Common Mistakes Real Estate Agents Make When Preparing Their Taxes
If you are a real estate agent, the chances are that you have already got a lot on your plate. Decision making, cashing in on opportunities and sales and marketing are some of the core activities that you cannot afford to ignore. Add to these the importance of keeping track of the rising and fall of real estate prices and knowing the new statutory regulations governing real estate scenarios, and you are left with hardly any time or breathing space.
With all the main tasks to focus on, you do not have much time to focus on other equally important activities such as accounting. As real estate agents, you have a lot to lose if you play your cards wrong. To help you avoid some basic errors that could prove to be costly, C.A.C Financial Services has put together a list of the most common mistakes real estate agents make when preparing their taxes.
1. Ignoring the home office deduction
If you use part of your home or apartment exclusively and regularly for the administration and/or management of your business, you’re entitled to the home office deduction. If you document your home office’s use correctly, you can deduct a portion of your rent, mortgage interest, utilities, repair bills, insurance, and more! You can even take a depreciation deduction on a portion of your home that you own. These deductions might seem small but ignoring them is a big mistake.
2. Mixing personal and professional finances
There are some agents who use one bank account for everything. Now you may think that it’s just easier to keep everything in one place, but it is too easy to muddy the waters when you use one account and credit card for both business and personal finances. Keeping them separate will make tracking expenses much easier while will, in turn, make filing your taxes easier.
3. Overlooking deductions and credits
With all the deductions and credits available to real estate agents, it’s easy to overlook some of them. Remember to carefully keep records of your business expenses throughout the year, as it will help you recall some of those expenses and deduct them. Ensure the deductions you claim are legitimate and be prepared to prove and substantiate them if asked.
4. Failing to track income and expenses
Many agents miss out on thousands of dollars worth of deductions simply because they failed to keep good records. Having all your expenses and incomes neatly organized in front of you will give you peace of mind, especially if there is an IRS audit. Seeking professional advice will ensure that your income and expenses are accurately and efficiently recorded.
5. Missing filing or payment due dates
Many agents will fall on the wrong side of the IRS just because they miss their filing or payment due dates. Unfortunately, commission payments don’t always sync up with the tax cycles. Filing your taxes late can result in interest and late penalties. If you can’t organize your taxes before the deadline, file for an extension.
6. Not hiring a tax professional
Filing taxes as a small business owner can be complicated. Erroneous data entry is one of the most common red flags for the IRS auditors and is also one of the most preventable. If you are not experienced or confident with your tax filings, it is highly recommended that you hire a tax professional to go over the numbers with you.
To avoid these and other mistakes, reach out to the experts at C.A.C Financial Services.
Over the past ten years, I’ve had the pleasure of working closely with small businesses, including independent truck drivers, beauticians, and home-based childcare businesses. I’m always helping individuals, entrepreneurs, and small business owners, get the most out of their hard-earned money. My experience and continued education have allowed me to thrive as a tax professional. I take pride in educating taxpayers to be aware, to stay informed and to take action about their finances.
I look forward to working with you. I offer services such as tax preparation services, small business bookkeeping and accounting services, payroll services, IRS tax help, and additional financial services. I serve clients across Las Vegas, Summerlin, Henderson, Spring Valley, North Las Vegas, Paradise, Enterprise, Blue Diamond, Sunrise Manor, and Whitney.