Taxes are one of the downsides to owning real estate investment properties. Regardless of the income earned or lost each year, every investor must file a tax return for federal, state and local taxes. The upgrades to computer software have been a big help for estimating and preparing tax forms for submission to tax authorities. Waiting until the last minute to estimate and prepare tax forms is something that many investors do. Preparing tax forms with the help of computer software has its advantages and disadvantages, but a CPA might be the best option for your tax filing needs.
Advantages of CPA Tax Preparation A large portion of the money that you pay to a CPA to prepare and file your taxes goes for experience. A CPA holds a state license to sign tax returns due to the legalities involved in tax disputes. A CPA might have many real estate clients that also invest in rental properties. Although no two tax returns are identical, there could be similarities in deductions and expenses that could help you qualify for tax savings.
Additional CPA advantages:
• Up to date knowledge of tax laws and filing dates • Tax planning advice for future returns • Audit protection • Safekeeping of past tax returns • Saves time
When you prepare your taxes with the help of a CPA, you know that you are getting an accurate return. Every CPA must sign off on a tax return and certify that the data is correct.
Advantages of At-Home Tax Preparation It is not a secret that tax filings from a CPA come with a larger price tag compared to filing taxes with computer software. While price is not the only factor that you should use to determine the best tax filing method, money is an issue especially if you have incurred real estate investment losses during a taxable year. Apart from the cost saving benefits, computer software does have several advantages to help make tax filing easier. Additional at-home advantages: • Free tax estimation throughout the year • Easy import of digital documents • Archive tax returns for financial analysis • Electronic filing available • Multiple tax brackets and business structures accepted
What to Know Before Filing Real Estate Tax Returns The decision how you file your annual tax is one that only you can make. You know the advantages of each method and either one could work out equally well for you. Before you begin any tax filing, it is helpful to keep accurate records for every transaction that you make as a real estate investor. All expenses and income received must be documented correctly before you can add the figures to your return. Not keeping good records is one of the fastest ways to owing more taxes that you should during the year. Late penalties and other fees can quickly eat up a tax refund or cash that you have saved from rental income. Part of being a savvy investor includes basic tax knowledge and expert management of your business.