Is your property management team ready for tax season? As long as all of your data and documentation is easily accessible and organized, you should be in good shape. Just remember, a single transactional error could mean you underpay or overpay the Internal Revenue Service.
It’s true that the IRS is picky, but property owners and your staff also rely on your accurate records when reporting earnings and expenses. Since there is ample time to get organized and scrub your data, this year can be stress-free for you and everyone depending on you – while also setting a foundation for a streamlined tax season prep moving forward.
Clean Your Data & Organize Your Documentation
Clean, organized data and documentation is key when you prepare your files for taxes. Try these two tips to knock out your tax prep like a pro:
1. Admit some of your data might be dirty.
Many people assume importing data from reliable sources, such as in-house spreadsheets, digital employee profiles, and electronic customer information files, automatically produce clean and error-free files. Sadly, even “balanced” books may contain errors. Here are some examples of data you should make sure it complete:
- Missing telephone numbers may indicate a client or employee did not provide a number, failed to give a complete number, or doesn’t have a phone.
- Misallocating funds could mean certain deductions are over- or under-stated, even though the balance sheet looks right.
- Adding an incorrect birthday to an employee profile may trigger IRS inquiries when the social security number does not jive with the DOB.
Using back-office analytics and custom reporting tools in your property management software allows you to look for anomalies, like too many digits in a social security number, issues with year of birth and zip codes. Think about establishing mechanisms to help maintain error-free data going forward. This makes it is easier to spot mistakes – like keying in a $10,000 tenant deposit when the actual funds were only $1,000. What a difference a zero makes!
2. Organize files for speedy processing.
Here’s a short list of files and backup documentation necessary to make tax filing a breeze:
- Gather the necessary forms and instructions.
- Reconcile all bank accounts – remember to watch for unusually high or low transaction entries.
- Before you print or release any 1099 or W2, confirm the recipient’s information.
- Generate year-end financials including owner statements, employee earnings, vendor transactions, purchase orders and any other reports that your accountant needs to accurately reflect your profit/loss. You’ll also need vehicle logs, the listing of capital asset activity and a summary of mortgage interest and property taxes paid, if applicable.
- Update employee profiles.
- Work with IT to establish mechanisms to enforce internal compliance. As an example, if you require purchase orders or an owner’s pre-approval for expenditures over $500, you can create a digital flagging tool with something as simple as an SQL query. This ensures those high-dollar purchases are allocated and billed properly.
- Check IRS.gov for the latest tax code changes – you won’t know which new deductions are available, or which credits and adjustments expired unless you look.
- Utilize the amazing tools and functionality built into your property management software. Businesses who use state-of-the-art software spend less time scrubbing data, updating records and preparing documents for their accountants than those who use a combination of spreadsheets, data warehouses, and manual records.
Set the Stage this Tax Season
Get organized. Deep clean the data. Spend a stress-free tax season confident your return is 100% accurate. It’s really that simple.