This is almost peak Tax Season. Many BP’s are reaching out to tax professionals here. Frankly, most are seeking free tax advice. Much like a forum on Divorce. The intensity and same desire to avoid paying a licensed professional for his opinion. That’s Fine. Human nature is immutable.

So, here is a useful tool which BP’s can use to answer those questions: AI. Either GPT or Claude. Take you pick.

Most questions revolve around Material Participation, and tax filing compliance. By “compliance” I mean what forms, what States/ Cities?

All AI queries should be in the following format. In brackets I will explain why. Ready?

Let’s start with Compliance

Prompt:

[1] You are an expert in the federal and state taxation of landlords owning rental property [you need to tell the AI what is expected].

[2] I am a CPA, with expertise in taxation of real estate [unless you want a watered-down response, tell the AI that you want a granular response]

[3] Use IRAC format [This is used by attorneys. It means that the response will follow the format of Issue, Rule, Analysis and Conclusion]

[4] Use markdown tables [the output will be in tabular form. You will shout for joy!]

[5] Cite Code, Regs and USTC decisions. [this will give you the absolute legal basis for the answers]

[6] Verify. Do not fabricate. [AI programs, actually called Large Language Modules, can give you false responses. These LLM’s are like puppies that want to please you. They will make stuff up. Be careful!!!]

[7] Facts: I am a resident of Pennsylvania. I am a landlord with 1 rental property in Philadelphia, 1 in Washington DC, 1 in Florida, 1 in Ohio and 2 in California

[Discuss how the properties are titled. In an LLC, individually, layers of LLC's - a WY LLC owning a PA LLC etc. And discuss whether those LLC's have more than one Member. Be specific. The LLC, amazingly, will remember who owns what. ]

What are my Federal, State and Local filing requirements? Income tax and local taxes. What are the annual filing and permitting requirements? Resident and Non-Resident, and LLC. What are the penalties for failure to file?

Comment: there you go! At the end the response, the LLM will pose very useful and intelligent follow-up questions. Be sure to request that all those be answered. They will help clarify the issues. Now when you approach your tax professional you will know the scope of work that is required. Be sure to print out the responses and annotate them as you see fit.

And now for the What-if Questions?

[After repeating exactly items #1 through 6 above, give the facts. Here is an example

Facts: I am a W2 employee at a Company which does [describe. This is important] and my Wife is [employee, contractor, Home Maker, . . ] We are landlords and own properties [see example from above]. My Wife and I manage the properties, we share in this approx [hours weekly]. Our adjusted gross income is [above or below] $150,000. The properties on an overall basis have tax losses.

Under what conditions can these passive losses be considered to be non-passive? Based upon this fact pattern, do we qualify for Real Estate Professional status? IRC §469(c)(7). How should we keep records to document that status? Please provide Checklists.

Comments: select all the follow up questions.

There!!! Now, there is no longer a need to seek free advice from busy tax professionals. Buy your copy of TurboTax with the modules for the States, and you are set to do this yourselves, without having to pay us. Just keep asking the LLM for help. Those pesky State Non-Resident tax returns? A piece of cake with TurboTax. California LLC returns? CA-568. Five minutes. DC Non-Resident? Just one click.

It will even calculate if you feed it numbers. For example, tell it that you have a rental loss $X from a property, and that the Unallowed losses are $Y, and the Qualified Business Income Loss carryforward is $Z. You could theoretically do all the calculations on TurboTax and double check with the LLM. Try it. It won't take too much time.

How to bypass your CPA and get free and accurate tax advice using AI [SAVE this post

Most Popular Reply