Tax Compliance Mistakes Real Estate Investors Can’t Afford to Make

On paper, real estate investments sound perfect: they’re passive revenue streams that underwrite your interests. However, many income sources sound great on paper. In actuality, it takes skill, knowledge, and experience to successfully generate income from these sources, and real estate investment is no different.

For instance, there are some tax compliance mistakes that you need to avoid at all costs:

Overpaying

Overpaying is an alarmingly prevalent tax-related issue in the real estate market. Generally speaking, if you provide inaccurate information, it’s highly possible that you’ll be overpaying. For instance, suppose you overstated your property value on your property tax return. You may have done this because your financial records weren’t correctly handled, or you failed to recognize some exemption. Alternatively, you could have also included ghost assets while reporting the assets you still use. These are assets that are no longer in your possession.

Inaccurate information means you’ll be taxed for more property than you have. The result is that you end up overpaying the IRS. You should periodically analyze your financial statements and subject your property to valuation by a skilled accountant to make sure you aren’t making unnecessary payments.

Improper Categorization and Management

All property isn’t alike, nor is it subject to the same tax laws. For instance, personal property typically isn’t taxed, and even if it is, you still need to maintain proper categorization.

Proper categorization is crucial to presenting accurate information to your jurisdiction. If you submit inaccurate information, you may be slapped with a fine or, in extreme cases, charged with intent to defraud.

Don’t Miss Deadlines

As a real estate investor, missing your tax deadline will needlessly cut into your income. These deadlines are fixed, so there aren’t any second chances.

Not Seeking Expert Advice

No one can be a specialist in everything. Unless you’re a successful real estate investor with intricate knowledge of tax planning and compliance (and if you are, color us impressed), you should seek expert advice.

Get in touch with us, at Harmon/Harmon, to make sure you don’t need to worry about tax compliance. We’re a CPA firms specializing in real estate in Austin, TX, that offers tax planning and compliance services for real estate agents and investors. We’ll make sure your taxes are filed correctly and nothing unnecessarily digs into your income.