Real Estate Strategies

The Dealer Vs Investor Problem for Real Estate Capital Gains

I remember trying to explain the dealer versus investor concept to a would-be real estate entrepreneur. I asked him whether he was holding the property for sale. He kind of looked at me and smiled and said “Everything is for sale. It just depends on how much.”. If there is any ambiguity it is easy to know what the answer is after the fact. If there was a big gain relative to expenses then you were an investor. If there was a loss, then you were a dealer. Unfortunately, you really are not supposed to practice that way. I am going to assume that you want investor status and that you are blessed with a gain. What can you do to make sure the IRS respects your investor status?

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Think Outside the Tax Box provides tax reduction strategies along with practical implementation advice in order to reduce your clients’ federal tax bill with ease.

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CURRENT EDITION

How Should a Disregarded Single Member LLC File a W-9?

Peter J Reilly CPA

Although Form W-9 has some other purposes, a company will usually ask you to fill it out if you are a business-to-business service provider . If you don’t provide a TIN to your customer, they may have to subject you to backup withholding . If it is my company that asks you for the W-9, I am not going to do backup withholding if you don’t send me the W-9. I’m just not going to pay you until you cough it up.

I believe in learning from experience. But it is better if the experience you learn from is other people’s experience. That is why a very large percentage of my tax writing is from court opinions, most often the United States Tax Court. This piece is my own experience.

IRS Installment Agreements: A Potential Cure for Forosophobia

Timalyn Bowens, EA

Taxpayers who seek tax planning strategies fall into two categories. We have taxpayers who plan well and want to keep their tax liability manageable and low as possible. Then, we have the taxpayers the IRS hits with a tax bill bigger than they were expecting. Both taxpayers are dealing with a case of forosophobia.

When the latter happens the taxpayer often goes into a panic or at least a small sweat. Whether they have the money sitting in a bank account or not, they weren’t intending to spend it on taxes. So, it changes their financial planning. This is when the forosophobia really starts to set in.

Forosophobia is the fear of the IRS and taxes. Have you experienced this with your clients? When tax season rolls around, they are anxious to see whether they owe taxes or not. Clients who haven’t made their estimated tax payments and don’t have anything to show for their income hold their breath. They wonder things such as:

What happens if I can’t pay?

Will I go to jail?

The IRS is going to empty out my bank account.

Once a taxpayer’s mind starts on this emotional rollercoaster it can be difficult to get them off. But as their trusted tax advisor you are in a very powerful position. Not only can you help them calm down and breathe again, but you can also get their lives back from this fear. As a licensed professional you can step in their shoes and handle their IRS problems for them.

If you aren’t familiar with this process, don’t worry, I’ll give you a breakdown of a potential cure for their forosophobia. Let’s look at who can help the taxpayer and how.

Some Easily Overlooked Items for Form 1040

Annette Nellen, CPA, CGMA, Esq.

A 113-page set of instructions accompanies the 2022 Form 1040, U.S. Individual Income Tax Return. Commonly used Form 1040 Schedules A, B, C, D, and E comprise an aggregate of 69 pages of instructions. Instructions are non-binding information but certainly necessary for getting tax information correctly placed on the tax return. With hundreds of Internal Revenue Code (IRC) sections, thousands of pages of regulations, thousands of IRS rulings and judicial opinions, on top of more than 200 pages of instructions relevant to many complex Forms 1040, some tax pros might easily overlook these items.

This article travels top to bottom through the two-page 2022 Form 1040, highlighting a few items not to overlook. No promises that the list hits all items, but what follows might bring to mind a few more items you can add to the list.