Archive for March, 2012
March 15 is when corporate returns are due. For a lot of people, Form 7004 is an annual tradition. This is the form that lets you extend your corporate for six months until September 15. It’s a pretty straightforward form but keep in mind if your extending a Form 1120, it’s an extension to file not an extension to pay so if you think you’re going to owe money, you have to make your payment at the time of the extension.
One nice thing about 7004 is it doesn’t require a signature what I do is send an email to all of my clients, get their approval for an extension and then mail them out en mass. You should still file one extension per envelope but not having to run down a signature makes it a lot easier. So be sure to get those corporate extensions in by March 15, which is Thursday.
Alright, over the last few weeks I’ve gone through the requirements you have to meet in order to deduct real estate losses as a real estate professional. If you didn’t catch them, I did it in three parts and you can click through from here.
Now we’re going to talk about some planning ideas. This is going to be a living post in that whenever I have a thought or learn something new on being a real estate professional, I’m going to add it here. As always, I’m going to keep things general and you should always consult with your tax adviser before you implement any of these ideas.
1) We’ve talked about how it can be tough meeting the 50% rule if you have a full time job. That means if you work full time, you have to come up with at least 2,000 in your real estate business. That doesn’t leave a lot of time for sleep. One was to meet the requirements is if you have a spouse who’s either been out of work or is a stay at home parent. If they’re not involved in the business and you find yourself not being able to take your losses because of the passive activity rules then it’s time to get them involved. They still have to meet all three rules though. One spouse can’t meet one rule and the other spouse two rules, in order to qualify one spouse has to meet all of the three rules.
Fortunately, while being a full time parent is as hard as any job, it doesn’t qualify as a business so most of the time, if the spouse can meet the 750 rules, then they’ll meet the other two rules as well. So get your husband or wife involved and that can help you deduct those losses.
2) Remember about the grouping election. If you don’t elect to group your real estate activities, then you have to meet the active participation for each one individually which can get challenging as your real estate portfolio grows.
3) Short term rentals don’t apply. If you have a vacation rental where the average lease term is seven days or less, then the hours devoted to that activity don’t qualify.