several tax questions

[David V.]

Hello everyone, i just signed up to Bigger Pockets tonight after about reviewing the sites content for about a month. Best site I have come across to date. With this said, I am fairly new to RE investing, I bought my first property in 2011 and three others since them. Although i consider myself financially savvy (CFA, MBA, 20 years in banking) taxes are not my thing. Although I have been using TurboTax and doing my taxes on my own after reading many discussions in this forum I have concluded that I have made mistakes on my taxes. As such, i would like to begin this discussion with several tax related questions on some topics I have not seen discussed and on a few others that I have seen discussed but further clarification would be helpful.

1) most important question (especially after reading many of the comments) Does anyone know a really good tax preparer specializing in rental properties in northern VA?

2) How is a cash rebate (reflected on HUd 1) from my realtor handled on an investment property i later rented out. My guess is that it reduces the cost basis of the property. However, i could not find anywhere on TurboTax to account for this in prior returns?

3) How do report insurance proceeds from a casualty event. I received $1,200 after a $500 deductible was met in 2013 from a flood in an adjacent townhome. The damage to my unit was minimal and i did not make any repairs. My guess is that the $1,200 reduces the cost basis o the property? Is this correct? What about the $500 deductible?

4) I believe I should have sent a 1099 in 2012. What should I do now?

5) I purchased a new HVAC in 2013. I believe this is depreciated over five years. Is this correct?

6) I bought a new laptop that i use for the rental business for $400. Since the amount is so low can i just expense it or do i need to depreciate it over 5 years?

7). I bought a washer/dryer after purchase and before tenant moved in. Is this depreciated over 7 years or is the entire amount capitalized over 27 1/2 years with all the other expenses?

8) i own property in another state but produce no income due to the higher deductible expenses. I did not file a State return in the first year 2011 but filed one in the second year despite no real estate related income. i just got worried and figured it was best to be conservative. But should i file a 2011 return for that state?

9) After i have read many of the comments in this forum i have concluded that in my 2011 and 2012 returns i did not capitalize various expenses prior to making my properties to rent. I intend on doing so or the one property i purchased in 2013 but i am thinking about amending both my 2011 and 2012 returns. The total amounts of what i expensed is maybe like $7000 for three properties and had i capitalized them i still would have had no taxable income. Oh - I also got cash rebates (on HUD 1) from my realtor which i ignored. As such, is it worth going through the hassle to amend the returns or is there another way to make the adjustments on my 2013 returns.

10) As i become more convinced i should get a tax preparer what would be a fair price for someone who has a regular job (W2 earner) with 4 properties and a few stock trades a year?

I hope my questions and any subsequent answers provide valuable advice to others on this site. I really love to learn new things so I am very excited to consume much content on this site.

Bests

Dave

[Steven Hamilton II]

Originally posted by @David V.:

Hello everyone, i just signed up to Bigger Pockets tonight after about reviewing the sites content for about a month. Best site I have come across to date. With this said, I am fairly new to RE investing, I bought my first property in 2011 and three others since them. Although i consider myself financially savvy (CFA, MBA, 20 years in banking) taxes are not my thing. Although I have been using TurboTax and doing my taxes on my own after reading many discussions in this forum I have concluded that I have made mistakes on my taxes. As such, i would like to begin this discussion with several tax related questions on some topics I have not seen discussed and on a few others that I have seen discussed but further clarification would be helpful.

1) most important question (especially after reading many of the comments) Does anyone know a really good tax preparer specializing in rental properties in northern VA?

2) How is a cash rebate (reflected on HUd 1) from my realtor handled on an investment property i later rented out. My guess is that it reduces the cost basis of the property. However, i could not find anywhere on TurboTax to account for this in prior returns?

3) How do report insurance proceeds from a casualty event. I received $1,200 after a $500 deductible was met in 2013 from a flood in an adjacent townhome. The damage to my unit was minimal and i did not make any repairs. My guess is that the $1,200 reduces the cost basis o the property? Is this correct? What about the $500 deductible?

4) I believe I should have sent a 1099 in 2012. What should I do now?

5) I purchased a new HVAC in 2013. I believe this is depreciated over five years. Is this correct?

6) I bought a new laptop that i use for the rental business for $400. Since the amount is so low can i just expense it or do i need to depreciate it over 5 years?

7). I bought a washer/dryer after purchase and before tenant moved in. Is this depreciated over 7 years or is the entire amount capitalized over 27 1/2 years with all the other expenses?

8) i own property in another state but produce no income due to the higher deductible expenses. I did not file a State return in the first year 2011 but filed one in the second year despite no real estate related income. i just got worried and figured it was best to be conservative. But should i file a 2011 return for that state?

9) After i have read many of the comments in this forum i have concluded that in my 2011 and 2012 returns i did not capitalize various expenses prior to making my properties to rent. I intend on doing so or the one property i purchased in 2013 but i am thinking about amending both my 2011 and 2012 returns. The total amounts of what i expensed is maybe like $7000 for three properties and had i capitalized them i still would have had no taxable income. Oh - I also got cash rebates (on HUD 1) from my realtor which i ignored. As such, is it worth going through the hassle to amend the returns or is there another way to make the adjustments on my 2013 returns.

10) As i become more convinced i should get a tax preparer what would be a fair price for someone who has a regular job (W2 earner) with 4 properties and a few stock trades a year?

I hope my questions and any subsequent answers provide valuable advice to others on this site. I really love to learn new things so I am very excited to consume much content on this site.

Bests

Dave

Dave,

If you plan to continue further into real estate investment you will find boxed programs very inadequate.

1) As to someone in northern VA, here is my take:

Do not feel like you need to use someone local. Many of us accountants have clients worldwide. Payroll, bookkeeping, etc can mostly be done remotely.

Here is a great list of questions to ask a potential accountant:http://www.biggerpockets.com/forums/51/topics/70447-questions-to-ask-a-cpa

Also check out the www.NAEA.org page in your search. It should help you find someone local. If someone comes to me, I'll send them your way.

If you need help in your search or want to verify something don't hesitate to ask.

I have clients worldwide and things are just as easy as I e-mail them, talking on the phone. I even use Skype and TeamViewer to communicate with clients so I'd highly recommend looking for one of the best with great references that interviews well with you. So look for someone you can connect with that works out for your situation.

2) It is a reduction of your basis in the property. Beware they may issue you a 1099 for the amount they reimbursed you. This would be included when you enter your basis.

3)The deductible may be deducted; and the insurance proceeds would be ignored provided they were used 100% for the property. Since you did not use the money it is treated as income.

4) As a landlord unless it is your trade or business, OR you qualify as a real estate professional you will not be required to issue 1099s as a landlord.

5) This would be depreciated over 27.5 years as it is considered a structural component.

6) Is it used 100% for business? This can be hard to prove, luckily the amount is not significant. If so you may deduct it as such, otherwise you may deduct it based upon the business use percentage.

7) You may deduct the washer and dryer over 5 years.
Here is a chart you should consider looking at: http://www.irs.gov/publications/p527/ch02.html#en_US_2013_publink1000219083

8) You should file as you probably received more than that state's filing requirement even though after expenses there is no taxable income.

9) You must keep records on a year by year basis. If it happens in 2010 it belongs on the 2010 return. I advise you to amend the returns to correct them as you will see more benefit by the deductions being capitalized.

10) That is very difficult to say mostly because I don't know the condition of your records. Prices can vary greatly between regions.

Based upon Federal, two states, several properties and advice on deductions/planning, I can tell you to expect to pay over $600 for a quality accountant who knows what they're doing.