Justin Shore, Advisory Manager at Hall CPA, sheds light on the significance of rigorous bookkeeping for real estate investors. He reveals how sloppy records can attract IRS scrutiny, and explains critical distinctions between tax forms like Schedule E and C. Proper categorization of expenses can be a game changer in audit defense. Shore emphasizes that mere bank statements won’t suffice and advocates for meticulous documentation to bolster deductions. Discover practical strategies to safeguard yourself from costly penalties and enhance your financial credibility.
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insights INSIGHT
Different Forms Reveal Different Risks
Schedule E is the dedicated form for rental income while Schedule C covers most other sole-proprietor activities.
The IRS designs different expense lines to reflect rental-specific activity and detect anomalies.
insights INSIGHT
Per-Property Reporting Raises Flags
Schedule E requires expenses to be reported by property in separate columns to show per-property totals.
Auditors use per-property expense ratios to spot suspiciously high costs that may trigger deeper scrutiny.
volunteer_activism ADVICE
Answer IRS Requests Fast
Respond quickly to IRS documentation requests to preserve credibility and deter further probing.
Aim to produce requested support by the end of the day or within a very short timeframe when possible.
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In this episode of the Tax Smart REI Podcast, Thomas Castelli sits down with Hall CPA Advisory Manager Justin Shore to break down why bookkeeping isn’t just busy work, it’s the foundation of audit defense and financial success as a real estate investor.
Tune in to learn:
- Why sloppy bookkeeping can raise red flags and trigger IRS scrutiny
- The key differences between Schedule E and Schedule C—and why they matter for your rentals
- How proper categorization of expenses (like cleaning vs. repairs) can make or break your audit defense
- Why bank statements aren’t enough, and the documentation you must keep to substantiate deductions
- The penalties and costs of poor records and how to avoid them
- The line between bookkeepers and tax preparers, and what responsibilities truly fall on you
To become a client, request a consultation from Hall CPA, PLLC at go.therealestatecpa.com/3KSEev6
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