Bookkeeping For Real Estate Investors

Today’s Tax Tuesday episode is focused on bookkeeping. Toby Mathis hosts with special guest Troy Butler, Executive Manager of our bookkeeping department at Anderson Advisors, and some of the bookkeeping staff from Anderson including Patty, Ander, Matthew, Eliot, Dana, Trisha, Blanca, Landsey, Kiera, and Cindy, are all online today to help answer your questions.  You’ll hear our advice on things like what bookkeeping software to use, expense reimbursement and mileage, grouping your businesses using “classes,” and even some detailed information on how you can become an Anderson Advisors client and the services you’ll have access to. Submit your tax question to taxtuesday@andersonadvisors.

Highlights/Topics:

• If I request an EIN so I can open up a bank account for my disregarded single member LLC, do I have to file a tax return or can I somehow inform the IRS the EIN is for a disregarded entity? – Any EIN should be on “a” tax return, but doesn’t have to have it’s own return.
• If I paid for something on behalf of my C-corp and it didn’t have enough funds to reimburse me, how do I account for it? – First of all, if you paid for something on behalf of your corporation, I would make sure that I'm submitting a reimbursement sheet. I would do that monthly where I'm putting together everything I paid for personally, putting it on a sheet, and submitting that to my company for reimbursement. Step 1 - Do it monthly or quarterly. Step 2 - You can have a revolving line of credit.If it's an IOU, it's a loan. It's a liability of the company. It would be an asset to you as the shareholder.
• What is the best way to record, handle reimbursement for business expenses that were charged on the owner's personal credit card to avoid giving the IRS concerns about the legitimacy of the business?" – Again, you would want to submit those charges that were business related on a reimbursement sheet. What you don't want to do is you don't want to put that credit card that's in my personal name on your company's books. That can be looked at as co-mingling. It's a business expense that you’re getting reimbursed for.
• Can I deduct other courses I take that are general business-type classes, not specific to real estate investing, and if they are for the purpose of helping me build my business? – General business if it's you're improving your current lines of business. I don't see an issue with that.
• What is the smartest tax advantage way to pay the kids for helping the S-corp? Can I reimburse myself for the payments I have made to them from my personal account? – There are a couple of options here. I am a believer in payroll. The reason for that is if they're on payroll, if they make less than the standard deduction as employees, they're not required to file a tax return. You can also pay them by putting money in their Roth - they’ll never pay tax, or do a 1099.
• How do I not pay taxes at the end of the year?- This is what everyone wants to know!! My reply is, either don’t make any money, live on borrowed money, have someone else make the money, or buy real estate as a real estate professional which unlocks passive losses.
• I have a three-member LLC taxed as a partnership. The members want to take a distribution each of $100,000. How is that taxed and how is it recorded in the books? – That's not a taxable event. It's a distribution. That's an equity transaction. The $100,000 is not a taxable event. The taxable event is the numbers that come on that K-1 and say, you made profit of “X” or you made loss of “X”.
• How does the Anderson bookkeeping service integrate with the accounting service, et cetera? – We work very closely between teams! …we have full service monthly, or quarterly “virtual” service that uses QuickBooks. Virtual bookkeeping is $995 for a year for the first set of books and then $495 for each additional set of books.
• Can you please discuss some big-picture strategies to help with bookkeeping automation, AI, we should be considering? Botkeeper is one AI we’ve learned about. They can’t do complex things. It's much cheaper to use a human being right now. Maybe that changes at some point.
• What is the best way to keep track of miles? MileIQ is an app, it works well and creates good reports. There is also a function within QuickBooks works reasonably well. And Timr is easy to use, but it is $100 a year
• Best software for doing bookkeeping? There are thousands, and thousands, and thousands of accounting softwares out there. Most of them do a pretty good job. We use QuickBooks online for all Anderson clients.
• I'm trying to figure out how to property log and transfer friends from the property LLC to the holding LLC and vice versa. (1) how to capture my personal mortgage loan into the property LLC and then to the holding LLC? – It's an investment expense that I'm going to show on my Schedule E, which is going to allow me to take that deduction against my rental income if it's real estate. (2) how to record all transactions from the property LLCs throughout the year and distribute to the holding LLC for tax filing. –Like Toby's saying, for each tax return that you file, you need a set of books. But if you have entities that are disregarded to a holding company, they can be within one set of books. If you have 10 properties, you're going to have 10 classes on one set of books, and it's all going to flow up.
• Platinum members: Log on to our bookkeeping office hours, Thursdays, 3:00 Pacific Standard Time. We’re live and answering all your bookkeeping questions!

Resources:

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