Tax Time Looms And You Have The Power To File With Ease

This article will focus on how to prepare your business and personal tax returns once tax time actually arrives. Issues discussed will include how to efficiently file your tax returns, how to avoid audit triggers and important filing issues. If you stayed organized throughout the year, tax time should be a breeze. Do not panic if you were less than diligent with your record keeping and organization: just make it a point to change your habits this year.

Make sure you have all of your documents

Gather all relevant information including reporting documents, bank/brokerage statements and available deductions. Review your prior year tax returns to make sure you have all of the documents that you had in the past and may have overlooked. This step is important to save time and to ensure that you do not have to file an amended return with information you forgot the first time. A complimentary checklist of common items you need to include on your tax return is available on our website: www.bergersontax.com, under the Income Tax Organizer tab.

Separate your expenses into categories

As a real estate professional you assuredly have many expenses from operating your business. It is very important that you do not lump all of your expenses together. but rather separate them into different categories. If you use accounting software you will be able to print out a statement that has your expenses broken down into different categories already. You will find if you have folders for each category of expense and separate and ledger your receipts throughout the year, you will save yourself time when you go to file your taxes.

If you just threw all of your receipts in a box, you will need to categorize your
expenses now. As an example of how to categorize your expenses, look at the chart titled "Deductible Business Expense Worksheet". By having your expenses separated into different categories you can easily transpose your numbers onto the tax return. If you hire a tax professional you will make his or her job easier and save money on tax preparation fees.

File on time

No matter what type of business return you are required to file, make sure to file by the appropriate deadline. April 15th is the deadline for filling your individual income tax return, unless it is pushed back a day or two as it has been in recent years. Your return is considered filed timely if the envelope is properly addressed and postmarked no later than April 15. If you use a fiscal year (which is a year ending on the last day of any month other than December), your return is due on or before the 15th day of the fourth month after the close of your fiscal year.

If you cannot file by the due date of your return, then you can request an extension of time to rile. However, an extension of time to file is not an extension of time to pay. You will owe interest on any past-due tax and you may be subject to a late-payment penalty if payment is not made timely. To receive an automatic 6-month extension of time to file your return, file Form 4868 by the due date of your rerum.

Do not include items on your tax return that will raise RED FLAGS

When preparing your tax return it is important to avoid including any items that might draw extra attention to your return. Below are a few items I have found attract extra attention from the IRS. A complete list of audit triggers can be found in The Audit Angel 2009: Income Tax Organizer and Mileage log available at www.bergersontax.com.

Unusually high itemized deductions

If you claim large deductions for someone in your income category the IRS might decide to examine your return. Do not be afraid to claim all of your deductions if they are legitimate, just be able to validate them. If you are interested, take a look at the IRS statistics from Income Bulletin, Spring 2008 News Release IR·2008-720of average deductions claimed for income categories. Compare your itemized deductions with the national average to see if your deductions would be considered high.

Losses from self-employment

As a real estate professional you most likely are considered self-employed and have to file a tax return for your business. The IRS audit rates are already higher for taxpayers who are self-employed, but the item that really raises RED FLAGS is if an individual claims losses from their self-employment year after year. When claiming losses every year the IRS wonders if you have a legitimate business and are making a real attempt to make a profit or if you are participating as a hobby.

Under the "hobby loss" rules you can deduct expenses only to the extent of income from the activity. In my experience, I have generally found the IRS starts questioning if a profit is not achieved between three to five years. As a self-employed individual myself, I know how difficult it is to achieve a profit, especially in the first several years of business.

If you do not earn a profit for many years, make sure you can show you are attempting to have a successful business and have a legitimate motive to make a profit. Things you can do to demonstrate that include: having a business plan, setting up a business account at a bank or having a business credit card, having a registered name, produce marketing materials and having a completed mileage log with appointments or meetings.

Do not report all round numbers

You might laugh at this one, but I assure you individuals do it all the time. Although you are required to round off your income and deductions to the nearest dollar. do not report everything rounded to the nearest zero. When all of your deductions are $50, $100, $1,000, it appears to the IRS that you are guesstimating your figures and not reporting the actual amounts. Actually several years back I had a client bring me his Deductible Business Expenses Worksheet filled out with all numbers rounded to the nearest hundred. Needless to say, I sent him back home to find the exact figures and thus solved him an unpleasant meeting with the IRS.

Get good advice

It is very important that you have a tax professional to consult throughout the year and to help you complete your income tax return at year end. Keep in mind when I say a tax professional I mean someone who is qualified, has ample experience, and is willing to speak with you personally to explore your individual tax situation to best maximize your deductions. The main reason to hire a tax professional is that chances are you do not keep up with current tax law.

Congress is constantly passing new laws, the IRS comes out with new rulings and judges make new decisions all the time, all of which directly affect your tax situation. How many of you have the ability to read about all these decisions in the newspaper as well as research them thoroughly to see how they affect your individual tax situation? Tax professionals subscribe to newsletters, press release and alert services that keep them abreast of every changing tax law. In addition, tax professionals attend tax education courses throughout the year and learn about changes from IRS agents and state officials.

Keep tax returns and records for at least three years

Your tax return and records should be kept for at least three years: since the IRS generally has three years from the date your return is filed to audit your return. Keep in mind, however, the IRS can go back as far as six years to question a return where income has not been reported or indefinitely where fraud is suspected. Records of transaction relating to the basis of property should be kept for as long as they are important in figuring the basis of the original or replacement property.

An example would be keeping records of the purchase of rental property or capital improvements to that property for as long as you own the property. The keys to a smooth income tax filing are to make sure you have all the correct documents, categorize your expenses, avoid audit triggers, file on time, and get good advice. If you follow the steps in this article and prepare properly throughout the year, your income tax preparation experience should be painless.

If you have not been very organized in the past, make it your New Year's resolution to start keeping detailed records of your business expenses. You will likely find that you have more deductions than you thought and you will also be protected in the case of an audit. The more organized you stay throughout the year the easier tax time will be.

REBAC's Exciting Entrance Into 2009

I understand that today's market presents unique challenges for all of us, which only strengthens my commitment developing new REBAC member benefits and reaching out to consumers looking to buy. Normally, I take the time in this Column to write about general topics, and not promote REBAC per se.

But I thought I would be remiss if I didn't share with you how strong Our organization is and how it benefits you. If you are a member of REBAC, thank you and please enjoy this overview. If you are not a member, I want to invite you to become a part of the largest member organization dedicated to representing buyer-clients in the residential real estate transaction.

In 2009, you won't see the REBAC staff slowing down or lessening our member support. You have my word that we are working tirelessly to increase your benefits, help you find clients and raise consumer awareness. So, please permit me to share with you what we have done and what we plan for members of REBAC and those that have earned the Accredited Buyer's Representative Designation.

YOUR WEB SITE: REBAC.NET

After conducting focus group research with members and consumers alike, we revamped www.rcbac.net. The site is as easy to navigate and has excellent tools for our members. Knowing that knowledge is power we placed these tools in the password protected "for members" section of the site.

o View all past issues of Today's Buyer's Rep online in the members section of
www.REBAC.net. many of which also include articles that will be valuable to consumers. Feel free to use these issues to brush up on your skills, share with your clients or use for prospecting tools. Just make sure you aren't violating copyright protections when you reproduce content from another source. If you want to use any REBAC materials, simply drop us a note at REBAC@realtors.org. We'll walk you through our simple process for securing reprint permission.

o Save time and money by using the REBAC Print Shop where we've developed professionally designed postcards and flyers that you can customize, geared toward first-time homebuyers, in addition to several other audiences, such as growing families, relocating buyers, vacation homeowners, move-up buyers, retirees and more. All you need to do is check your personal contact information and, if you like, add your photo. You can even upload your mailing list and let the Print Shop send your postcards for you.

o I strongly encourage members with real estate questions to try our new "Ask an Expert" feature, Here you can submit questions for a real estate lawyer, a mortgage broker, another buyer's rep or other real estate professionals. Your questions, as well as all answers, will be posted on the site, so all members can benefit from this expert advice. Don't worry about asking a question that seems too basic, we won't list names on the site.

o In addition to hiring the quantity and quality of online member benefits, the new web site is loaded with valuable information for homebuyers, including many great tips and insights into the importance of working with an ABR. That information, coupled with a stepped-up online advertising campaign, should result in strong traffic from consumers to generate even more referrals for REBAC members.


LEARNlNG AND EDUCATION

On more than one occasion, members have asked me why REBAC doesn't have a continuing education requirement for members. My reply is simple-we provide such a wealth of on-going information that members receive education all the time. Members get this fine magazine, weekly email updates and our monthly newsletter - Today 's Buyer Rep. Also, we will continue our REBAC Connection webinar covering a wide range of topics of particular interest to buyer's reps.

The introductory sessions have received very high marks from the members who have participated in to them. There is no charge for these webinar; - it's part of your member benefits package. These are just some of the things that REBAC is doing for its members. Don't forget that we have other incredible tools for you such as REBAC's online guide to Successful Homebuyer Seminars, which walks you through each step in the process and offers numerous helpful shortcuts.

Also REBAC's Homebuyer's Toolkit; an excellent resource you can provide to prospective buyers for a comprehensive quick-reference guide to buying a home. And in 2009 we will be going full-force into creating social media outlets for you to network with peers, find prospects and continue to learn. While the media and others are painting complete gloom and doom, I firmly believe that REBAC members, and especially those who have already earned their ABR designation, are uniquely positioned for greater success this coming year than other real estate professionals.

Also, we've witnessed an ongoing trend over the years, in terms of buyers becoming increasingly informed about the many different purchasing decisions they make. This trend has been fueled in large part by easy access to information over the Internet. I say this is great! The more educated the buyers are, the more they will see the benefit in using someone with additional training and accreditation as it relates to the buy-side of the residential transaction.

Now, more than ever, homebuyers want to make sure they're making smart choices, both in terms of the homes they buy and in terms of who they will work with to complete their transaction. As buyers sort through their options -including learning about the benefits of buyer representation -it will undoubtedly become clear to them that their interests are best served when they're served by an Accredited Buyer's Representative.

It's About Time

Let's face it - the real estate industry had a tough year in 2008. The mortgage crisis, declining prices, lower buyer confidence, slower sales rates and myriad other factors contributed to a year many of us are glad to be done with. But although most experts agree that any rebound in 2009 will be slow and
deliberate rather than sudden and extreme, the new year, along with a new administration and outlook, provides each of us with a fresh start of sorts-and some time to think about the industry and our place within it.

TIME FOR STIMULUS

The housing industry is the primary focus in any discussion of getting the U.S. economy back on track. In fact, by the time you read this, one of several stimulus packages might already have been adopted. The act of making housing a national priority and implementing a plan is a vital step in the recovery process. The move should aim to increase demand (through means such as tax incentives and/or interest
rate buydowns), curb foreclosures, eliminate problematic mortgages, assist homeowners and restore consumer confidence.

And while no one forecasts a smooth residential ride this year, some local markets are already showing signs of turnaround while others seem capable of doing so with the proper stimulus. Buyers are out there, despite considerable challenges in terms of oversupply and general economic turmoil, the combination of attractive interest rates, sound lending practices and attractive prices should bring people back into the market.

TIME FOR GREEN

While the economy and the election rightfully dominated headlines over the past year, another transformative social shift also will have a vast impact on our industry. "Goinggreen" is far from a new concept, but the scope to which it has grown shouldn't be underestimated. The days of $4 gasoline may have disappeared for now, but the national focus on energy efficiency has not.

For real estate agents, this requires a deeper understanding of the green paradigm.
Are you able, for instance, to articulate to your clients the significance of LEED. Energy Star and other rating systems? Are you properly versed in sustainable communities, smart growth, new urbanism and the latest trends in conservation? Are you prepared to deliver professional advice on the green merits or lack thereof - of a particular property?

Fortunately, there are excellent ways to learn. The new Green Designation program unveiled at the National Association of Realtors Convention in November, for example, can provide you with a solid foundation of skills, knowledge and credibility. The curriculum consists of a two-day core course and one of three one-day electives. This might be the ideal time to complete the training and add the designation to your toolbox.

TIME FOR TECHNOLOGY

In Denver, where I live, we're on the verge of losing the city' s oldest newspaper, The Rocky Mountain News, which was first published in 1859. Other venerable newspapers, from the Miami Herald to the Chicago Tribune, also face troubling situations. These longtime media giants are struggling for a variety of reasons, but the tidal shift in classified advertising is cause No. 1. Quite simply, more and more readers now use the Web to find things - such as home listings - that they used to see in the newspaper.

Paraphrasing an old saying, the best time for a real estate professional to fully engage online advertising and lead generation is five years ago. The second-best time is today. If you aren't, on the first or second page of results when someone Googles real estate in your city; if you haven't investigated which Search Engine Optimization techniques will drive traffic to you; if you haven't explored the many venues that can promote your listings and generate leads for free or at little cost; if you're unclear about podcasts, virtual tours, blogs or digital photos: or if you' re reluctant to network with colleagues and/or consumers on any number of social media sites, then the time for you to make a shift in your online approach to business is right now.

TIME FOR ACTION

Under any conditions, we all remain empowered to approach each day with the energy and motivation required of successful people. No matter what sort or trouble brews, the age-old adage still holds true: Nothing beats hard work. In sales, that translates to maximizing the time you spend on activities resulting in business. It's vital to have systems that cultivate leads, process contacts and serve clients in the most efficient manner possible.

Whether through team members or automation or other means, you need to deftly complete the day-to-day tasks that connect you with prospects and transform them into clients and customers. Then you must deliver the type of expert service that creates advocates and additional referrals. There' s simply no substitute for this. It's easy to forget that promotion, reputation, visibility, efficiency, knowledge, skill and sheer professionalism are permanent cornerstones in the success of the very best real estate agents. But make no mistake: Strength in those areas will see you through - even in the hardest of times.