It's almost tax time. (Ugh!) I prepare hundreds of tax returns for real estate agents and brokers each tax season, and receive dozens of question about what is needed, what's deductible, can an extension be filed, etc.
So to help you spend less time and money on taxes and tax prep, here's 7 essential steps for Realtors to take as you prepare for 2020 taxes:
- What do you need to get started? You need a 1099 from your broker. You also need an account statement from your broker showing all of the broker splits and broker charges during the calendar year. This account statement will detail things out by each transaction or sale. Don’t miss this because you can uncover a lot of fees you might otherwise miss as deductions. You also need the typical forms like 1098 and 1095s, and you also need to add up all your real estate expenses by category.
- What’s deductible? There’s over 50 categories and I’ve outlined these in a popular YouTube video a couple years ago which has had thousands of views. In the meantime here’s the big four you should pay the most attention to: maximizing auto deduction, dues and memberships, fees to broker/office in home, advertising and lead generation
- Which tax form should You use to file? 80% of agents will file a form 1040 with a schedule C for their business. This includes also proprietors and single-member LLCs. The other 20% of agents who have an S Corp. or C Corp. or a multimember LLC will file a form 1120S, 1120, or 1065
- Who should prepare the return? Well you could prepare yourself and basically take the same approach that a FSBO takes when they try to sell their home. (Heck, it's easy - I'll do it myself!) But they can lose thousands of dollars by not working with a professional. Of course, the other option is hire a tax pro, pay a few hundred dollars, and then save thousands in taxes, making sure you’re getting all the deductions you deserve, plus get some proactive tax planning throughout the year to reduce your taxes going forward.
- What’s the filing deadline? 80% of agents will have to file by April 15. But the other 20% who have a formal business entity (Corp, Multi Member LLC) have to file by March 15, not April 15
- Should You file an extension? You certainly can file an extension but be aware then an extension to file is not an extension to pay. You can extend the filing deadline six months, but if you owe taxes, the taxes are due on the original deadline date without the extension, and the penalties can be significant.
- Should you file if you don’t have the money? It’s important that you file on time, whether you can afford it or not. You can always make payment arrangements after you filed. Just file on time.
Anchor on this: It pays to file on time even if you don’t have the money. I’ve seen too many Realtors who delay filing because they’re “too busy“, or “don’t have the money“. It pushes back temporary pain but multiplies IRS troubles in the coming months and even years in terms of non-filing penalties, IRS notices, threatens to levy your bank account, etc.
Just get it filed on time! We can always help you resolve the tax debt later.
If you have questions, unfiled returns, unpaid taxes, or simply need help maximizing your deductions and minimizing your tax bill by having us help prepare your 2020 tax return, please call me at 757-346-1040 or email me at jim@anchortaxrelief.com
Jim Flauaus, EA
AnchorTaxRelief.com
Comments(3)