Randy Brown (guest on the vlog) gives five practical tax-prep steps for real estate investors preparing for 2021: (1) "herd your cats"—collect missed expenses (personal card, cash, mileage) and reconcile activity; (2) estimate total income across sources (W-2, flips, rentals); (3) project tax obligation on a modeled 1040; (4) make a tax plan (retirement contributions, strategic purchasing, cost segregation, timing transactions between 1231 vs 1:1); (5) open accounts and execute the moves. The goal is to reduce next-year IRS payments by organizing records, estimating liabilities, and applying timing/deferral/acceleration strategies.
Foreign what's up, everybody? My name is Randy Brown, and Flip and Danny have asked me to jump on here. I think they've done a great job with setting up this, the first couple of episodes of the vlog, and they've asked me to jump in here and talk to you about a few things that you can do to get ready for 2021. Actually, five things. And you may think that I'm going to say tighten up your paperwork or start filling out the tax organizer that your CPA has sent you and those kind of things, but I'm going to go a little bit differently. That theme is going to be interweaved, but I'm going to go a little differently. I'm going to go in the direction of how to save on your tax obligation and mitigate what you have to pay to the IRS next year. So the very first thing I'm going to suggest is that you herd your cats. All right, Now, I'm going to leave a little space here in case a list shows up or some type of graphic. But you herd your cats. And here's what I mean by that. I want to find all of the stragglers, all the loose ends. So I'm going to set some time, preferably early in the morning, where I'm not going to be distracted. And I'm going to go through, in my mind, or with the help of an Outlook calendar, I'm going to go through the activity for the year. I'm going to flush out all of the things that may be missing from the activity that I've captured. So anyway, expenses that I paid with a personal credit card or times that I paid cash or I want to put together my mileage log. So if I haven't been doing a good job of keeping that mileage log, I'll go through my calendar and I'll say, hey, I had to attend that meeting, or oh, yeah, that's right, I had to go and do a minor repair at one of my rental properties or something like that. Something where I wouldn't necessarily have captured it through my normal activity or whatever methodology you use. And those things make a big difference, right? If I visited a rental property that was 90 miles away, I need to make sure that I'm getting that mileage deduction and those kind of things. You know, the deductions are in the details. And so I want to take time and herd all of those cats. Now, the reason why I'm herding those cats is to estimate my income. Should show up here again, right? I want to estimate my income. I want to take the time to pull everything together. If I have a W2 job, if I'm in a real estate investor, I've done some flips, I did some rentals, those kind, I hold some rentals. You know, I want to put all that together and I want to model that to my 1040 and put together what my ultimate tax obligation is going to be. And so that's number three. I'm going to project my tax obligation. The reason I want to project my tax obligation or the reason why I want to estimate my income and project my tax obligation is because every, every good tax strategy begins with where we are, right? We're just throwing darts blind. If we don't know what your income looks like and how much tax you're going to be responsible for, then we can start from there and look at ways to mitigate that responsibility, see how dramatic our strategy needs to be, right? So that's going to be number four. Once you have that information, you're going to want to make a tax plan, alright? And there are things that you can do. You can contribute to a tax advantage retirement savings program. You can look at strategic purchasing. You know, are there things in the first quarter that I'm going to need and if it makes sense, I'll go ahead and buy those things now so that I can accelerate that deduction. Do I want to do a cost segregation study and accelerate some depreciation? You know, all of those things and more are available to us on 1231. And some of those things would not be available to us on 1 1. You know, do I have a deal pending? Do I want to go ahead and take funds for that deal on 1231 or do I want to push that to 1:1? And just to give you an example, if I take a deal on, if I close a deal on 1231, I take those funds, then my tax obligation is going to be due just three and a half months later. Whereas if I just push it one day and do no other strategy, my tax obligation is, is going to be due the, you know, 15 months later. I know that there's estimated payments and things like that involved. All right? And so the last thing I'm going to suggest that you do is to open your accounts and make your moves. Hope this was helpful to you. If you have any questions, please leave them below. Yes.
