Solving The Client 's Current Tax Situation And The Tax Problem Encountered By Tom Jensen

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1. Tax Problem – explain the client’s current tax situation and the tax problem encountered a. Tom Jensen, a part-time realtor, hires an accountant to prepare his 2015 tax return. Tom does not work exclusively as a realtor, and his accountant wants to make sure his real estate activities qualify as a business and accurately report income and expenses. 2. Facts – explain the facts of your client’s tax problem a. This is Tom’s fifth year in the real estate business and he has prepared his own tax returns in previous years. His recordkeeping is shoddy and it seems that Tom wants to deduct as much as possible in business expenses, but his accountant wants to avoid being completely erroneous. 3. Issue – What tax issue will you be researching?…show more content…
As a real estate professional you are a business owner and the Federal government has decided that business owners don’t have to pay tax on income they spend for certain business purposes. To do so, you will have to figure out which tax deductions from income you are entitled to and keep proper records documenting your expenses. Even if you work with an accountant, no one will ever know as much about your real estate business as you do so it is imperative that you learn about tax deductions. As a statutory nonemployee, also known as an independent contractor, there are certain tax benefits that often allow independent contractors to pay less tax that employees who earn similar income. Independent contractor real estate agents make their own estimated tax payments to the IRS four times per year, instead of having their taxes withheld. The lack of withholding combined with control over estimated tax payments can result in improved cash flow for realtors. Agents can also take advantage of many business-related tax deductions that are limited or not available to employees. This may include, for example, office expenses, including those for home offices, travel expenses, entertainment and meal expenses, equipment and insurance costs, and more. In contrast to the numerous deductions available to the self-employed, an employee’s work-related
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