All Forum Posts by: Jonathan Feliciano

Hi Tyler. I agree with Austin. You can for sure try to do it yourself, but I think the smarter option would be to have a CPA help you, as they are experts in accounting and tax. I definitely don't think a CPA would charge "thousands" of dollars to prepare your tax return. Given your tax situation, I think a fair price you could expect to pay is between $500 - $1,000. I recommend reaching out to some local CPAs and requesting quotes from them. You should also ask if they do cost segregation analyses, as that might be extremely helpful in reducing your income tax liability.

You could pay a CPA to prepare your tax return for this first year and learn as much as possible from them. That way, in the following year, you can prepare your tax return by yourself. The first year is probably the most crucial year, as you will need to calculate the cost basis in your rental properties, which will influence your depreciation expense on Schedule E.

Hi Tony. Like most answers to a tax question, it depends. Generally, you can form one of three types of business: a partnership, S-corp, or C-corp. The most tax advantageous business types are partnerships and S-corps, for you don't pay income tax at the entity level. Rather, the income from those entities flow-through to your individual tax return (Form 1040), where it's taxed along with all your other sources of personal income. With a C-corp, you must pay a flat 21% income tax rate on your net taxable business income. Then, when you distribute dividends to yourself, you must pay taxes on those dividends on your individual income tax return. This is called double taxation, and it's the reason why C-corps are seen as the least tax advantageous business type.

Overall, there's not really a business entity type that will help lower the amount of income tax you pay. The primary reason why people form a company is to limit their legal liability from lawsuits.

Hi Kevin. I'm a CPA. I've been practicing tax for about 2 years. I'm probably not the best person to be your tax strategist, but I can introduce you to the partners in my company, who have 15+ years of experience and have worked with people in your situation. The name of my company is Moss, Krusick, and Associates (MKA). We have multiple offices in Florida. I'm based in the Miami office. We work with clients nationwide. Let me know if you have any questions about MKA that I can answer for you.

Just curious. What deductions do you think your current CPA is missing?

Thank you all for your replies so far! I appreciate hearing your wisdom and experiences.

 I'm sorry to hear that, Brandon. Thank you for your advice.

Hi Todd. I will try to answer your questions as directly as possible.

1. In order to get a CPA, would they need to be licensed in all three states in order to help me both with Personal and Business taxes/accounting needs? If this is a requirement, feels like odds would be low to find a match? No. You do not need a CPA to be licensed in all three states in order to help you with your personal and business taxes/accounting needs. I'm a CPA, and I've done tax returns for clients in multiple states. I'm licensed in Florida.

2. Should I instead just try to land an accountant in Illinois and JUST ask them to do the accounting and taxes for the business only, then I'll just tackle the personal taxes like I have always done? Not necessary. See my response to Question #1.

3. Third idea was to see if TurboTax may still be able to tackle my scenario. Anyone use TurboTax to help manage the business taxes and returns, depreciations, tax benefits etc? I've never used TurboTax, personally. So, I cannot opine on their efficacy. However, based on the info you provided, it sounds like your tax situation is more complicated than the average person. I think you would benefit more by working one-on-one with a local CPA on a consistent basis. It might be helpful to interview TurboTax and some local CPAs to see which option will be best for you.

Hi Joe. I agree with Ben. Generally, people with high income on their 1040 have a greater change of being audited by the IRS. Still, the probability is very small. As long as you have documentation to back up the figures on your 1040, you'll be fine. Also, I agree with your CPA's decision to not do a partnership with your wife; it really wouldn't change your probability of being audited. Again, the IRS looks at your level income, not the number of pages on your 1040. Think about it: The IRS has a greater chance of winning money if they audit someone showing $10 mil of total income on their return versus $100,000. I hope this helps.

Hello BP Community,

I'm thinking of taking on a business partner to do out of state investing. The idea would be to have some boots on the ground in the area I'm interested in investing.

For those of you who have formed partnerships...

1. What was that experience like? Did it make real estate investing more easy or hard?

2. How did you meet your business partner?

3. How did you vet your business partner?

4. Any general tips or advice on forming partnerships with out of state investors?

@John Clark

Like most answers involving taxes, it depends. A good rule of thumb is to follow what’s reported on

your bank statement.

For example, if your monthly bank statement shows $1,500 rental income (deposit) and a $100 expense (withdrawal), then yes. Report yourself as receiving $1,500 in rental income and incurring a $100 expense. Personally, I wouldn’t call the $100 withdrawal a “discount,” but rather “lawn care expense.”

@Seth McGathey

Hi Seth. This is my opinion as a CPA who has prepared hundreds of income tax returns for both individuals and businesses with rental properties.

To answer your question directly, you report the rental income you ACTUALLY received.

It does not matter what you advertise as your rental listing price. At the end of the day, what truly matters is the rental income that enters your bank account. That is what the IRS cares about.

Now, there are different reporting methods you can implement here. But I think the simplest and easiest method would be reporting $1,400 per month. It would be extra reporting work to say you had $1,500 in rental income and $100 in discounts every month.

I hope this helps.