According to IPX1031’s 2024 Tax Procrastinators report, one in four people in the US don’t feel prepared to file their taxes. Plus, 37% of the investment property owners surveyed said they struggle to file rental property taxes. In a Chamber of Commerce survey, some respondents cite stress as the reason for procrastinating. Others assume they won’t get a refund, so they don’t rush to pay.
If you’ve put off working on your tax return, don’t panic. Looming deadlines and anxiety can lead to mistakes and inaccuracies, so take a deep breath. REI Hub is here to help. Use our checklist for last-minute filers to tackle your tax prep essentials.
Confirm Your Deadlines
Start by verifying which forms you need to file on which dates. Rental property owners usually file the Schedule E, but you may also need to file a Schedule ES. Both are due in April, but estimated tax payments are due four times per year.
You may also need to file 1099 forms and a 1096. These are due on January 31 each year.
State return deadlines vary, so use this tool to check your tax authority’s requirements.
Not sure which kinds of taxes apply to your business? Start with REI Hub’s business tax overview, then check with your CPA or lawyer about your specific situation.
Review Your Transactions
Now it’s time to download all your bank and credit card activity for the year. While you’re logged into your accounts, download your statements for the year. You’ll need those for supporting documentation later.
Once you download or upload the transactions to your accounting software, categorize each entry. Check for any personal purchases that went through your business accounts. Mark them as Owner Draws or put them in a similar equity account.
Go through your personal bank and credit card transactions for the year as well. You should record any business purchases that you made using personal funds.
Verify Your Income
One of the most common errors in rental property bookkeeping is reporting incorrect revenue. Income for real estate investors encompasses more than just rent. Check your records and report any income related to these situations:
- Advance rent payments, such as the last month of the lease
- Constructively received income, like January rent received in December
- Forfeited security deposits
- Late payment fees
- Lease cancellation fees
- Property or services received instead of rent
- Undeposited rent payments
If you expect to return a security deposit to a tenant at the end of the lease, the deposit doesn’t count toward your income for the year.
Double-Check Your Deductions
Deductions help decrease your tax liability, so reviewing your expenses pays off. Rental property owners can deduct these costs:
- Advertising
- Depreciation
- Insurance
- Interest
- Maintenance
- Mileage
- Professional fees
- Taxes
- Utilities
Use REI Hub’s Tax Time Double-Check to make sure you account for easily missed deductions but also spend a few minutes checking for IRS updates that apply to you. The IRS mileage rate varies yearly, and the deductible portion for meals will be updated in 2024 as well.
If you’re filing online, some platforms will help you review your deductions and tax credits.
Did you know? REI Hub subscribers can use the Tax Review report to prepare for filing.
Choose Your Software Wisely
Many tax-filing platforms advertise free programs. Even the IRS has a free filing option for taxpayers who meet certain criteria. However, real estate investors typically need a more robust platform. The free programs are geared toward people filing simple returns. Deducting rental property expenses from your rental income means you’ll have a more complex return. Expect to pay a fee to file.
Free programs often exclude state returns; if you need help with your return, the live-support options may come with additional fees. Before you start using the software, make sure the platform offers the tax forms and support options you need.
Be Realistic
The IRS estimates that, on average, taxpayers spend 13 hours to prep and file Form 1040. However, for business taxpayers, filing a tax return averages 24 hours. Before you pull an all-nighter completing your returns, take a minute to evaluate your situation honestly.
- Are you capable of gathering all the required information before the deadline?
- Does your schedule allow you enough time to categorize your transactions, choose and learn the filing software, and check your deductions?
- Would a reasonable person agree that you can get it done in time?
It’s ok if the answer is no. There’s nothing wrong with filing an extension, especially if it relieves some stress. You’ll have more time to gather your information and perform a more thorough review.
You can get Form 4868 here to file for an extension.
Just note that even if you get an extension, you’ll still have to estimate your tax liability and submit a payment by the original deadline. If you miss the deadline, owe taxes, and don’t pay on time, the IRS may add penalties and interest. But you won’t be penalized if you miss the deadline and receive a refund.
How REI Hub Can Help
You’re not alone if you’ve waited to work on your taxes. With REI Hub’s checklist for last-minute filers, you have a step-by-step guide to get you ready to file. Remember, keep a clear head, and take this process one step at a time.
With REI Hub’s comprehensive accounting platform for rental property owners, you can set up your books in minutes. Our options for linking accounts and importing transactions make updating your books simple. Start with our free 14-day trial today!
