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Posts by Patrick Camuso, CPA

How Real Estate Agents Save Big on Self-Employment Tax

If you are a real estate agent or broker, you are most likely subject to the self-employment tax. We will go over how you can potentially save thousands on your tax bill.

If you’re like many real estate agents and brokers, you are paid as independent contractor.

As an independent contractor, you are considered self-employed and subject to the full 15.3% self-employment tax. W-2 employees pay 7.65% and their employer pays the other 7.65%

Electing to have you LLC to be taxed as an S-Corporation allows you to hire yourself as a W-2 employee and split your earnings between salary and distributions.

It is very important to work closely with a CPA to set a reasonable compensation for yourself to avoid IRS scrutiny. Creating an entity and electing to be taxed as an S Corp has its advantages and can potentially lower your tax liability, but has many considerations which are warranted before making the tax election and changing your company structure.

Contact our team today to discuss you entity selection in detail as it related to your specific financial circumstances.

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What Meals Can You Deduct After the 2018 Tax Law Changes?

On 22 December 2017, the President signed tax reform legislation known as the Tax Cuts and Jobs Act (TCJA). While the full implications of the Tax Cuts and Jobs Act are still unraveling, a number of tax-planning opportunities have presented themselves.

The Tax Cuts and Jobs Act of 2017 has also made significant changes to the deductibility of business meals and entertainment starting in 2018.

Generally, entertainment expenses are nondeductible and most meals are 50 percent deductible. Previously entertainment expenses were 50 percent deductible and a most meals were 100 percent deductible.

We anticipate this area of tax reform will be heavily scrutinized by the IRS. It is important that your accounting records accurately categorize these activities.

How Does It Work

In order for meals to be considered 50 percent deductible business must be discussed during the meal. If no business is discussed the meal is not deductible for tax purposes and thus should be entered as entertainment. Meals with employees/coworkers where business is discussed along with meals while travelling are considered 50 percent deductible as well. Company activities, such as holiday parties, birthday and anniversary celebrations, picnics, etc. are fully deductible.

Here at Camuso CPA, we offer a wide array of tax services for investors including tax preparation and tax planning. Financial service and technology companies are transitioning from employee driven revenue models to information driven revenue models. Camuso CPA strives to deliver useful insights and offer relevant explanations about the latest tax and financial topics.

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What To Do If You Have Not Reported Your Real Estate Investments On Last Year’s Tax Return

Here at Camuso CPA, we offer a wide array of tax services for real estate investors including tax preparation and tax planning. If you are interested in how this might specifically benefit your business or portfolio, please don’t hesitate to reach out in detail today to schedule a free initial consultation regarding your specific facts and circumstances.

The IRS can go back up to three years to prosecute cases of tax evasion, and in cases where they find substantial error, they can decide to go back up to six years or more. If you did not report your real estate transactions properly in prior years the best course of action is to file an amended tax return.

Step 1: Calculate Your Tax Liability

When preparing your tax return, you are going to have to figure out your taxable income from your real estate investments for the year. This involves figuring out how much of your assets were sold for capital gains. Additionally, if you own rental properties you will have to determine the amount of taxable income to report from your portfolio.

If doing real estate tax is proving to be a challenging feat, you should consider enlisting the services of a qualified CPA at a professional tax firm such as Camuso CPA.

Step 2: Amend your return

Once you have determined your capital gains and tax liabilities, you should download a current IRS Form 1040X, Amended U.S. Individual Income Tax Return

Step 3: Mail in your amended return

After preparing your amended tax return to reflect your real estate transactions they will be mailed to the IRS along with all applicable tax payments.

While paying taxes can at times be painful, it is very important that you include your real estate businesses and portfolio properly on your tax return. Ultimately, if you choose not to file your gains/losses and/or income, you will be committing blatant tax fraud to which the IRS can enforce a number of penalties, including criminal prosecution, five years in prison, along with a fine of up to $250,000.

Here at Camuso CPA, we do have the ability to offer tax preparation and planning services to our real estate clients. If you are interested into how this might benefit your business or portfolio, please don’t hesitate to give us a call today. One of our friendly and knowledgeable representatives will be happy to answers any questions you have.

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How Real Estate Syndicators Are Impacted By Tax Law Changes To Business Interest

Here at Camuso CPA, we offer a wide array of tax services for real estate investors including tax preparation and tax planning. If you are interested in how this might specifically benefit your business or portfolio, please don’t hesitate to reach out in detail today to schedule a free initial consultation regarding your specific facts and circumstances.

Tax reform, also known as the Tax Cuts and Jobs Act (TCJA), was enacted at the end of 2017, resulting in considerable changes to the federal tax code including a new limitation on the business interest deduction.

Business interest expense was generally deductible under the previous law. Beginning in 2018, however, the business interest deduction may be limited to the sum of a taxpayer’s business interest income for the tax year and thirty percent of the taxpayer’s adjusted taxable income for the tax year.

Syndicators can elect out of this limit by electing to be a real estate trade or business for tax purposes. The drawaback then is that real property has to follow a longer depreciation schedule. And may not be eligible for 100% bonus or accelerated depreciation on property with useful lives of 5,7, or 15 years.

Syndications can be a powerful tax planning tools ,but can also have negative tax consequences if you’re not careful. Be sure to speak with a qualified CPA before investing or starting a syndication.

Here at Camuso CPA, we do have the ability to offer tax preparation and planning services to our real estate clients. If you are interested into how this might benefit your business or portfolio, please don’t hesitate to give us a call today. One of our friendly and knowledgeable representatives will be happy to answers any questions you have.

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How To Calculate Depreciation On Rental Portfolios

Here at Camuso CPA, we offer a wide array of tax services for real estate investors including tax preparation and tax planning. If you are interested in how this might specifically benefit your business or portfolio, please don’t hesitate to reach out in detail today to schedule a free initial consultation regarding your specific facts and circumstances.

How To Calculate Depreciation On Rental Portfolios

If you own a rental property and want to take advantage of the tax breaks one of the most useful tax tools at your disposal is depreciation. Rental property depreciation allows investors to write off the structure and improvements to the property over a period of time. This is non-cash expense that you can use as a write-off on your taxes. Depreciation is one of the biggest benefits to real estate investing because it can reduce reportable net income and therefore, your taxes

Depreciation is the loss in value to a building over time due to age, wear and tear, and deterioration. You can also include land improvements you’ve made and items inside the property that are not part of the building like appliance and carpeting. You can only depreciate the improvements to the structure itself – not the land.

Depreciation deductions are spread out over the useful life of a property. The IRS allows an owner to depreciate the value of the home over a 27.5 year period. The time periods of depreciation can be adjusted based on the components of the property which can offer even larger tax planning opportunities. We cover this in other articles here.

It is important for all real estate investors to deeply understand depreciation and how it applies to their portfolio. There are many tax planning opportunities available related to depreciation.

Here at Camuso CPA, we do have the ability to offer tax preparation and planning services to our real estate clients. If you are interested into how this might benefit your business or portfolio, please don’t hesitate to give us a call today. One of our friendly and knowledgeable representatives will be happy to answers any questions you have.

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Form 1099-K: What Cryptocurrency Investors Need to Know in 2019

Here at Camuso CPA, we offer a wide array of tax and accounting services for cryptocurrency investors and traders including tax preparation, tax planning and portfolio reconciliations. Camuso CPA strives to deliver useful insights and offer relevant explanations about the latest tax and financial topics.

The IRS has demonstrated it intends to enforce existing 1099 reporting rules on cryptocurrency exchanges, but it has not followed up by providing clarity regarding those rules. For instance, trading platforms might have to send 1099-B forms to users who exchange one type of coin for another, but they’re not explicitly required to send the forms the way brokers are for stock trades. Generally, requirements surrounding the 1099-B remain unclear for cryptocurrencies.

The IRS has already forced a Coinbase to report users on form 1099-K, the same form home-share and ride-share companies use to report transactions with homeowners and drivers. The federal reporting threshold for the 1099-K is currently set at $20,000 and 200 transactions per year.

The 1099-K lacks the cost basis details required to capture the capital gain/loss calculation that would ultimately determine taxable income and tax revenue for the IRS.

If people are transacting in digital currency, it’s important that anyone understands that there’s a tax obligation on their part. Whether they’re paying their taxes or whether they’re day traders– it doesn’t matter. Any time there is a transaction with digital currency, it’s important that people understand there is a tax liability.

The reason that 1099-K are not usually accurate is because they do not report the relevant cost basis data necessary to accurately calculate capital gains/losses. Additionally, this form does not reconcile trades across multiple exchanges. Our team at Camuso CPA works with cryptocurrency investors and traders on a daily basis to accurately calculate all of your cryptocurrency transactions in order to properly report them for tax purposes.

Properly tracking and reporting your cost basis is imperative to protect your assets from penalties and interest as a result of underreporting. When analyzing cryptocurrency portfolios our starting point is the last ending tax year’s cost basis for each asset which is considered along with all relevant transactions from the current year to arrive at both an ending tax liability and ending cost basis for each respective asset you are holding. This means that if you did not track your cost basis correctly in prior years or did not report it that your portfolio calculation for years following that will also be incorrect. This can cause cascading and costly issues across multiple years of tax returns in many cases.

Analyzing financial transactions are a detailed process that can easily be plagued with costly errors if you do not have a structured process and workflow in place. Analyzing crypto transactions adds another layer of complexity due to the nascency of this industry and the reporting standards from exchanges. Without the proper experience and training it is very easy for well-meaning accountants to make costly errors related to the portfolio calculations and advisory they provide investors.

Be careful and do you due diligence. At the end of the day your tax return is your responsibility and it is your job to work with an experienced CPA firm to protect your assets. I would suggest that investors work with a CPA that not only understands and invests in crypto but also a CPA that has a strong background in financial services.

If you searching for CPA firms to assist you with reporting cryptocurrency income and capital gains, contact Camuso CPA. Whether you need tax preparation services, assistance with properly reporting gains and income from virtual currencies on your taxes, cryptocurrency portfolio analysis, or any other service provided by a certified accountant, Camuso CPA can help. We are industry leaders in cryptocurrency tax services and you will not find a better team of CPAs to assist  you with your tax needs.

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How To Treat Earnest Money Deposits for Tax Purposes

Here at Camuso CPA, we offer a wide array of tax services for real estate investors including tax preparation and tax planning. If you are interested in how this might specifically benefit your business or portfolio, please don’t hesitate to reach out in detail today to schedule a free initial consultation regarding your specific facts and circumstances.

Many investors think earnest money deposits are an expense when in fact they are treated as an asset. Although an earnest money deposit is no longer in your possession once paid, it will give you a direct value in the near future whether you purchase a property or whether you receive a refund of your earnest money deposit.  When you pay the earnest money deposit, you are creating a current asset, and when you purchase the property, the earnest money deposit reduces your cash payment that is a reduction of a current asset.

While it is very important to track earnest money deposits for any real estate investor, it becomes increasingly important for flippers and investors who are purchasing real estate on a large scale.  When you expand your business or portfolio and there are multiple purchases taking place in a short amount of time, earnest money deposits can be overlooked.

Here at Camuso CPA, we do have the ability to offer tax preparation and planning services to our real estate clients. If you are interested into how this might benefit your business or portfolio, please don’t hesitate to give us a call today. One of our friendly and knowledgeable representatives will be happy to answers any questions you have.

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Can I invest in a syndication using a 1031 Exchange?

Here at Camuso CPA, we offer a wide array of tax services for real estate investors including tax preparation and tax planning. If you are interested in how this might specifically benefit your business or portfolio, please don’t hesitate to reach out in detail today to schedule a free initial consultation regarding your specific facts and circumstances.

Do you have a rental property that you’re looking to sell using 1031 exchange?

There is a common misconception that you can simply do a 1031 exchange directly into a syndication. However, this is not possible because when you invest in a syndication, you are purchasing part of an entity that owns real estate not the real estate itself.

A viable option as an alternative which can use a 1031 exchange is a tenant in common structure or Delaware Statutory Trust . While these options are similar to syndications, they are not syndications.

Delaware Statutory Trust are derived from Delaware Statutory law as a separate legal entity and formed as private governing agreements for the purposes of managing, administering, investing and or operating real, tangible and intangible property; or business or professional activities for profit that are carried on by one or more individuals who act as trustees for the benefit of a party who is entitled to a beneficial interest in the trust property. Delaware Statutory Trusts are not new, in 2004, the IRS came out with an official Revenue Ruling detailing how a DST could be structured in such a way that it would qualify as a property replacement vehicle for 1031 Exchanges.

Here at Camuso CPA, we do have the ability to offer tax preparation and planning services to our real estate clients. If you are interested into how this might benefit your business or portfolio, please don’t hesitate to give us a call today. One of our friendly and knowledgeable representatives will be happy to answers any questions you have.

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Why Cryptocurrency Investors Cannot Use Popular Tax Preparation Software

Here at Camuso CPA, we offer a wide array of tax and accounting services for cryptocurrency investors and traders including tax preparation, tax planning and portfolio reconciliations.

Virtual currency exchanges signed up millions of new users in 2018. However, cryptocurrency became an increasingly mainstream investment last year, and more and more people started trading at high volumes. By the end of the year, some of the more active cryptocurrency investors had made thousands of trades.

The IRS requires investors to submit records showing every time they sold or spent their virtual currency assets. For high volume traders, this can add up quickly.

As the cryptocurrency investment community gets ready for tax season, some high-volume investors are finding they are no longer able to self-prepare. This is because many of the existing tax preparation software limits the number of transactions you can report. TurboTax Online can only accept up to 500 transactions per account, and the company warns that online performance is likely to go down as more information is uploaded.

Camuso CPA offers the highest-quality tax advice and planning services specifically focused on the needs of cryptocurrency investors.  The tax laws are changing, and the IRS is focusing on the crypto investors. Cryptocurrency investors need sound tax advice from a trusted and experienced CPA.

If you searching for CPA firms to assist you with reporting cryptocurrency income and capital gains, contact Camuso CPA. Whether you need tax preparation services, assistance with properly reporting gains and income from virtual currencies on your taxes, cryptocurrency portfolio analysis, or any other service provided by a certified accountant, Camuso CPA can help.

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Why Do People Love The Tax Benefits of Rental Portfolios

Here at Camuso CPA, we offer a wide array of tax services for real estate investors including tax preparation and tax planning. If you are interested in how this might specifically benefit your business or portfolio, please don’t hesitate to reach out in detail today to schedule a free initial consultation regarding your specific facts and circumstances.

For most, tax season is a time of year they do not enjoy. We understand that most people do not like taxes and most definitely do not like paying them. Real estate investors enjoy great advantages in building wealth and passive income while keeping tax liabilities down. There are even greater benefits for those who expand real estate investments or get started with real estate investing in 2018.

Depreciation

This is a non-cash deduction that spreads the cost of an asset over multiple years. This paper expense can protect other income from taxes and reduce your tax bill.  The Tax Cuts and Jobs Act has opened a new window of opportunity for investors and property buyers to enjoy a 100% first-year bonus depreciation deduction. This break is retroactive for 2017 tax filings on property acquired and in service by September 2017. This break will be available until 2022, when it begins to be reduced by 20% per year until phased out.

Leverage

Many investors use debt leverage to buy real estate. Leverage magnifies the profits mentioned above. The interest on debt is deductible as a business expense.

To raise cash most investors consider selling investments. This leads to taxes or complicated procedures to minimize taxes. Another option is t pull capital out of an investment tax-free by refinancing.

Reduced Pass-Through Taxes

Pass-through income from business entities such as LLCs now gets a 20% deduction on qualified income. This allows successful existing real estate firms to expand and enjoy better profitability while making it more appealing and advantageous to launch new real estate startups or get started in real estate investing through legal entities like limited liability companies.

1031 Tax-Deferred Exchange

A 1031 Exchange is a transaction in which a taxpayer is allowed to exchange one investment property for another by deferring the tax consequence of a sale. The transaction is authorized by 1031 of the IRS Code. Executing and completing a 1031 exchange requires meeting specific criteria.

Installment Sales

When a taxpayer sells a capital asset on an installment note with the buyer making payments over time can choose to spread the income from the sale over the life of the installment note. Spreading the capital gains income over multiple years can reduce the amount of tax compared to reporting the entire gain in one year.

The key benefit of the installment sale strategy is spreading capital gains income over time.

Retirement Account Investments And Contributions

IRAs and 401k retirement plans are incredible tools to build wealth while minimizing taxes. Taxpayers can self-direct these to invest in real estate rather than tradition investment vehicles. While self-directed IRAs are a great tax planning tool, there are many pitfalls and strict rules to be aware of.

Here at Camuso CPA, we do have the ability to offer tax preparation and planning services to our real estate clients. If you are interested into how this might benefit your business or portfolio, please don’t hesitate to give us a call today. One of our friendly and knowledgeable representatives will be happy to answers any questions you have.

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