Filing taxes for your property management firm can be stressful. The tax code is complex and always prone to change. If you’re like most property managers, you hardly have time to handle your taxes in addition to every other aspect of running your business.
That, of course, is where your accountant comes into play. However, property managers also deal with several kinds of accountants. Not all of them can do your business taxes.
Below, we’ll cover the types of accountants that property managers rely on. Then, we’ll dive into the tax documents your accountant needs to complete your taxes.
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Property management firms are unique in how accounting works; you must handle both your clients’ accounting and your own business’s internal books. Both teams will play a part in assembling the documentation you need for tax season.
Let’s look at the key differences between each.
Property accounting, also called client accounting, involves handling transactions associated with client properties.
Some accounting and bookkeeping tasks here include:
The property accounting team will grow as your business takes on more doors. Experienced property managers know that this is way more than simple bookkeeping, property accounting is a crucial aspect of the service you’re offering your customers.
At Evernest, about 80% of our accounting team is on the property side. We recommend a mix of in-house accounting staff and outsourced services for tasks such as data entry.
Your staff accounting team, or internal accounting team, handles your company’s books, not your clients’.
They perform the same types of tasks as an accountant in any other industry might. These could include:
In our experience, staff accounting teams don’t grow as fast as property accounting teams. Your business can grow a lot before needing new staff accounting team members since they only handle one business. At Evernest, only 20% of our accounting staff are on the internal accounting side.
One other thing: The work your property accountants do is part of your operations. Therefore, it flows through to your internal accounting staff. Your internal accounting staff will use what they gather to handle your tax matters. This applies if you hire an external accounting firm instead.
Your accountants do the heavy lifting when preparing and filing your tax returns. However, they need several documents from you to get their work done. Preparing these ahead of time will make taxes go much more quickly and painlessly.
Make sure you prepare the following documentation for your tax accountant:
Before digging up your financial documents, make sure you have documentation of your personal and business information.
Personal information includes:
Business information includes:
Financial statements give your accountants the financial information they need to complete most of your return. The three statements to provide them include:
Your accounting software should be able to generate these fairly quickly.
Provide your accountant with year-end statements from your business’s banking and investment accounts. This helps your account cross-check revenues, expenses, profits, and cash flows to ensure everything matches.
Additionally, providing this paperwork ensures your accountant has extra documentation if you ever face an audit.
Keep a physical or digital receipt for any purchase made for business purposes. Organize your receipts into the following categories for your bookkeeper.
Vehicles used for business purposes may qualify for tax deductions. There are two methods for deducting qualifying vehicle expenses.
First is the “simplified method”. This lets you deduct an IRS-defined amount per mile driven. As a result, you have to track your mileage in a vehicle mileage log.
This is relatively simple — you can use a notebook or spreadsheet software to jot down your miles. Many accounting software solutions offer mileage tracking, too.
The second method, the “actual vehicle expenses method,” also uses mileage to calculate your deduction. Therefore, it also requires a mileage log.
However, there’s more work involved. It lets you potentially deduct a portion of all vehicle operating expenses based on the number of miles driven for business. That means you’ll need receipts for items like:
Tax returns from previous years help your accountant do a few things:
If you’ve worked with your accountant for several years, they may already have previous tax returns. Make sure to bring that up with them if in any filing-related meetings just in case.
We can’t give you tax advice. However, here are some potential deductions you can discuss with your accountant:
Your property accountants are ultimately part of your operations. They impact your taxes insofar as they deliver excellent client service and boost your revenues.
Meanwhile, your taxes are handled either by your internal accounting staff or an external firm.
Whichever you choose, you’ll need to get a lot of documentation into their hands. The faster you prepare these, the more time your accountant has to complete your return and minimize your potential tax liability.
Spencer is the VP of Marketing at Evernest. He wakes up with Google and Facebook on his mind. Having bought and sold over 150 homes in Birmingham, Spencer gets a kick out of helping new and seasoned investors navigate the mistakes he made as an investor. Spencer is also passionate about his love for Michael Jordan and does his best to explain to the Millennials (who never saw him play live) how much better he was than LeBron. He loves to hang out with his wife, kids, and the world’s best black lab, Jett.
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