January2016
DearClientsandFriends:
Theever-complexandchangingworldoftaxlawhastaughtusalltobeasdetailedaspossiblewhenaccumulatingdataand informationtobeincorporated aspartofataxpayer'syear-endtaxrecords.YoushouldbeawarethattheInternalRevenue Serviceis continuing torequire more due diligence on the part of tax preparers, and IRS notices and inquiries continue to be a major source of revenue for the IRS.Withthat end inmind,our officeisstriving tobeasaccurateand completeaspossibleinthe gatheringofinformationthat will beusedtocompleteyourpersonalincome taxreturn and in order to help you to pay the lowest, legal amount of tax possible.
Enclosed,youwillfindouryear-end“RentalPropertyTaxPacket”.Wehopethatyouwillfindthistoolusefulin compilingyourcurrent yearrentalpropertyinformation.Pleasenotethatnotallitemsofincomeandexpensewill applytoeveryproperty.TheIRShas established a strict set of standardsfortaxpreparers.In orderto meetthecriteriaset forthunderthe IRSguidelines,my officeistakingextrameasuresto assistyou withthegatheringofinformationtobeincludedonyourtaxreturn. Therefore,itisMANDATORYthatallrentalpropertyownerscompletea“Rental PropertyTaxPacket” (forallareasthatdoapplytotheirproperties). Please be sure tosignanddate theforms. Thepacketshouldbereturnedtoourofficealongwithyourotherpersonalincometaxrecords.
If this is your first year with our firm, please be sure to provide a copy of any prior depreciation schedules. You should also be aware that even though the requirements for all rental property owners to file forms 1099-Misc. were repealed, some rental property owners are still considered to be engaged in a trade or business and are subject to the 1099 reporting rules. For example, if you are a real estate professional or own property that is rented out for less than a week at a time, or you provide substantial services, you are subject to the 1099 reporting rules. This means that you are REQUIRED to keep track of all payments you make to individuals who provide services to you in connection with your rental property (i.e plumbers, painters, landscapers, accountant, attorney, etc). For all payments of $600 or more to any one individual during the tax year, you ARE REQUIRED to prepare and file Form 1099-Misc. and report those payments. These 1099-Misc. forms must be distributed to the payee on or before 1/31/2016. We strongly suggest that you obtain IRS Form W-9 and begin collecting the required information NOW and have the person providing the services to you complete and sign the form BEFORE you make any payments to them in the current year. You may find it difficult to gather the necessary information after you have made your payment for services. You can obtain Form W-9 from the IRS or by visiting our website at either
Pleasekeepinmindthattherearealimitednumberofweeks,daysandhoursduringtaxseasonthatwehaveavailable to producethemostaccuratetaxreturnthatwecan.Therefore,weaskforyourcooperationinfillingouttheRentalProperty TaxPacketascompletely andaccuratelyaspossibleandreturningtheformstoourofficewithyourpersonaltaxrecords.Wedoappreciateyourcooperationand lookforwardtoworking withyou.
All my best and I look forward to working with you. Thanksagain!
Rental Property Owner(s): ______
Fillingoutthistaxorganizercansaveyouthecostsofourfirmdoingthebookkeepingforyourrentalproperty. Add each group of checks and receipts twice to ensure accuracy. ONLY INCLUDE EXPENSES ACTUALLY PAIDIN2014(orchargedto a credit card in 2015 - regardless of when paid). Keepthereceiptstogetherbytypeforyourrecords. Write theexpensecategorydescriptiononthetopofeachgroupofreceipts. Pleasebesuretoanswerallquestionson page 2 and complete the auto worksheet, if applicable. Use the legend at the bottom of the pg. to insert the appropriate codes for each of the property type(s) below.
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Address property 1: Address property 2: Address property 3:
Description / Property 1 / Property 2 / Property 3Rents Received
Security Deposits Received
Security Deposits Refunded
Other Income - Vending/Furniture Rental/etc.
Accounting
Advertising
Auto miles * (Please use auto worksheet)
Cleaning/Maintenance
Commissions - Management Fees
Insurance
Legal/Professional Fees
MortgageInterestPaidtoBanks
- Other Interest
- Other Interest
Repairs** - Building/Roof
- Plumbing
- Electrical
- Painting/Wallpaper
- Flooring/Rugs
- Appliances
- Heating/Air Conditioning
- Other
Supplies
Taxes
Utilities - Electric
- Water/Trash
- Telephone
- Other
Travel Related To Rental Property
Other Expenses (List) -
- Pest Control
- Condo Fees
Appliances/Furniture/Major Purchases or Repairs***
Property Type Code: ______
Property Type Code: ______
Property Type Code: ______
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***(See new Repair & Capitalization Rules)
Property Type Codes: 1 Single-Family Residence 3 Vacation/Short-term Rental 5 Land 7 Self-Rental
2 Multi-Family Residence 4 Commercial 6 Royalties
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Please answer the following questions about the properties above.
Property 1Property 2Property 3
1.) Did you or any family member use for□Yes □No□Yes □No□Yes □No personal purposes any of the above
property for more than 14 days or 10%
of total days rented?
Total # of DaysAvailablefor Rent
Total # of DaysUsed Personally
2.) For eachproperty listed did you:
a. Actively participate in the operation
of the activity during the year?□Yes□No□Yes □No□Yes □No
b. Spendmore than 500 hours
participating in the activity during
the year?□Yes □No□Yes □No□Yes □No
c. Are you the ONLY one who
substantially provided services or
managed the property?□Yes □No□Yes □No□Yes □No
d. Did you spend MORE THAN 100 hours
servicing or managing the property and
NO ONE ELSEspends more hours?□Yes □No□Yes □No□Yes □No
3.) Do you maintain a separate bankaccount□Yes □No□Yes □No□Yes □No for rental security deposits?
4.) Please indicate if the property is for a Single□S □M□S □M□S □M Family or a Multiple Family Residence.
5.) Date Property FIRST AVAILABLE for Rent?______
6.) Date Property first ACTUALLY Rented?______
7.) Did you make any payments during the year that would require you to file Form(s) 1099? □Yes□No
8.) If “Yes,” did you or will you file required Forms 1099? (Please provide copies) □Yes□No
My signature below indicates that I have maintained the proper records and receipts and have evidence to support the deductions claimed.
Taxpayer Signature Date
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CarandTruckExpensesWorksheet
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TaxpayerName:
TaxYear:
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VehicleInformationVehicle1Vehicle2Vehicle3
Do you have a company car titled in the
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name ofyourbusiness?
YES NOYES NoYES NO
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Do you use your personal vehicle for
Businessorservicingyourrental?
YES NOYES NOYES NO
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Indicate which type of vehicleyou are listing expenses for:
“B” Business“P” PersonalBPBPBP
Make andModelofvehicle
Date placed inservice
PurchasedNew orUsed
Type of vehicle – Auto/Truck/SUV
Gross VehicleWeight (VeryImportant)
Cargo Area Length (Truck Bed)
Totalmilesforthe year
BusinessmilesforPeriod: 1/1 - 12/31
Personal milesforPeriod: 1/1 - 12/31
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Is another vehicle available for personal use?
Was the vehicle available forpersonal use duringoff-dutyhours?
YES NOYES NOYES NO
YES NOYES NOYES NO
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Was the vehicle used primarily by a
more than 5% ownerorrelatedperson?YES NOYES NOYES NO
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Is there evidence to support the businessuse claimed?
YES NOYES NOYES NO
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If“Yes”,istheevidence written?
YES NOYES NOYES NO
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Wasthe vehicle leased?
YES NOYES NOYES NO
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Expenses
Gasoline,oil,repairs,insurance,etc.
Vehicle registration, license (excluding propertytaxes)
Vehicle lease orrental fees
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Wasthe vehicle financed?
YES NOYES NOYES NO
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Interestpaidforthe year
By signing below, I hereby certify that the above expenses are trueand correct, and I have evidence to support these deductions.
***IF ANY RENTAL PROPERTY OR EQUIPMENT/ASSETWASACQUIRED OR DISPOSEDOFDURING THE YEAR, PLEASE FILL IN DETAILSBELOW AND ATTACH RECEIPTSANDCLOSINGSTATEMENTS (if applicable).
ItemDescriptionDate AcquiredCostDate SoldSelling Price
* Please detail auto usage/costs on auto worksheet attached
** Attach receipts for any singleREPAIR OR IMPROVEMENT over $200
REPAIR AND CAPITALIZATION RULES FOR FIXED ASSETS
The below information is to provide some guidance regarding the deductibility of certain renovations to real property or with regard to new assets you may have or will purchase in the course of running your business.
Whether an expenditure qualifies as a currently deductible repair or is required to be capitalized is a factual determination. The burden of proof rests with the taxpayer, and sufficient contemporaneous records must be maintained. It is important to correctly characterize such expenses from the beginning. Otherwise, amended returns may have to be filed and that may require a change in accounting method request which could result in an IRS audit.
Generally, no deduction is allowed for amounts paid out for new buildings or for permanent improvements or betterments made to increase the value of property. Similarly, no deduction is allowed where an expenditure restores property to a "like new" condition.
Where a company constructs an addition to its building, the direct and indirect costs of construction must be added to the building's basis. The amount added to the building's basis also includes construction period interest. Capitalization is also generally required for installations of material components to buildings or equipment.
Under IRS regulations in effect before 2014, a taxpayer may generally deduct the cost of incidental repairs that neither materially add to the value of the property nor appreciably prolong its life, but keep it in an ordinarily efficient operating condition. Repairs in the nature of replacements, however, to the extent they arrest deterioration and appreciably prolong the life of the property, must either be capitalized and depreciated or charged against the depreciation reserve if such an account is kept. The subjective nature of these standards resulted in considerable controversy between taxpayers and the IRS on the issue of repairs vs. capitalization.
In an effort to reduce this uncertainty and controversy, the IRS issued new regulations - first in the form of temporary regulations issued in 2011, and then in the form of new final regulations issued in 2013 (and still being clarified by Revenue Rulings and updates) - regarding the deduction and capitalization of expenditures related to tangible property (ie Fixed Assets).
These new rules provide simply that a taxpayer may deduct amounts paid for repairs and maintenance to tangible property if the amounts paid are not otherwise required to be capitalized. Determining if they are to be capitalized or not is where the time consuming process comes in. Under the rules, a taxpayer generally must capitalize the related amounts paid to improve a unit of property owned by the taxpayer - and a unit of property is improved if the amounts paid for activities performed after the property is placed in service by the taxpayer are for a betterment to the unit of property, restore the unit of property, or adapt the unit of property to a new or different use, or of course, purchase a new item (ie tools or equipment) that must also be capitalized.
The new regulations also provide rules for determining the appropriate unit of property; rules for leasehold improvements; special rules for determining improvement costs in particular contexts, including indirect costs incurred during an improvement, removal costs, aggregation of related costs, and regulatory compliance costs; a safe harbor for small taxpayers; a safe harbor for routine maintenance costs; rules for determining whether amounts are paid for betterments to the unit of property; rules for determining whether amounts are paid to restore the unit of property; rules for amounts paid to adapt the unit of property to a new or different use; an optional regulatory accounting method; an election to capitalize repair and maintenance costs consistent with books and records; the treatment of amounts capitalized under the regulations; the recovery of amounts capitalized under the regulations; and rules for accounting method changes to comply with rules for improvements.
Do you have a headache yet? Please have patience with us, we are trying our very best to keep on top of these rules and regulations and review all of the updates that are coming out so that we can help YOU stay in compliance and get the best possible tax deductions we can get. Please understand that these rules are very extensive and very time consuming to comply with. We will make every attempt to minimize your burdens, however, we will need your cooperation by providing us with more information than you have ever provided in the past, just to comply with the minimum requirements of these new rules.
FIXEDASSETQUESTIONS
(Buildings, Improvements, Furniture,Fixtures, Equipment,Vehicles,etc.)
PleaseProvideDetailedInformationforanyindividualitemwitha costof$200**
In order to raise the limit to $2,500** for the New Year (meaning 2016), you
** Must have adopted a Capitalization Policy - please complete the next page
Salestaxauditscontinue to be a source of revenue for each State.Ingeneralyoumustpay salestax onanyitemsyou purchasethat are notre-sold including officesupplies,equipment,onlineandout-of-statepurchases.Youneedto charge salestaxon anyitemsyou sell (notlaborifseparatelystatedontheinvoice),exceptforthose customersfor whom youhave avalidexemption certificateonfile.Makesurethatyoufilesalestaxreturnsinallstatesin whichyouhaveanoffice,store,salespeopleor other presence.
a.Wereanyfixedassetsscrappedand/orstolenduringtheyear? □Yes □Nob.Wereanyfixedassetstradedduringtheyear? □Yes □No
c.Didyoupurchaseanyfixedassetsduringtheyearwithpersonalfunds? □Yes □No
d.Wereanyfixedassetssoldduringtheyear andthemoneynot deposited □Yes □No
intoyourbusinesscheckingaccount?
e.Didyoupurchaseanyassetsfrom(outofstatelocations,internet,etc.)for □Yes □No
whichyoudidNOTpaysalestax? (ifyes,pleaseprovidereceipts)
f. Did you purchase any assets you have not previously told us about? □Yes □No
g. Did you purchase any buildings, other real property or make any building improvements? □Yes □No
h. Did you make any repairs or improvements to buildings or structural components during □Yes □No
the year in excess of $200? If yes, provide copies of all receipts.
- Did you make any repairs costing in excess of $200 to any equipment or other fixed □Yes □No
year) If yes, provide copies of all receipts.
If“YES”toanyquestionabove,please provide more details on a separate sheet of paper and providecopies
of all salesinvoices,purchasereceipts, to explain or support the correct reporting of the item.
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______
(Insert your company name, if applicable, or taxpayer name if none)
It is the adopted policy of this business and/or property owner, for both book and Federal income tax purposes, the following policy regarding capitalization expenses for the year beginning January 1, 2016.
In accordance with Internal Revenue Code Sections 167 and 168 and related Regulations, this business and/or property owner has determined that amounts whose individual cost (including tax, installation and delivery costs) does not exceed $2,500., will be deducted as incurred as an operating expense.
Amounts exceeding this dollar limit will be examined individually to determine if their use or purpose requires capitalization under the betterment, adaptation or restoration rules used by the Internal Revenue Service and will be capitalized or expensed as incurred as a result of the application of those rules."
______
Signature of Duly Authorized Printed Name of Authorized
Business Owner and/or Property Owner Business Owner and/or Property Owner
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