LLC taxes: did my accountant screw up?

[Gillian C.]

Hi everyone,

My partner and I bought our first property last year under an LLC. We deferred our tax filing this year (both LLC and personal) because we weren't ready in time, and are using a new accountant.

We just received a draft of the LLC taxes, and I'm concerned. In 2018 we had rents of about 20k but line 2 "gross rents" of form 8825 reads 0.

I also can’t find any reference to our travel expense (1619 miles). What line would this appear on if prepared correctly?

Lastly we had suggested a land value of 25% for the depreciation calc but the number used was closer to 10%. We’re in Chicago, the property is in Avondale. We have a private mortgage so the land never got assessed. I’d love to use 10 but don’t want to get dinged and we plan to refinance this year and want to understand how the official appraisal will affect our taxes/ depreciation if land value is adjusted up drastically in year 2. Any thoughts welcome.

In deferring our personal we didn’t make any state tax prepayment and I made the same selections on my income as a person I work with, who did owe state taxes, another thing I’m worried about.

1. Am I missing something or did this guy mail it in?

2. If the answer to #1 is yes, any recommendations / referrals for trusted Chicago tax accountants with experience in Real estate LLCs / multi families?

Thanks all!

[Ashish Acharya]

Originally posted by @Gillian C.:

Hi everyone,

My partner and I bought our first property last year under an LLC. We deferred our tax filing this year (both LLC and personal) because we weren't ready in time, and are using a new accountant.

We just received a draft of the LLC taxes, and I'm concerned. In 2018 we had rents of about 20k but line 2 "gross rents" of form 8825 reads 0.

I also can’t find any reference to our travel expense (1619 miles). What line would this appear on if prepared correctly?

Lastly we had suggested a land value of 25% for the depreciation calc but the number used was closer to 10%. We’re in Chicago, the property is in Avondale. We have a private mortgage so the land never got assessed. I’d love to use 10 but don’t want to get dinged and we plan to refinance this year and want to understand how the official appraisal will affect our taxes/ depreciation if land value is adjusted up drastically in year 2. Any thoughts welcome.

In deferring our personal we didn’t make any state tax prepayment and I made the same selections on my income as a person I work with, who did owe state taxes, another thing I’m worried about.

1. Am I missing something or did this guy mail it in?

2. If the answer to #1 is yes, any recommendations / referrals for trusted Chicago tax accountants with experience in Real estate LLCs / multi families?

Thanks all!

You need to ask these same questions to him. He needs to clarify that to you. 

 Is there any other place he put the gross rent? 

What is net activity at 8825?  Did he not put just a gross rent or other activities as well. 

He might have capitalized the travel to the basis of the property. Need to ask this to him otherwise it would go under like 15. 

Once you pick a depreciable value of the building, the future appraisal does not impact it. So the initial % needs to be supported by comparable or assessment. It should be reasonable.

You probably won’t owe any Penalty and interest if you extended your personal return because your one rental property must not create underpayment penalty if it did not have much of net income. Can’t say that with certainty. Also, when you extended your returns, your tax professional should have figured out if you need to make any payments to avoid any penalties and interest. 

You pay what you get, don’t choose the cheapest firm out there. 

More than happy to look over your return if you want to share. PM me.