Have you already finished your taxes? Chances are you haven’t. As tax season is well upon us, we share three tips for getting through it .
1. PROCESS SHOULD BE AUTOMATED - Your Time is worth it!
Every year we become more and more tech savvy so it is just a crime against humanity to use paper and spend out time sorting through it. Accounting is a very basic process and we shouldn't fear it. We should just be running reports and not getting paper cuts. Let me explain, you receive rent, then spend money on fixing up the rental. So, all you need is to track both costs and income while assigning them to a property automatically. This should not be a process you complete, but something is automated. When a tenant pays rent, it should be online and then account for it properly without you needing to do anything, as money is sent directly to your bank account. That is automated! Then at the end of the year you are only looking at final numbers and not actually adding them up.
Related: Make Your Tax Season Easier: Maximize Tax Deductions, Automate The Process
2. CLOUD SHOULD BE USED TO STORE INFORMATION
You must know that it is very important to keep careful records of all expenses that relate to your real estate business. You need to store all your receipts for at least seven years and that includes tenant information. Storing the information doesn't have to be in a box on a shelf. The cloud is one the safest and most secure places for such information.
A cloud property management system that saves all your expenses automatically. Even if you go to the hardware store - just take a picture and enter the amount. The receipt will be stored while the transaction will be entered into your accounting system and you then have access to it anytime. You can start running reports and not have to touch, store or manually enter receipts ever again. Many landlords pay higher taxes than they should because they don't keep proper records and if audited don't have receipts and documents organized. You now have no excuses as there are free options to keep track of this all for you. So, stay organized and on top of all your income and expenses during the year.
3. TAX DEDUCTIONS SHOULD BE MAXIMIZED
Business expenses are meant to help lower your overall taxes. A business expense is explained to be tax deductible if it is ordinary and necessary.
Ordinary expense – common and accepted
Necessary expense – helpful and appropriate
This would include things like mileage on your car, internet service and part of your phone (if you use a cloud based software), related educational events and more that normally get ignored. Instead of guessing how much you need to report on your schedule E start tracking your income and expenses in real time. Make it easy to have a strategy by using online accounting software focused on rental accounting.
Services like TenantCloud provide rental accounting and cloud based storage for free. This property management software is a perfect example of how you can store everything in one place. All of your receipts, online payments, canceled checks and credit card statements and more in one place. You just need to create an account, select categories and you will be on your way to less stressful tax season. Everything will be automated and you will have access to all of it at your fingertips.
In general, just stay organized through the whole year! One of the primary reasons people dread tax time is because they are not prepared. Adding technology to your life can remove the stress that tax season brings. Take your time, consider if your paper routine is worth your precious time and money. If not, you know what to do - cloud based rental accounting.
Guide To Tax Season To Be Closed: Tips For Automating The Process
Form 1040, Schedule E, Supplemental Income and Loss: Tax Season 2020