Good RecordKeeping Can Save a Ton of Money

Good Record Keeping as a Real Estate Investors can save you a TON of money! 

Good record keeping can save you a ton of money and keep the IRS off your back. The key to superior recordkeeping is to make a habit of it. Recordkeeping should be done every day or every week and at least every month. Record keeping allows you to obtain every possible tax deduction, which is another way of cutting expenses. It is also one of the best ways to tell what does and does not work for your business as a real estate investor.

 Poor recordkeeping is costly!!

Tax courts regularly disallow expenses, which cannot be substantiated by sufficient records. Recordkeeping is also the single best defense against an IRS audit. I just recently represented a client who was being audited for their tax return. This was the year they started investing in real estate. As a result, they had a lot of mortgage interest expenses, advertising expenses, and educational expenses.

When this client first went to the audit, the IRS auditor disallowed most of these deductions to the tune of $56,000, which resulted in a tax liability of $17,625 in addition to penalties and interest that had accrued.

After meeting with this client, I asked the auditor to give us one more month to come back for a meeting.

After one month of aggressive recordkeeping, pulling past statements, reconciling quicken accounts, my client was more prepared for this audit. During this process of getting ready for the audit, I noticed that the client had overlooked consulting fees in the amount of $20,479 to purchase their properties as well as a whopping $30,000 of advertising expense that was charged to their American express card.

Not only did the IRS auditor make a positive adjustment of $50,479 but my client also received "AN UNEXPECTED" refund in the amount of $14,760.14!

My client and his wife decided that they could take the much needed time off work to spend the summer with the kids.

Find out more about how to save money from the IRS by going to WealthBuildingCPA