With the new year in full swing, it means that tax season is right around the corner. In fact, tax season begins the minute the calendar changes from December to January. Tax season can be especially difficult on real estate agents, most of whom are self-employed. Here are some tips on how real estate agents can prepare for tax season.
Be Prepared for an Annual Audit
Real estate agents should be prepared for an annual audit, even if it has never occurred. Self-employed people are more likely to be audited than employees, so if you run your own agency, or work on your own selling property, be prepared for an audit. Have all the receipts of items listed on the return at the ready in the event of an audit. Also make sure you report all income that was reported to you and to the IRS.
Include a Schedule for Large Items
Make sure your return includes a schedule for large items. The schedule is a statement that allows you to explain anything on your tax return. The schedule of items could help prevent an audit. For example, if you claimed $30,000 on your return for dental expenses, but didn’t explain it, you will likely face an audit. If you attach a schedule explaining the $30,000 you could avoid an audit. Maybe the money was used for braces for three children and dental implants for an adult in the family.
Use a Tracker When Filing Return
When you file your tax return, it is a good idea to use some sort of tracking system so you know where the return is at all times. If you file via mail, pay for delivery confirmation and tracking information. If you file online, you will be able to send the return directly to the IRS using their system. A tracking system when filing offline will help you prove to a court that you sent the return to the IRS even if they did not receive it.
Start Tracking Taxes
As a self-employed real estate agent you need to start tracking taxes. This will make filing your return every year easier. Use your phone and a cloud app to take pictures of important receipts and save them for future use. Track all of your business mileage and other possible deductions.
Filing taxes as a self-employed real estate agent can be daunting if you don’t know what you can deduct or claim. Tobin & Collins can answer all of your questions, help you understand the laws and even file the return for you. Contact their experienced staff in Hackensack, New Jersey today at 201-487-7744.