The Equifax Hack

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In the last week and a half, we have had news of another North Korean missile launch, protests in St. Louis, President Trump tweeting about anything and a terrorist attack in Britain.  The news item that probably affects more Americans directly than any of those is the news of the security breach at Equifax.

I have been contacted by several clients asking Are they effected? What is the threat? and What to do?  This hopefully answers some of your questions and gives you a path for the way forward.

Where we are.

Last week Equifax announced that personal data of approximately 143 million Americans as of this writing had been stolen.  Equifax has begun some paltry attempts to begin recovering.  They early on put up a website to discover if your information had been compromised.  The website was not well supported and crashed multiple times.  They also offered an 800 number to call in to.  Numerous people report calling in and receiving incorrect advice from untrained call center workers, if they were able to get an answer at all.  Early on Equifax offered a free year of credit monitoring but part of signing up for it was waiving your right to sue for damages.  The stipulation has since been removed but the credit monitoring service is largely a symbolic gesture.  Government investigations have been promised, some of Equifax’s corporate leadership has “retired”.  Recent reports suggest that some Equifax executives had sold stock in the interim between discovering the leak and announcing that leak to the public.  Equifax reports that none of these stock sales were in response to the leak. Read More...


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Are you a Real Estate Professional?

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Are you a “Real Estate” professional in the eyes of the IRS?

It does not matter if you are a bookkeeper, Enrolled Agent, CPA, Attorney or an employee of the IRS the tax code is daunting and easy to misinterpret.  Even if you understand it the application of the regulation presents a further complication.  An area in my tax practice where I see mistakes routinely made is in the application of the title “Real Estate Professional”, section 469 of the IRS code deals with this topic specifically. 

Recently I was contacted by a potential client.  The IRS had sent him a notice that they were going to audit him.  He retained me for representation during the audit.  Being defined as a real estate professional is very advantageous to the tax payer.  The biggest advantage is that the passive activity loss limitations no longer apply.  Also real estate professionals are able to exclude rental income from the additional 3.8% tax on net investment income.  This client, named Jed had 3 rental properties and ran a business doing construction/home repairs and improvements.  He self-prepared his taxes by hand.  Between him and his wife they had a joint MAGI income which was in excess of $150,000.  He had claimed on his return that he was in fact a “Real Estate” professional.  But in speaking with Jed he wasn’t sure what the definition of one was for sure.  I explained a real estate profession in the eyes of the IRS has two main requirements and they are; Read More...


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Forgotten depreciation deduction a major tax issue

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Real estate investing provides many tax benefits, and depreciation is one of the biggest. It’s also one of the more misunderstood.

Depreciation lets you deduct a portion of the cost of the investment each year for the length of its IRS-designated life span.  The depreciation computation is figured based on the value of the improvements, not on the land underneath the improvements.  This necessitates that you be able to determine the value of the land and the value of the improvements.  This determination is generally included in the multitude of closing documents you received when buying the property or found on the county real estate tax website.  It is essential that you keep your closing documents.  There are additional costs that can be expensed and loan costs that must be amortized involved in the closing itself.

A recent client case provides a good example for this deduction and how it can be forgotten.

Joe, an old Army buddy into my office asking for help with his taxes.  He had done his taxes up to this point as he had a pretty simple tax situation but about two years ago he moved and turned his old primary home into a rental property.  The first year of owning his home he had done his taxes and he had read some articles about depreciation and expenses that had gotten him thinking that maybe he had done something wrong on his taxes so the following year when his taxes were due he came to me make sure everything was correct. 

I reviewed his prior year tax return and immediately knew I was going to have to file an amendment to correct some glaring mistakes.  The first thing I looked at was his Schedule E.  He had about $10,000 of rental income and no expenses.  He had a 1099 showing interest and taxes for the property.  He had mistakenly included all the interest and taxes from the 1099 as an itemized expense and had not prorated the amounts between schedule A and E.  That was pretty simple.  When I computed his mistake, he had taken the standard deduction so the decreased itemized amount did not negatively affect him but I when I added up the interest and taxes attributable to the rental portion of of the property it reduced his income down to about $7,000. Read More...


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