4 Steps Real Estate Professionals Should Take NOW for a Stress-Free Tax Season

by | BiggerPockets.com

It’s almost that time of year again. That’s right! Tax season is closer than you think. Although I know everyone is working hard in 2015 to establish new deals, new rentals, and new flips, let’s not forget about 2014. I’m sure many of you are rolling your eyes and thinking, “Really? Tax day is months away,” but the reality is that it’s going to be here before you know it.

Don’t let it creep up on you, and don’t wait until the last minute to scramble for your stuff.

Also, keep in mind that the closer the deadline gets, the busier your bank, loan officer, bookkeeper, and CPA will be. Now is the time to start getting prepared so you’re not waiting on hold with the bank for hours to get a corrected 1098 the day before the filing deadline. Here are a few things that you can start doing now to get prepared for tax time.

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4 Steps to Take NOW for a Stress-Free Tax Season

Make a List

Start preparing for tax season by getting organized. Take inventory of your various investment ventures and write them down. Next, think about what documents you expect to receive for each one.

For rentals, you should have a 1098 for mortgage interest if you purchased your rental with a loan and a 1099-MISC showing rents received if you have a property manager.

Related: Your Complete Guide to the Real Estate Professional Tax Loophole

If you flipped a home or sold a rental, you should have a 1099-S showing the amount that you received in proceeds. If you had a foreclosure or short sale, you will likely receive a 1099-C.

If you purchased or sold a property, make sure to get your closing HUDs and send them to your CPA so that your expenses can be maximized. I recently met with a realtor who told me that she gathers up all of the HUDs she has processed and sends them to her clients at the beginning of the following year. I would love to have all my clients work with this realtor!

How often do you find yourself digging around for those HUDs and then copying or scanning all those pages that are part of the closing package? Well, the good news is that you generally do not need to bring the entire closing package to your tax preparer. Simply bring them the actual HUD pages (usually about 3 to 4 pages), which should have all of the important tax deductible information on them.

Once you have a list of what forms you expect to get this year, write them down and check them off as you receive them. If you feel that there is a form that you expected but didn’t receive, then call the issuer to make sure that you have all of the documents that you need for filing your taxes.

Get Your Books in Order

January is the time to make sure that you have accounted for everything in your finances. If you haven’t done so already, take a look at your financial statements and make sure that income and expenses for each category and property make sense. Next, take the 1099s and 1098s that you receive and make sure that they match your Profit & Loss Statement.

If they don’t, you may need to do some digging to find the discrepancy either on the tax form or on your financials. If you feel that there is an error on one of the forms, now is the time to call your bank or property manager to request a corrected statement. Remember, it is common for 1099s and 1098s to be incorrect. This is why it is important for you to match these tax forms against your records so that you can identify any errors.

This is also the time to make sure that all of your expenses and receipts are accounted for. If you are planning on claiming Real Estate Professional status for 2014, make sure that your log is complete with dates and times of real estate activities in case of an audit.

Plan Ahead

If you have a CPA or tax preparer who does your returns each year, contact them now to sign up for 2014 tax preparation. If you wait until the week before the deadline, they may not be able to accommodate you.

Related: What Can I Deduct? The Answer That Will Save You on Real Estate Taxes

Also, if you know that you need your taxes filed quickly for a loan or student aid application, be sure to let your tax preparer know so that they can try to accommodate your deadline.

Pay on Time

If you think that you will owe taxes for 2014, plan accordingly. Make sure that you have enough money in the bank to pay your tax bill. Oftentimes, if an investor had a particularly lucrative year, they will start buying new properties or perhaps a new company car and then panic in April once they realize that they don’t have enough left to pay Uncle Sam.

Also, keep in mind that filing for an extension does not allow you to pay taxes later. Although you can extend the filing date to September or October, you still have to pay the taxes due by April 15th to avoid any late payment penalties. An extension is merely additional time to file your returns in the event that you haven’t received all of your documents or haven’t gotten everything together for filing. If you don’t pay by the deadline then you could be getting a nice bill from the IRS requesting the balance plus interest and penalties.

Read 6 Reasons You Should Consider Filing an Extension for Your 2013 Taxes  for more information about filing an extension.

Investors: Are you thinking ahead to tax season yet? What are you doing to prepare?

Questions? Comments? Write a note to me below!

About Author

Amanda Han

Amanda Han of Keystone CPA is a tax strategist who specializes in creating cutting-edge tax saving strategies for real estate investors. As real estate investors herself, Amanda has an in-depth understanding of the various aspects of investing including taxation, self-directed investing, entity structuring, and money-raising.


  1. Kimberly H.

    Thanks more mentioning the HUDs. Did not occur to me. And it’s relevant with cash-out refis since I’m charged for stuff with money didn’t come out of one of my accounts, but out of the cash I got out, therefore not documented in my records.

  2. Great reminder! Tax season is more stressful than dealing with a difficult real estate client, I must say. So I make sure I have all my receipts and books organised every day of the year.

  3. Great tips! Planning and organisation are the keys to a stress free tax season. You tend to make mistakes if you do things in a hurry. Mistakes are very expensive and this, in turn, will give you more stress.

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