Early Start Tax Planning Checklist

EARLY START TAX PLANNING CHECKLIST

1. If you own a business, do you have an EIN number, operating agreement, and a separate bank account?

2. Have you recorded all the income and expenses related to the business on the business bank account? This is a huge audit item for 2012.

3. If you own investment property that was foreclosed or sold as a short sale, have you considered the impact of the cancellation of debt income on your individual income taxes? Have you calculated the loss of sale of investment property?

4. If you generated any kind of active real estate income, have you considered restructuring your business to minimize the impact of self employment taxes?

5. If you have significant real estate education expenses, have you registered a business in order to minimize your audit exposure on deducting these expenses?

6. If you have significant business expenses and already have a registered business, have you considered converting to a partnership to avoid an audit flag?

7. For homes that have been repossessed, do you know the rules on recourse vs. non-recourse debt?

8. Do you understand what your tax filing requirements are for the states where your business is registered such as annual filing, personal property tax returns, etc.?

9. If you own investment property, have you considered doing a cost-segregation study in order to increase your depreciation expense?

10. If you bought or sold property in 2012, have you considered the impact of capital gains, adding rehab expenses to the basis of the property, and whether the holding costs (mortgage interest, taxes, and insurance) are deductible in 2012?

Here is recent question from my blog:

QUESTION: I acquired a house in September 2010. I evicted the previous owner in December 2010. I paid the eviction costs in January 2011. I listed the house for sale in March 2011. I expect to sell the house in 2012. The house is most likely a dealer property. Should I expense the eviction costs on my 2011 tax returns, or should I add them to the basis of the house?

ANSWER: It depends on what you investment intent is. If your intent was to buy, hold, then sell, then yes, you can deduct the eviction costs in 2011. If your intent, was to buy, fix, and sell then those costs are added to the cost basis of the house.

I address many of these issues in my Wealth Building Plan. Make sure you are getting the best tax advice. Let me evaluate your financial and tax situation, then develop a customized tax strategy just for you. Together, we will come up with a strategic plan designed to answer your questions as you build your own customized wealth-building plan. You can get more information at WealthBuildingPlan