How to Get Your Annual Taxes Done: 3 Options for Getting Your Taxes Done
Annual taxes are the taxes that individuals and businesses are required to file every year with the government.
As a landlord, you're responsible for paying taxes on your rental income and property expenses.
Filing your taxes accurately and on time is crucial to avoiding penalties and legal issues.
In this post, we will provide options for getting your taxes done, as well as tips for a smooth tax season.
Now let's talk about options for doing your taxes.
Options for Getting Your Taxes Done
Doing your taxes as a property manager can be daunting, but several options are available to make the process easier.
In this section, we'll discuss the different options for getting your taxes done, including doing it yourself, hiring a tax professional, and using tax preparation software.
Doing your taxes yourself is an option that many property managers choose. It can be cost-effective and give you more control over the process. However, it can also be time-consuming and stressful, especially if you own a property management company.
There are many advantages that come with doing your taxes yourself.
Some of these advantages include the following:
- More cost-effective
- More control over the process
- Can be used as a learning opportunity
With that being said, it is also important to highlight some of the drawbacks that can come with the DIY approach.
Some disadvantages of this approach are:
- Its time-consuming aspect
- It may be confusing and stressful
- You may miss out on deductions and credits
It is also worth mentioning that by doing your own taxes, you can put yourself and your business at risk if not well-versed in applicable laws and regulations.
There are, however, there are some options that will make this process easier.
Tools and Resources Available
If you decide to do your taxes yourself, there are several tools and resources available to help you. These include:
- IRS website: The IRS website has a wealth of information, including forms, publications, and instructions.
- Tax software: Many tax software programs are available, such as TurboTax and H&R Block. These programs can walk you through the tax preparation process, help you find deductions and credits, and e-file your tax return.
- Tax preparation guides: Many guides are available that can help you understand tax laws and filing requirements.
If you decide to do your taxes yourself, here's a step-by-step guide to help you:
- Gather all necessary documents, such as 1099 forms, receipts, and invoices.
- Determine your filing status and eligibility for deductions and credits.
- Fill out Form 1040 and Schedule E.
- Calculate your rental income and expenses, including depreciation.
- Report your rental income and expenses on Schedule E.
- File your tax return and pay any taxes owed by the deadline.
Please note that this is a simplified guide, and there may be additional steps required depending on your individual situation, so always ensure to do additional research.
If you decide that maybe the DIY approach is not for you, you can also hire a professional, which we'll discuss next.
2. Hiring a Tax Professional
Hiring a tax professional is another option for getting your taxes done. Tax professionals can help ensure that your tax return is accurate and that you're taking advantage of all available deductions and credits.
Just like the DIY approach, hiring a professional does have its advantages and disadvantages.
Some advantages of hiring a professional can include the following:
- Saving time and reducing stress
- Increased accuracy
- Helping find deductions and credits
Some disadvantages of hiring a professional include:
- High cost
- They may not be necessary for simple tax returns (maybe you only manage one rental property)
- They may not be able to guarantee accuracy
If you decide to hire a tax professional after weighing out the pros and cons it's important to understand that there are several types to choose from.
The first type of tax professionals that we will discuss are Certified Public Accountants (CPAs), which are licensed by state boards of accountancy and have passed the Uniform CPA Examination. They have expertise in accounting and tax law.
Another type of tax professional is an enrolled Agent (EA), which is licensed by the IRS and has passed an exam on tax law. EAs have expertise in tax law and can represent taxpayers before the IRS.
Finally, you have Tax Attorneys who have a law degree and specialize in tax law. They can provide legal advice and represent taxpayers in tax court. This can be useful for more difficult returns or property owners and companies with huge portfolios and revenue.
How to Find a Tax Professional
If you decide to hire a tax professional, the first step is to determine your needs and budget, a tax attorney will handle more complicated scenarios while a CPA or EA can handle more run-of-the-mill situations.
The next step is to ask for referrals from friends, family, or colleagues. This will ensure that the person you are hiring is trustworthy. Trust me, you do not want just anyone filling out your IRS form.
You then want to research potential candidates by reading online reviews and checking their qualifications, this is extremely important as you want to hire someone with a reputable business.
Finally, once you choose the tax professional that best fits your needs and budget, schedule a consultation to discuss your needs and ask any questions.
Tips for Working With a Tax Professional
If you decide to work with a tax professional, here are some tips to ensure a successful collaboration:
- Be organized: Provide all necessary documents and information in a timely manner.
- Communicate clearly: Make sure to ask questions and communicate any concerns or changes in your situation or rental real estate income.
- Review your tax return: Before filing your tax return, review it carefully to ensure accuracy.
- Keep records: Keep a copy of your tax bill and any supporting documents for at least three years.
If you decide that neither the DIY nor professional route work for you, we have one more option.
3. Using Tax Preparation Software
Tax preparation software is another option for property managers who want to pay tax and execute the entire process themselves but need assistance.
Tax software can guide you through the process, help you find deductions and credits, and e-file your tax return.
Just like the previous methods, utilizing tax preparation software comes with its own set of advantages and disadvantages, so let's get into them.
Some advantages of utilizing tax preparation software include the following:
- Helps find deductions and credits
Although tax preparation software can be an amazing tool, it does have its drawbacks, such as:
- It may not be able to handle complex tax situations
- It may not be as accurate as a tax professional
If you decide to use tax preparation software, there are several options available, such as TurboTax and H&R Block, TaxAct, and TaxSlayer.
TurboTax is super user-friendly and offers a variety of plans and features, but it can be on the expensive side:
H&R Block offers convenient in-person assistance and online chat support, but the tax prep experience isn't quite at TurboTax's level:
TaxAct is a more affordable option that offers a free version but may not have as many features as you'd like.
TaxSlayer is also another affordable option and offers a user-friendly interface, but may also lack many desired features.
How to Use Tax Preparation Software
If you decide to use tax preparation software to do your taxes, here's a step-by-step guide to help you get started:
- Choose a tax preparation software that best fits your needs and budget. Consider factors such as the complexity of your tax situation and the level of support you may need.
- Gather all necessary tax forms and documents, such as W-2s, 1099s, and receipts for expenses.
- Create an account with the tax preparation software and follow the prompts to enter your personal information.
- Enter all income information, including any rental income you earned as a property manager.
- Enter all deductible expenses, such as property taxes, mortgage interest, and repairs and maintenance.
- Follow the prompts to find additional deductions and credits that may apply to you, such as home office deductions or energy-efficient property credits.
- Review your tax return for accuracy and completeness.
- E-file your tax return and pay any taxes owed.
- Keep a copy of your tax return and all supporting documents for your records.
- If you have any questions or concerns, contact customer support for the tax preparation software you're using.
Always remember that tax preparation software is designed to guide you through the tax preparation process, but it may not be suitable for all situations.
If you have a complex tax situation, own a limited liability company (and are filing for the first time), are a property owner with a vast amount of rental properties, or have any doubts about using tax software, consider hiring a tax professional to help you.
In summary, annual taxes are an important part of a property manager's responsibilities, and there are various options available for getting your taxes done.
We've explored the advantages and disadvantages of doing your taxes yourself, hiring a tax professional, and using tax preparation software. We've also provided step-by-step guides for each option to help you get started.
As a final piece of advice, we recommend that you take a proactive approach to tax season by organizing your records and seeking help if needed.
Remember to keep up-to-date with any changes in tax laws or regulations that may affect your property management business.
If you do need help with your taxes, don't hesitate to reach out to a qualified tax professional. They can help you navigate complex tax rules and regulations and ensure that you're not missing out on any deductions or credits.
Now you are ready to face the season head-on!