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News & Information: Orlando REALTOR® magazine - Special Feature

Ducks In A Row

Monday, March 31, 2014  
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Orlando REALTOR® | March/April 2014

If preparing your taxes this year was
akin to a wild goose chase,
get it together NOW for next year

For all but organizational Olympians, tax time is indeed a cruel season, one spent chasing down receipts and records and documents. Oh my.
But it needn’t remain so! Put an end to the madness by putting in place (now, while the memory is still fresh) a simple five-step tax organization plan.

Keep your records electronically

Every self-employed person or small-business owner should keep their books using a reputable accounting software package such as Quickbooks or Quickbooks Pro. Period.

Even if you are not self-employed, it’s a good idea to electronically keep track of your personal records and finances.

Segregate your tax records by tax year

Keeping your records electronically is just the beginning; you still must have a system for retaining and organizing the underlying accounting records.

The Word On Employment Status
For Federal Tax Purposes

Most real estate professionals operate their business as a sole proprietorship. This means that you are not someone’s employee, you haven’t formed a partnership with anyone, and you have not incorporated your business.

Licensed real estate agents are statutory non-employees and are treated as self-employed for all Federal tax purposes, including income and employment, if:

  • Substantially all payments for services as a real estate agents are directly related to sales or other output, rather than to the number of hours worked; and
  • Services are performed under a written contract providing that they will not be treated as employees for Federal tax purposes.

The statutory non-employees category includes individuals engaged in appraisal activities for real estate sales if they earn income based on sales or other output.

Source: Internal Revenue Service

Whether you file your tax returns on a calendar or fiscal year, you report the results of your business operations for a 12-month period. Consequently, your tax records should be separated by tax year.

It sounds logical enough but as a tax preparer, I am regularly handed boxes of with years of receipts tossed together all willy-nilly.

Group your records

Organize your records into five main categories — Receipts, Expenses, Fixed Assets, Inventory, and Liabilities — then set up a folder for each category.

Include in the Receipts folder a copy of your reconciled bank statements for the year and any cash register slips or other information about your income

Include in the Expenses folder copies of all vendor invoices for the year and copies of all cancelled checks and credit card transaction reports

Include in the Fixed Assets folder copies of all invoices for the year relating to the purchase of furniture, fixtures, automobiles, and equipment and copies of documentation for any sales of such assets you made during the year.

Include in the Inventory folder copies of all invoices related to the purchase of inventory or raw materials during the year and records of all physical inventories taken at year end.

Include in the Liabilities folder copies of all promissory notes, mortgages, equipment, or premises lease agreements and payment schedules relating to same.

Further group the Expenses folder

Your Expenses folder will contain the most documents and, therefore, needs to be organized further. Begin by printing out a chart of accounts from your accounting software, then create a folder for each account category included in your chart of accounts.

Finally, group in separate sub-folders all vendor invoices and/or canceled checks by account category.

Prepare and maintain a fixed asset schedule

Prepare a list of all furniture, fixtures, equipment, real property, and vehicles owned by your business. The list should include the following information:

  • The date you purchased the asset;
  • A description of the asset;
  • The amount you paid for the asset;
  • The date you began using the asset for business purposes;
  • The date you sold, disposed of, or ceased using the asset for business; and
  • The amount you sold the asset for.

Keep everything related to your business and organize it on a daily basis in accordance with the above instructions, and you will minimize your accounting and potential tax problems. Plus, you won’t be running around like a chicken with its head cut off when tax season rolls around next year.

By Peter Pappas, The Pappas Group. Pappas is a tax attorney and Certified Public Accountant. He can be reached at or by visiting

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