363. Tax Filing Mistakes That Cost Real Estate Investors Thousands

You're now listening to the Taxmart REI Podcast, the number one tax podcast for real estate investors. Your source for all things real estate, accounting, and tax. Here we reveal our secrets that can save you thousands in taxes, streamline your accounting process, and help grow your business. Stay tuned to hear insightful interviews with industry experts, successful real estate investors, and current clients on what strategies they used to grow their business, and how they steer clear of all percent. Thanks for tuning into this week's episode of the Taxmart REI Podcast. Today we're going to be talking about tax filing mistakes. With tax season rapidly approaching, tax filings on everybody's mind, but every year we see hundreds and hundreds of mistakes. I think over 85% or 80% of the returns that we do review have some type of significant errors or missed opportunities for tax savings or just other little errors that we do catch. So we'll be going through a lot of those here today. This can be relevant whether you're an active investor or a pest investor, you're in short-term rentals, or you're just a high-income earner in general. This is going to be for you, so we'll be talking to all these mistakes in just one minute. You've probably never found a real estate newsletter worth reading, and that's because we hadn't created hours yet. The REI daily is a newsletter you actually want to read. Whether you own one property or a hundred, we created this for you. Each issue delivers crucial tax saving strategies, legislative updates, as well as real estate market insights. Everything you need to stay sharp in the head of the game. You get the real estate and tax news that actually matters straight to your inbox. Subscribe to the REI daily newsletter today at the realstatecpa.com/subscribe. That's it for now and right back into today's episode. All right, and we're back and you know, Nate, I know you see a lot of mistakes in the stuff you see on your end, so really interesting to get your take on some of these first and foremost, a lot of short-term mental investors tuning in to this. Obviously, guys, we're going to go beyond short-term mental today, so if you're not in short-term mental, so we'll be getting to plenty of mistakes that we see outside of that. So kind of the first one we see is reporting short-term rentals on schedule C. Yeah, that's a big one. One thing I want to say, too, is that like this applies with, hey, if you're a short-term mental investor, whether you're active, passive, high-income earner, like a lot of these mistakes I want to talk about, this one specifically, right? We can fix this, we can amend tax trends. Not everything I'm going to talk about today is actually fixable. Some things might be permanent and permanent decisions always have consequences, right? And that's just a live lesson that we all know. We all know all the listeners now here too, is that permanent decisions are not like that can be an issue at times, but going back to short-term rentals on schedule C, right? So in my career, when I first started out, my first year as a tax repairer, I saw an Airbnb on a schedule C. I thought, huh, that kind of feels right, I guess, until you come across the wonderful blog, Hall CPA that talks about short-term rentals. And actually, why that doesn't make sense. Interestingly enough, the technical partner of my very first firm said, hey, Airbnb belongs on schedule E, which agreed with what we say. It's like, why does that matter, right? Why can that be costly? That's because of self-employment tax. So our goal is always to have cash flow and income, right? Hopefully, depreciation helps us with that. But if we are actually having a really great Airbnb and I've seen a lot of our clients create that, that means now you are creating an additional 15% tax upon yourself with that. And Tom, I don't know about you, but I don't know if I'm going to pay an extra 15% to the government, 15.3% to the government if I don't have to. Right, right. 100%. 100%. And we've seen this before. People come in, they have their prior tax repair filing their short-term rentals on schedule C. And to your point, yes, in the first year, you might be creating substantial deductions. You have bonus depreciation on your short-term rental. But there are certainly cases where in subsequent years, you could be generating quite instantly in profit. And that's why a lot of people do get into short-term rentals outside of just the tax benefits. Is the cash flow at Airbnb's can produce or short-term rentals in general can produce? And you might be subject to self-employment tax when you do file on schedule C. But here's why it's typically wrong. And we've had all the regulations you could find it on the realstatecpa.com and other articles that we've written that if you're merely renting the space, meaning someone's just renting out your Airbnb for the weekend or the week, whatever the case may be. And there's no substantial services that are being provided that it goes on schedule E. And there it's in the regulations. There's plenty of IRS publications. There's plenty of authoritative guidance that suggests that's how it should work. And again, substantial services are going to be hotel-like services like daily cleaning, daily meals, concierge, vouchers, you know, just things that go above and beyond your typical rental. So unless you're doing that, unless you're providing substantial services, which is my experience, like 95% or more of short-term rentals are not, then that should go on schedule E. And usually see it put on schedule C by general CPAs, just have a surface level understanding of the nuances of dealing with short-term rentals. So that's just something you want to avoid putting on schedule C, unless you should go there if you're providing substantial services. And Tom, I want to talk real quick about substantial services, because we get that question a lot. And some people will say, "Hey, I am available 24/7 from my Airbnb." It's actually talked about in the tax court case a little while back, where someone did something similar with for rental participation, but basically, basically, I want to call 24/7 to fix anything at the property, right? That's not substantial services, right? It's like what Tom said is that it's got to be hotel-like. A lot of times, I see beach properties actually legitimately provide substantial services, right? The providing of a you know, a boat or something of that nature. However, it also has to be a large part of the rent associated with it, too, right? It's not just a one-factor test, like, "Oh, if you do a lot of stuff, right, do you think about what the hotel does, right?" You probably can hop on a shuttle from the airport to the hotel, right? A lot of times they offer that kind of a service. Is your Airbnb offering that, right? Are you providing actual meals? Is there a restaurant? Is there a cook being provided? Are you actually paying for that and it's a part of your rent, right? Is that considered substantial services? You can offer one-off services and still not be considered, quote unquote, "substantial," right? Like, people have asked a lot of times, "Oh, hey, I'm offering a tour guide, right? It's a tour guide. I'm not going to do it, but I'm offering a tour guide." That's not going to get you into substantial services category, but if you have that, plus the Uber ride from the airport to the property, or somebody like you start attacking on a bunch of different stuff, now it becomes a big part of your rent. It's a lot, there's a lot of involvement. Now you put yourself into substantial services category. This is what I say, too. If it's all going to make you money, if it's all going to be profitable for you and it provides a great experience for your guests, who cares if you wind up getting tossed in a self-employment bucket, right? There's other ways that we can discuss and figure that around and plan around it, but if you get yourself into that and you're making money, great. You're running yourself in no great problem. Absolutely. Bottom line is it's a little bit more complex. It's why it's best to work with a tax advisor who can help you understand these nuances and make the best decisions for you on where these things should go. Just something to keep in mind is the common mistake we do see is the misreporting of short term rentals. Next one is going to be more generally applicable and that is not filing an extension. There's a few different things here. There's some misconceptions about that, too, which we'll cover. In general, as you get more sophisticated, as you get into the real-stage space, it's more common that you file an extension on your tax return and file beyond the April 15th deadline. I can speak for, in fact, I've been extending my tax return for at least the last 10 years, might be 11 years. I have to go back in check. I'd have to go back and check how long it's been, but it's been at least 10 years and it's very common in this space. There's nothing wrong with long extension. It does not flag the IRS for anything or anything like that. Now, here's the thing. Extensions are not automatic. At the 1040, you have to actually file you or your CPA have to file an extension on your behalf. There's no oops I forgot on the day after you have to do it before the April 15 deadline. Right. Talking about 1040s, have to do it before April 15th. If you created any new entities this year, any new LLCs, and maybe you have a spouse or partner on those, you just created a partnership tax turner, what we call a multi-member LLC. You need to talk to your CPA about making sure they file that extension. Those are the ones I see get missed the most, honestly, where they don't let there's just miscommunication between the creation of this LLC and it's filing requirement. We don't actually get the extension on the door because unaware that it existed, that that was here. That's why you usually had to say, "Hey, if you get an entity and you haven't or want to reach back out to your tax pro, recommend doing that to make sure you get that extension done because if you don't, regardless if you do on the 16th, the 17th, the 18th, whenever the following Monday is after that 15th, that can be $1,000 just right off the bat. So it's not the most expensive thing in the world, but it can get costly with a number of partners and how long you wait to actually get that return done." If you're not going to be fined by the April 15 deadline, which is very common again in the real estate space and I think as people kind of get more and more experience in real estate, they start to realize this is just how it works. You want to make sure you've got that done on time either. You've done it or your CPA is done on your behalf. Next one up is going to be not making estimated payments with an extension. So an extension, when you file an extension, your tax return, whether it be a business tax return or your personal tax return, your 1040, it is an extension to file, non-extension to pay. So that means that if you do have a tax liability or you will likely owe taxes and your CPAs can help you estimate if you do or you don't, you want to make an estimated tax payment by April 15th so you minimize penalties and interest if you wait to file into the summer months. Yeah, so it's a small thing. It's one of the small things, Tom, we talk a lot about the big things you can do. It's 1031, whether it's implementing STR or the cost s egg that can really help with tax savings. This is one of the small things that can actually still save you a little bit of money and help you over time, right? Maybe you don't make any estimate tax payments. Well, the government basically says by doing that that, hey, you borrowed money from us for X number of time. So we would like the interest on that. It's a lot lower interest than most banks are going to give out to you. Hey, that's a game you can play, but if you make these estimated tax payments, that's $1,000 you can save. That's interest you did not have to necessarily pay, right? That's a loan you'd not, so this I have to take out. Now, everyone has their own cost of capital, how they want to make the determination essentially. But this is one of the easier ones that you can knock out and take care of, right? There's different ways. Hey, if you own an S corporation, right, maybe we can run that through W2 with holding at the end of the year, right? Maybe you don't have to actually make the estimated tax payments, maybe we can just do it right then there at the end of the year. Not a bad play could be a good option, but it's one of those easy ones that I think people don't think about enough and think, oh, I'm just not going to do it. When like, hey, on your tax term, more times than not, tax pro, I know we do it, says, hey, this is the estimate tax payments you need to make to ensure that you're not going to get messages like you are going to not pay penalties to the IRS and you file your tax term. Absolutely. Absolutely. Super important to be aware of that. And you go to speak to your CPA, speak to your advisor on how you want to play that game, but just something you'll be aware of. All right, next one up, we have not claiming the full deductions that you're entitled to. And there's a lot of reasons for this, but you know, I can't tell you how many times I've seen a return that's missing property taxes, that's missing insurance. Now most people are going to have these types of expenses. And more often than not, it's a reflection of poor record keeping or bookkeeping where things just kind of get lost in translation that proverbial shoebox where your receipts are don't really ever make it fully over to your CPA, but it most certainly does happen for other reasons too. Sometimes a CPAs can be a little too conservative. Oh, you know, we're going to not take all the deductions because they're scared of what risk or whatever the case may be. Yeah, Tom. I mean, I cannot tell you a number of times I've had the client tell me, I've gotten excel spreadsheet. It's amazing. You can't miss it, right? You can't miss it. It's amazing. It's incredible. I don't miss any expenses, right? I think lo and behold, every time we get to end of the tax turn, guess what happens? They always go back and say, I can find some more expenses. Maybe they'll be back real quick. And because they know they're on the best tracking system. Sure, maybe they can give their best faith estimate, but this is when bookkeeping is really important. Having quick books, having a bookkeeper, having something or some software that's helping you do this, you know, that isn't something that is just an excel spreadsheet dropping down your credit card statements and all of that, right? Yeah. And also don't use your personal credit card statements, please don't use your personal credit card. At least have a separate credit card that makes it clear and easy for you and the IRS. Because guess what? They might review your transactions. If you can't figure out your transactions, they ain't going to figure out your transactions. I as always, like Tom is saying before, don't under report your deductions have some kind of system in place that isn't excel. It doesn't require you to manually input things. Right. Absolutely. So yeah, you definitely want to make sure you have your records in good order. So you are claiming the full deductions you're entitled to because that's easy tax savings that you can easily pick up. So now this next one is actually pretty big one and it's usually a result of erroneous tax planning or poor tax planning. And I have a little bit of a case study right here that I could share on this one. But it's erroneously electing out of bonus depreciation, which is irreversible. I don't know if you want to opine on that a little bit. Yeah. So unfortunately, we get flexibility when it comes bonus depreciation. We're actually going to get flexibility this year with the new 100% bonus depreciation. So essentially, when you file, you get to make the choice of whether or not you want to take 100% bonus depreciation or you can choose not to. Essentially, so let me say this too. So there's 109 and there's bonus depreciation. You must opt into 179 deductions bonus depreciation. You must opt out of a lot of times. Tom and I both see this all time where CPAs choose to always opt out for the clients, right? Because oh, depreciation recapture or things like that, right? A lot of times, we don't want to do that. We don't want to make that election. We want to have the max benefits in that tax year so we can get max tax savings. Unfortunately, if that CPA does it without talking to the client, that means that person has no ability to go back and do a retroactive cost segregation study. If they decide to change their mind or they've never applied one before, right? Unfortunately, it looks like it's a default box at times, depending on the software, that keeps you from ever going back and doing a retrocostic, which is pointing to here when you realize you could have gotten maybe $30 to $50,000 of tax savings on a short terminal or another rental property you've got. Absolutely. Hey, real quick, if you've been a long time listening to this show, then you know we give everything away for free from how to use the real estate professional status and the short-term rental loophole to save tens of thousands of dollars on taxes. To upcoming tax changes, we don't hold anything back. And the only way we would help more real estate investors is if you rate, review, and share the show. It just takes 15 seconds to leave a quick rating, review, or share with a friend who may find this information useful on their real estate journey. That's all for now. We'll dive right back into today's episode. Here's a little case study that I saw on a client that came across my desk. I reviewed his return. So here's a story, right? So it previously was a passive investor, right? Did not qualify for reps. In this case, he did not invest in short-term rentals. This is real estate professional status type of matter. And he had substantial holdings on his substantial real estate holdings that he acquired over the last few years. And he now qualifies for reps now in the current year. So what happened was his CPA went back and elected out of bonus depreciation on just regular renovations, like little renovations he was doing on the five and 15-year property. So that totaled up to little numbers back then in the prior years. But now fast forward, he's now eligible for the real estate professional status. And he could have, if he didn't elect out of bonus depreciation or CPA didn't elect out of bonus depreciation, gone back done retroactive cost segregation studies on some of his properties that it made sense to do. And he could have pulled that forward to his current year tax return. Now he does qualify for the real estate professional status, leading to tens of thousands of dollars in tax savings. And unfortunately, because bonus depreciation was elected out of, that was a non-option at this point. And it's just very painful to see. Yeah, so essentially, this is a permanent election. I think Tom and I both said that if we didn't, this is permanent. That means there's no going back, right? That means there's no chance to go back and make a change ever again, right? So like the lead that removes the optionality than Tom's client's case, where hey, they're not hitting reps today, but maybe in the future, they're going to hit reps. Maybe they really are going to get more into real estate and lose the W2 job to manage their properties, be a real estate agent, be a developer. And by doing that, by electing out of bonus way back when, when felt like it didn't matter, becomes a big deal in 2025, consult with your taxpayer. I have a client that we're going to opt out of it. We're going to use 40%, we're going to use 40% bonus depreciation because it just makes more sense, they need to spread the deductions out. So there's times it makes sense. I'm going to say that's 5%, the other 95%. We shouldn't do it at least so we can leave the option for ourselves down the road as a tax play. Yeah, so just something to keep an eye out that if you receive your tax return and your CPA has elected out of bonus depreciation and you don't have a clear understanding of why, you might want to go back and have that conversation. If you're proactive, you'll know beforehand whether or not you'll be doing this. So you're all on good shape when it does come time to filing your return. The next one up, okay, this is failing to make the real estate professional status that reps the -9 election as we call it, or the other proper grouping elections you might find under 469. That is something that I think we've seen recently, which I think was problematic, or we might have saved the situation, but long story short, when you qualify as a real estate professional status, you need to materially precipitate in your rental properties. By default, you need to meet a material precipitation test on each and every single one of your rental properties. And that can be quite challenging. Imagine trying to spend 100 hours or more on a big portfolio or trying to spend 500 hours or more on each of your rental properties. Very challenging to do. The good news is there is an election that allows you to treat all of your rental properties as one for the purposes of the real estate professional status, and then that means you only have to meet one material precipitation test across all of your rentals, which is far easier. The thing is, you actually have to go ahead and make that election. Yep. Yeah, so that's the -9 election that you're talking about there, Tom. Essentially, if you group your entire portfolio, right, let's say you've got 15 properties and you manage all of them. It would not be great if you just spent 100 hours in every single property. That's 1,500 hours. That's a full time. We're getting pretty close into -75% full-time job. We're getting pretty close to what a full-time job is right there. But with this election, we get to say, "Hey, we're going to grab the entire portfolio, consider it with one property, one portfolio. If we spend 500 hours plus more than any time than anyone else, you're good to go." Now, that only applies to what we consider "LTRs." Anything that has a long-term lease or long-term contract and put in place. Short-term rentals can't use a -9 election. But there is a similar business election that can be used for short-term rentals. That same rules apply. Let's say you've got a pretty massive or nice short-term rental portfolio that you're managing all in your own, same rules. If you spend 500 hours on that portfolio, you qualify regardless of how much time anybody else puts in, right? That could mean you manage two properties yourself, 250 hours, 250 hours, 500. That means you can have property managers on the other two potentially, right? That actually is super helpful and gives you optionality. Maybe you're doing a big rehab in one year, right? And so something like that, right? So just FYI, there's flexibility and possibility with this. There's a lot of great options to use. Yeah. Absolutely. And it goes beyond just the real estate professional status too. There's all the elections that dash for election. You can group businesses together. For example, short-term rentals are very common here, but it doesn't apply to much other types of businesses. Exactly. So there's something that you want to understand that the need to be made. Also under that same dash for election, there's the ability for you to group say a dental practice, for example, together with a dental office. Yes. And that election has to be made in the first year that they're both kind of together. So you want to make sure that not only that the proper elections are being made, but they're being made at the right time. So there's just something to keep in mind. Again, proactive advisory, you are getting this stuff already handled way before it comes time to even follow your tax return. But these are just a lot of mistakes that we see. Yeah. Of course, our desk. Yeah. No, absolutely. These are things that our team always is looking for, right? To see like how can we optimize these things? Can we go back and fix them, right? Those type of things. One thing that's kind of small with the failing to make a rep selection, the dash nine election is net investor income tax. So that's a 3.8% surtax. I have a client right now who basically has overpaid a million dollars over the past four years by their tax repair, not having made that proper election. And they would not have made that election had they not come inside different council and come to us to ask about, Hey, we are thinking we don't need to do this. And that would have been another like $500,000 of net tax. So always little things to look for here, right? Always making sure that everyone's buttoned up and has these things put in place. Absolutely. There's a few more here that we're going to go through here today. This is not all of the ones that are out there. These are just common ones that we see. I mean, next one's going to be failing to carry forward form 85 82, which is where your passive activity losses are reported. So if you're a passive investor or perhaps, you know, you were a passive investor at some point in the past, good chance that if you're investing in real estate that you had losses for your properties that you weren't able to take against your W2 or business or other non passive income. And when that happens, they get suspended and carry forward to future years where you can use them when you have passive income when you sell a property for a capital game, okay? And sometimes it's just not reported. This is not carried forward. So you could have one year, which is say 2024, for example, where it was reported in 2025, where it just goes missing. And that becomes problematic. And I've seen clients in situations where they had substantial passive losses that could have helped them on the sale of a property, for example. And they just didn't have it on their most recent tax return, because their CPA failed to carry it forward. So it is something out there. And if you want to make sure that when you receive your tax return, that that is being done properly. No, a hundred percent, Tom, like the 8582. So I tell everybody is like, go check that yourself, go see how many passive losses you have. So when you think about selling a rental property, you're like, I'm going to get a big gain on this. You get to go look and see, hey, how much I'm saved of losses do I have that I'm going to get to use that actually helped me this year. All right. And so also double checking that you're looking at the next, like you said, when you change CPAs, make sure that those are properly accounted for. Point those out, remind, right? Sometimes we need reminders too, right? Tax preser people, right? We are also people, we're not cloud, we're not chat GPT. We are also people not bots. So sometimes we need a reminder of that stuff too. It's like, hey, don't forget, I've got all these carryover losses and I'll make sure they get applied or they they cared over properly, right? Absolutely. Absolutely. Something you don't want to miss. Next up, we have wrong entity reporting. Okay. So sometimes people have, they think they have a single member LC when really it's a multi-member LC that has a partnership tax filing requirement. And that sometimes overlooked extensions aren't filed. It's maybe misreported and that just creates issues. So you want to make sure that the proper tax returns are being filed for your entities based on how they're classified. Right, Tom. Next up, here are the most common LLCs that we see, right? There's a single member, there's a multi-member, which is a partnership, and then there's the S-Corp. The S-Corp and the partnership, like Tom just mentioned, those extensions are due by April 15th. You have to file, I'm sorry, not April 15th, March 15th. You have to file those by March 15th. A lot of times, unless you live in a community property state, and there's only a small handful of those. I don't even think 10. But unless you live in a community property state, if you and your spouse have an LLC together, guess what? Whether it's 1% ownership or 50% ownership, you now have a multi-member entity. So what that means is that means you have a partnership tax return, unfortunately. And that means, let's say unfortunately, this means you have a new filing requirement, you got to take care of a new tax return. And if you don't do that, it could be late penalties, like we talked about earlier. It could also mean the IRS is looking at you and maybe they find this out and they go, "Hey, you should have filed this year's ago." That's actually now a late tax return and late penalties and interest. All of that starts to stack up and creates a bill, unfortunately. So don't want to miss that. S Corp's the other one that we see all the time where someone misreports a rental property into the S corporation, right? We don't, and that's, look, we can't say that enough on this podcast. S Corp's rental properties don't generally mix. So we need to be very careful about what's getting put into an S corporation or when we're making an S corporation, right? So hey, if your tax per saying you need an S corporation, I honestly say get a second opinion, talk to your CPA, shoot us message. We'll talk to you and tell you probably don't get an S corporation, right? And then the single member LLC, right? Like I said, generally single member LLCs that just wind up on your personal tax turn, easy stuff. But if you add your spouse, a partner, et cetera, that can create issues. There's either the weird tenants in common, tick interest structures too that exist out there. Look, those also are really easy to break, right? The IRS does not make this easy. They want everybody to report their share of income and it's not the easiest thing in the world. So make sure that you're making the right elections and filing the right things on the right tax returns. Otherwise, it can create a bit of a mess. Absolutely. Absolutely. All right. We got one more here and actually, I thought of one more as we were talking that we'll briefly touch on. This last one is not filing at all. Okay. And believe it or not, I see this quite frequently, more frequently that I think you would imagine. I'd say several times per month, not even kidding. There's people coming to us saying I haven't filed my tax return since 2020, since 2019. You name it. It happens. And usually it's a result of waiting on K1s too long. It's you don't think you actually have to file or I have no, I don't know any taxes. I don't need to file my tax return. Well, that's first of all, not always true. Secondly, if you're in the game of real estate eventually and I've seen this happen now multiple times, your lenders are going to start requesting your tax returns at some point. If you can't produce those, you're going to be in hot water and now you're going to have to go back and this happens. And you have to go back and you have to have find somebody who can go file 2020, 2021, 2022. So on and so forth. And it just creates a big mess. And look, if you're making money out here in the United States of America, which I hope everybody tuning in is chances are, chances are you have a file and a requirement. And you do not want to put that off. It just creates a whole bunch of mess, complexities, potential penalties and interests that you just, you want to avoid. Yeah, Tom. I saw this get posted on social media. Is that like a lot of people take a tax hiatus this year where they're choosing not to file their tax turn. Let me tell you, like Tom just said, that's how you lose a lot of leverage with the IRS if you do that. There's not something I recommend. Look, I understand not wanting to pay taxes. I understand that's why Tom and I do what we do is that we don't want people have to pay all their taxes. But at the end of the day, you need to file these returns because that way you are going to be up to par with the IRS. Whenever you're up to par with the IRS, you can get options. You can have opportunities. You can abate penalties. You can have flexibility with them, right? But if you have five years, like Tom said, of no filing, the IRS really is like, Hey, you just kind of just told us to like, that you don't want to mess with us. And so sorry, we're not going to give you a lot of wiggle room to do anything here. And so we want to avoid that as much as possible. It creates audit risk, creates triggers, because then hey, let's say you go back and you file that 2020 return, right? That's where six years ago at this point. That 2020 return might have had K ones that you forgot about, might have 1099s, you forgot about. And that's how you absolutely get picked up by the IRS. And so yeah, there's three years of statutory limitations, et cetera. So don't forget about that too, right? Is that like, Hey, after three years, IRS technically can't go back unless they find fraud, which they will. They'll try and make that case a lot of times. If they think there's fraud existing there. So just an overall FYI there, please file your tax returns. Yes. Look, I'm not a big fan of authority. So don't get me wrong when I say this, but I just can't imagine not find my tax returns because it's going to open up a whole bunch of can of worms that you don't want. Okay. So if you're making money, file your tax returns as part of doing business as part of participating in this economy, just do it and do it timely. And you know, Tom, if you're if you're driving on the highway and you know there's a place where there's someone who's right there that generally hangs out when you're speeding, right? You know, there's a cop that's generally hanging out right and there's a you probably shouldn't speed there unless you really just want to take that risk and you may or may not pay that $200 ticket, $300 ticket, whatever it is. And so you could take that risk, but me personally, if I know that's where that's where I know where the police are hanging out, I'm probably not going to speed in that area. Same thing here with IRS. If you know they're going to be hanging out, looking at your tax returns, maybe not sure that I want to take that risk on, have to pay a bunch extra money to them. Yeah. Absolutely. Absolutely. Bottom line is file your tax returns, do the right thing. One more bonus one that we did not list here that I'm going to call out because it happened to be one of our larger clients had this. And this is kind of pleased through like a lot of these actually bleed through. It's like proper planning and advisory and paired with tax filing will eliminate a lot of these problems for people or a lot of these mistakes. And one of them was partial asset dispositions, right? We had one of our largest clients. We reviewed this returns just a few years back now, but just to kind of show you the magnitude of the consequences of some of this could be especially positive story. But we found that there was over a million dollars in partial assets dispositions that this this taxpayer is client was entitled to that was never reported by their prior CPAs. So these little things are the reasons why you want to work with a real estate specialist and not just a generalist because generalists oftentimes they just don't know the nuances. They don't go in depth on these areas. And you're often either making mistakes that cost you penalties interest. Sometimes mistakes that are costing tens of thousand dollars in tax savings that aren't always fixable like the bonus depreciation situation. So when you have a proactive advisor who is on your case knowing and understand your situation they can help you navigate what you can do what you can't do and so you understand why you're doing what you're doing and you ultimately come out with better tax outcomes when it comes time to find your tax return. So you know tax filing and not all the tax repairs are created equal they'd say it but that's just the case. So no there's an awesome opportunity if you have rental properties anything like that it's good to come over and see oh yeah that fence established in 2024 that you replace two years later get that off the books right like maybe that's not like massive tax savings but it's again like we've said multiple times this episode there are little things that we can do to help us accumulate tax savings right maybe it's not all one like sure we can do a lot of big moves and big swings after we make those it's in the little like it's like it's all sports teams right so you can smack home run like you can have scored 199 yard touchdowns but it's the process that got you up to that that was super important so it's like removing the pads paying your tax estimates on time not paying penalties right saving those little chunks here and there that eventually help you get up to a place where you can make the big swings again absolutely so if you're working with a general CPA you're getting into the big leagues real estate here you're adding more properties things are getting more complex for you consider working with a real estate specialist we are still taking on clients with 2025 tax year so if you are looking for new CPA we truly believe that proactive tax advisory combined with specialty tax reporting meaning people actually know how to file everything what we're just talking about leads to better after tax outcomes at the end of the day so go ahead click the link in the show notes to this episode or on the video on youtube wherever you're watching request a discovery call we'd love to learn more about your situation how we can help you avoid all these mistakes and ultimately reduce your taxes so you can take that money you can go reinvest into your portfolio go take that vacation go buy that car whatever you want to do with the tax savings is up to you but bottom line is you should be working the real estate specialist if you're in the game of real estate so click that link and we'll catch you on the next week's episode of the Taxmont RAI podcast the Taxmont real estate investors podcast is for general information purposes only and is not intended to provide and should not be relied upon for tax legal or accounting advice information on the podcast may not constitute the most up to date legal or other information no reader user or listener of this podcast should act or refrain from acting on the basis of the information on this podcast without first seeking legal and tax advice from counsel in the relevant jurisdiction used of an access to this podcast or any of the links or resources contained or mentioned within the podcast show or show notes do not create a relationship between the reader user or listener of the podcast and the host contributors or guests any mention of third party vendors products or services does not constitute an endorsement or recommendation should conduct your own due diligence before engaging any vendor for more information reference the show notes or description of this episode thanks for listening to today's show if you enjoyed the show please find us on iTunes and leave us a review you can also email us at contact at the real estate cpa.com with any feedback or topic suggestions we are always taking on new clients and with the new tax laws in play you really don't want to navigate this alone let us help you save money on taxes with your counting and cfo needs to become a client navigate to our client page after real estate cpa.com and fill out a web form with as much detail about your situation as possible thanks so much for listening have a great rest of your week.