four more abusive syndicated conservation easement transactions. The IRS calls on any taxpayer involved in syndicated conservation easement transactions who receives a settlement offer from the agency to accept it soon.
https://www.irs.gov/newsroom/irs-offers-settlement-for-syndicated-conservation-easements-letters-being-mailed-to-certain-taxpayers-with-pending-litigation

@Daniel Dietz

Loans have nothing to do with capital gains, ever. Initial loans, refis - none of them.

Bought for $100k, sold for $200k - you have $100k capital gain, with or without loans.

Without a loan, you walk away with $200k cash and $100k capital gain.
With a $100k loan, you walk away with $100k cash but still $100k capital gain.

Here is the start:
https://www.biggerpockets.com/renewsblog/2016/02/21/tax-implications-house-hacking/

You're welcome. No need for an entity. 

Practical answers are protected species. Very few of them left. Usually you'd see CPAs preaching otherwise. Thumbs up, Ashish!

@YaWen Hsu

If you use the refi proceeds to pay off your rental, that portion of interest IS deductible against the rental as a business interest.

The rules you're reading restrict personal deductions, not business deductions.

First, the good news. Due to Covid-19, they are letting the inmates out, so you're unlikely to end up in a Federal prison for tax non-compliance. 

The less exciting news is that this July 15, formerly known as April 15, combines several important deadlines. I will list seven of them.

1. File either your 2019 IRS taxes or an extension. We did not need an extension on April 15 this year, but we need it now. The extension will give you until October 15 to finish your taxes. Make sure to file it even if you do not expect to owe the IRS, because it will drastically reduce your penalties should you end up owing the IRS.

2. File either your 2019 state taxes or an extension. Warning: do not assume that your state follows the IRS approach to extensions. Most states do, but not all of them. Check with your state. Special note for Texans: Franchise tax reports for your LLCs are due on July 15, too.

3. Pay the balance of your 2019 taxes. If your taxes are finished, then you know how much you owe. If your taxes are not done yet, you have to somehow estimate. Either way, you need to pay by July 15 to avoid late penalties and interest. CRITICAL WARNING: filing an extension on July 15 does NOT extend this deadline to pay. The penalties will still kick in on July 16, extension or not. However, the penalties will be much less if you do file an extension.

4. Pay the state balances for your 2019 taxes. Same as above, only for the state taxes if you owe them. Warning: some states have their own variations of the IRS July 15 policies, so check with your state.

5. Contribute to your IRA accounts for 2019. After July 15, it will be too late. You may be wondering which type of an IRA account you should fund and how much to contribute. If your taxes are not finished, you won't know yet. So here is an easy shortcut: contribute maximum allowed ($6,000 if you're under 50, $7,000 if 50 or older) and contribute it to a regular non-Roth IRA. Later on, when you have your complete financial picture, you can convert it to Roth or withdraw.

6. Pay the 1st and 2nd quarterly estimated payments for 2020. I wrote a separate post about this:
https://www.biggerpockets.com/forums/51/topics/850372-july-15-deadline-for-estimated-irs-payments

7. Claim a refund for your 2016 taxes if they need an amendment or if they have never been filed. Exception: if you filed a timely 2016 extension back in 2017, then you can keep procrastinating until October 15. Otherwise, the door is permanently closing on July 15, and you can never claim this money.

Couple additional tips.

How to pay the IRS? Do NOT mail checks. It was never a great idea, but especially now when the IRS is horribly backlogged and understaffed. Pay online which is safe (as long as you wear your mask) and free if paid from your bank account: https://www.irs.gov/payments

What to pay first? If you have multiple tax payments due and not enough money to pay all of them, it's hard to tell which ones are more important to pay. Except for one rule of thumb: if you owe any payroll taxes for your employees, make sure to pay those first. After that, it depends.

No. Safe harbor is simply a new way to qualify as T/B. It is cumbersome and is not needed in most cases. Probably not needed for you. You should be able to qualify without the need to invoke the safe harbor and jump thru its hoops.

@Joshua T.

As mentioned by others, the 250hr safe harbor is an unnecessary gimmick. You should qualify as a trade or business as is.

But there're plenty of apps to do these logs if you want to be extra safe or if you're trying to qualify as a Real Estate Professional, a different game that also requires contemporaneous logs. Just google "time-tracking apps."