I just finished up my personal income tax return. Tax accountants always do their own tax return first, or last. In between, clients come first.
I use expensive ( > $5K) tax software and have to renew it every year at that price. The problem is that tax software is always written on the fly. Tax season IS the beta test. So, if you don’t know how a tax return should look and where items should be reported and flowing, chances are good your return is going to have some problems.
One of our USTax Aid CPAs is also doing her personal return today. We were comparing some of the challenges we have with the software. We know what we’re doing because we specialize in tax and because we’re active CPAs (and not attorney just giving tax advice) we know how the tax return is supposed to look for the strategies we do. I got to wondering what would happen if someone was trying to do-it-yourself (D-I-Y) on tax prep with only a rudimentary understanding of what SHOULD be possible.
That’s when I came up with a quick self-test to give yourself, if you are determined to D-I-Y this next year.
If you have real estate, do you know where and how to report:
* passive real estate loss
* non passive real estate loss
* catch up past depreciation
* report real estate professional status
* calculate at-risk for loss
* take a suspended loss upon sale (This is where my software messed up)
If you have a partnership, do you know where and when to report:
* recourse versus non recourse debt
* Sec 754 election for sale or other step up in basis of partnership interest
* passive loss
* non passive loss
These are just a few of the important issues that you need to make sure you’ve got covered when you file your return.
* Do you know how to report a passive and non passive loss? Do you know the difference?
* If you’re a real estate professional, do you know where to report that?