The IRS says that small businesses make four common errors during tax season. They underpay their taxes, deposit employment taxes, file late, or fail to separate expenses.
Raleigh, North Carolina, landlords might run into these problems if they don't organize their tax records in advance. There are rental property accounting tips that can keep you efficient and organized.
Read on to learn them and how a property manager can help.
Create a Business Account
Rental property accounting requires organization. If you want to ensure your records aren't mixed up with your personal affairs, open a business bank account.
When you create an account, you can also open a business credit or debit card. Use this for rental property expenses. You'll be able to easily track where your money is going when you don't have to go through irrelevant transactions.
An audit by the IRS is possible. With a business account, you don't have to worry about your personal finances getting confused in the mix if you were to get audited.
Build a System and Stick to It
Rental property bookkeeping is repetitive. Build a system that works for you from the start and stick to it to be more efficient.
Setting up your books may take some trial and error. Once you have it right, it will be easy to meet tax requirements and categorize expenses regularly.
Finding the right accounting software that works for you is part of the process. There are various systems to choose from and some offer free demos. You can test them out to find out which you could see yourself using in the long run.
You can also hire a rental property management company. Property managers understand rental property banking and already know how to use helpful software programs.
Additionally, the services you pay for generally include rental property software that offers accounting help.
Categorize Income and Expenses
Rental property income can be split into different categories. Most of your income will come from rent, but you may also incur pet fees, late fees, and security deposits.
Keeping these in their corresponding accounts can keep things organized. Plus, you'll stay compliant with certain laws in Raleigh.
There are going to be more expense categories than income to keep track of. On Form 1040 Schedule E from the IRS, you'll find these expenses categories and more:
- Cleaning and maintenance
- Insurance
- Management fees
- Taxes
- Depreciation
It's important to keep track of all expenses so that you can get your rental property tax deductions at the end of the year.
Rental Property Accounting Tips That Work
Rental property banking is not an easy concept, but these tips make your system more efficient.
PMI Triangle is a full-service real estate asset management company that can help you implement these tips. We have been in the business of assisting Raleigh landlords for over 20 years.
We make it easy to keep tabs on your investment with comprehensive financial reporting. We can collect rent, pay vendor bills, and disburse security deposits. Every month, you'll receive owner statements and reporting documents.
Let's make rental property accounting a breeze. Contact us today to get started.
