All Forum Posts by: Michael Plaks

I have no relationship with the person you mentioned, and neither am I a Bigger Pockets employee or admin. Generally speaking, no company will (or should) "cancel" a professional based on a single incident between such a professional and their client. 

Things can go wrong for many reasons, and there're always two sides to every story. Please don't take it personally, I'm not suggesting that you did anything wrong, and I'm not defending my colleague. I don't have all the details to have a valid opinion. I'm simply saying that requesting that this person be removed from BP does not seem reasonable to me.

To record a complaint about someone, there is actually a special forum here on Bigger Pockets:  https://www.biggerpockets.com/forums/92

Now, to your specific predicament. It is indeed nearly impossible to get competent help on such a short notice. I recommend that you let your regular accountant file your tax return as it was prepared, because this will minimize your IRS penalties and interest should his result be confirmed as accurate.

Then later on you find one of the real estate tax professionals, there are over 20 of us here on the tax forum, and get a qualified second opinion. If it turns out that your tax return can be redone and improved, then you will file a corrected ("amended") tax return which will override your first return.

Self-employment tax is completely separate and cannot be reduced by anything you do with your rental properties, including 3115/481(a)

As other people already mentioned, you most likely will not reduce your taxes at all with LLCs if you are planning to merely hold rental properties. In fact, it is likely to backfire by creating very significant extra hurdles (like double-entry bookkeeping and commingling prevention) and very significant extra costs (professional level bookkeeping and possibly the need to file separate partnerships tax returns).

Allegedly, LLCs could enhance your asset protection, but not being  an attorney I cannot comment on it. I can only express my concern that your self-created operating agreements could derail whatever legal protection you may be shooting for.

Overall, I'm not in favor of spending your limited resources of time, energy and money on creating entities early in your real estate, especially multiple entities. Unless you invest together with other people, then it may be necessary.

Beyond these very generic pointers, the only way to responsibly advise you would be through a thorough one-on-one discussion of your current situation and your business plans.

You can get a lot more opinions on this forum by searching it for "benefits of LLCs."  Here are some older threads to start with:
https://www.biggerpockets.com/forums/51/topics/806960-s-corp...
https://www.biggerpockets.com/forums/109/topics/1200723-llc-...
https://www.biggerpockets.com/forums/109/topics/1212815-i-ne...
https://www.biggerpockets.com/forums/926/topics/1097903-all-...

Michael - great name, by the way ;)

I will say it again: you're likely creating more problems for yourself by trying to DIY it. I understand your aversion to paying a tax professional, but you would be better off.

Your attempt to DIY this thing may result in losing some of the benefits and even triggering an IRS audit. And then it might cost you even more to get it straightened out. But of course it's your decision.

You should not switch to the correct depreciation without simultaneously filing 3115. The whole 3115 approach is called "changing an accounting method from an impermissible to permissible."  And you're planning to switch to another incorrect accounting method (because prior depreciation matters) before making the ultimate switch to the correct one. Plus, there is hardly any benefit to adding depreciation in 2024 considering your low taxable income for 2024.

The most beneficial thing is probably waiting, but I'm saying "probably" because I do not have all the details about your situation, and there could be numerous factors changing my preliminary hunch. There is no statutory limit on waiting.

@Michael Kare

You will not appreciate my suggestion, but I suggest leaving this for a tax pro, as you continue to make wrong conclusions and are about to make wrong actions that could backfire. This is not an easy thing, really, and even tax professionals who are not real estate specialists make mistakes here. That said...

1. You cannot amend ANY of your old returns. It is against the rules. It might fly under the radar, but it still breaks the rules. The only correct procedure is one Form 3115 and one set of 481(a) adjustments for ALL years combined.

2. Given your low tax situation for 2024, you probably should wait and apply this correction to your 2025 taxes next year. This should give you more savings.

3. But if you're determined to do it for 2024, you must do it before October 15. Notice that the mechanics of submitting Form 3115 are complicated. You need to attach it to your tax return AND also send it simultaneously to another IRS department. Read 3115 instructions carefully.

4. 481(a) adjustments are entered on Schedule E, per property, not Schedule 1, and it does change calculations on Form 8582.

@Theodor Chung

I know this is 2025, and we expect that anything can be figured out from Reddit and ChatGPT. Complex tax situations still can't though. You can (and did) receive generic advice, but it is not enough if your goal is to be audit-proof.

Things you may be missing:
- before counting hours, you need to pass material participation for each of the activities (or group of activities)
- there are two different groupings of activities, and you may need to combine both
- targeting 750 hours is very unsafe, you need a significant cushion
- driving hours have been treated by courts both ways, so you cannot rely on them to pass the test
- a helpful informal way to look at hours: if someone else was performing the tasks that you want to count as REPS hours - would you pay them for these hours?
- etc.

@Bob V.

Since your post has been moved into Classified area of the site, we're now allowed to offer you our services.

My firm is in Houston, not in Austin. Post-Covid not even our local Houston clients want to come to the office, so we closed it and work 100% remotely. Pretty much all of my colleagues work remotely and nationwide these days. And all of us cover both personal and real estate side, it's a given.

We do all client communication with technology: portal and video conferencing. Feel free to reach out anytime.

Meanwhile these posts can provide some background:
https://www.biggerpockets.com/forums/51/topics/1222774-expla...
https://www.biggerpockets.com/forums/51/topics/1088325-expla...

You're jumping to Step 2 (cost segregation numbers) while ignoring Step 1.

Step 1 is to figure out if you have room to deduct additional depreciation. If you don't have such a room, then cost segregation and bonus depreciation won't save you anything.

Here is an intro to how it works:
https://www.biggerpockets.com/forums/51/topics/1075919-five-...

And here is an overview of what changed in 2025:
https://www.biggerpockets.com/forums/51/topics/1249780-expla...