Working as an independent contractor in real estate is a flexible job for most of the year, but it can be particularly challenging during tax season. Instead of submitting a simple W-2, you’ll working to complete W-9s, pulling out receipts from the past 12 months, and praying you have everything accounted for. Filing your taxes correctly can save you a large sum of money and reduce the risk of an IRS audit. If your previous tax experience caused you more stress than you could handle, consider the three steps below to improve the process this year.
Maintain Organized Accounting Records Year-Round
You’ll find two types of people who file their taxes: those who have everything organized and in one place, and those who struggle to find a year’s worth of checks, receipts, and invoices throughout their offices.
If you’re struggling to file your taxes, look for opportunities to improve your income and expense reports. Some people track their income monthly; others sort transactions by client. Similarly, by saving your receipts and investing in business wallet-checks with stubs for recordkeeping, you can track the monthly costs of running your real estate business or total amount spent at each property you represent. If an ounce of prevention is worth a pound of cure, then a few minutes of financial tracking each day is worth hours of tax organization each spring.
Create a Separate Work Bank Account
At the end of the year, discerning between work deposits and personal contributions to your bank account can be almost impossible. Some people find themselves looking at scans of their checks and trying to guess what each payment represents. Not only does this approach cause confusion, but it can also lead to incorrect reporting and overpaying.
Instead, consider opening a separate business bank account. This action will allow you to keep all of your transactions in one place and make sorting between personal and professional expenses flawless.
Submit Quarterly Tax Payments
While you’re too late to follow this tip for the 2016 tax year, you can start making quarterly tax payments for the 2017 tax year as early as April 18. According to the U.S. Internal Revenue Service (IRS), individuals who are sole proprietors, partners, and shareholders need to make estimated payments if they’re expected to owe more than $1,000 to the government at the end of the year.
Quarterly payments allow independent contractors to pay what they owe — instead of making a lump sum payment in the spring — and increases the likelihood that you’ll submit your income tax payments on time. You can download the estimated tax forms and submission deadlines via the IRS website.
Documentation and organization are the two keys to success during tax season. Without proper tracking year-round, you could make mistakes when you file your tax return. By following the advice above, you’ll set yourself up to get the most money possible from your tax filings, in the least amount of time needed to file, so that you can focus on other aspects of your real estate business.