How Your CPA Could Solve Problems You Never Knew You Had

CPA Accountant Business Financial Solve Problems

Problem Solver CPAs

There’s a cool shirt floating around the internet that says something to the effect that CPAs help people solve problems they didn’t know they had. While this shirt has been the brunt of many jokes among CPAs, it’s actually proving to be a true statement. CPAs have helped millions of people and millions of companies recover from financial hardship.

So how exactly can your CPA help you solve problems you never knew you had? That’s easy. Let’s look at a few of the more obvious ways.

CPAs Can See Your Bad Spending Habits

One look at your financial records and your CPA can see your bad spending habits. So often, many of us with debit cards develop a bad habit of swiping that we fail to see just how much money we are spending.

CPAs Can Help You Forecast the Future

Do you have big plans for your businesses financial future? Your CPA can tell you how to get there and also be honest and upfront with you and let you know if your goals are unrealistic.

CPAs Can Tell You No

Many business owners will do everything they possibly can to surround themselves with yes men. The great thing about a good CPA is that they can literally be the only people on your team who have earned the right to tell you no. This “no” is not intended to be disrespectful but is intended to keep you on track toward whatever your business goals may be.

Are you a small business owner who has a CPA? What problems has your CPA helped you solved that you didn’t know you had?

Image credit: Alan Cleaver

Private Use of Rental Property

The guidelines associated with the personal and leasing utilization of premises are included in this article in the Landlord’s Tax Guide. This may be either because you are leasing out a space in the same property which you are living in, or you have got a vacation residence that you might privately employ a few weeks out of the calendar year and rent the remainder of the time. This information will not apply to you at all if you never use your rental property for personal use. However, if you do, you will want to keep reading.

Property rented for less than fifteen days. Any time you leased your property for less than fifteen days total in the past year, you don’t have to file any of your rental revenue. If this is the scenario, then the real estate property is going to be considered personal for taxation considerations, and on Schedule A of Form 1040, it is possible to deduct any of the property associated expenditures as personal.

Employing Your Holiday Home as a Part Time Rental

Personal use test. It’s important to work with some type of numeric formula to determine the total number of days during which the rental property was used for personal use. That is the personal use test. How you deduct your rental expenses is going to largely be determined by whether or not the personal use test is satisfied. Finding out the actual quantity of days in the past year in which the real estate property was leased out at fair market value is the initial step in calculating the personal use test. The next step is to multiply that number of days by ten percent. We will label the outcome the “total days rented” or “TDR” for short. The next stage will be to figure out how many days the rental property was employed for private use. We can label this “personal use days” or “PUD” abbreviated. Look at the table below for a vision of the personal use test.

NOTE: “Personal use” consists of use by you, any other owners of the home and property, plus the families of all individuals who own the property, unless of course your family member is paying out rent at fair market value.

If TDR is…

and PUD is…

then the personal use test is…

over 14

less than TDR

not satisfied

under 14

less than 14

not satisfied

over 14

more than TDR


under 14

more than 14



If test is satisfied. If the personal use test is satisfied, you will deduct your rental expenses only to the extent of the rental income. A net rental loss will not be attainable, but when there are any additional expenditures you do not write off this year, they can be moved forward to later years, provided that there is an adequate sum of rental earnings in the tax year in which you claim them.

If test is not satisfied. Your own leasing costs will never be restricted by the rental income if the personal use test is not satisfied. You could deduct your rental costs and also have a net rental loss. There could be a few passive activity rules, however, which may still restrict the rental loss tax deduction.

Computing all of your rental expenditures. A number of expenses should be allocated between leasing and personal application. These include expenditures that will have already been charged no matter the use, such as real estate taxes and mortgage interest. Find out the whole number of personal use days. Then, you will need to determine the total quantity of TDR. After that, divide rental days by the sum of PUD and rental days. The end result is the rental percentage. Finally, you have to multiply the total cost of your expenses by the leasing percentage that you have established, and then the result will be the rental deductible part.

Leasing a Section of Your House

You need to expressly allot all your costs in between private usage and leasing use if you rent out a part of your own personal home. The IRS allows a little versatility with the method you employ; just make sure it’s consistent from year to year. Some people choose the option of taking the number of rooms within their residence along with the number of rooms within the home, and divide them. Dividing the rented sq . ft . by the residence’s total sq . ft . is another option that lots of people go for. You’ll end up with rental costs and personal costs. Those allotted to the leasing income can be deducted as such, and you can use Schedule A of Form 1040 to deduct what’s left.

Kirkland CPA+John Huddleston has written extensively on tax related subjects of interest to small business owners. He is the owner of his own small business, Huddleston Tax CPAs. He is a graduate of Washington State University and the University of Washington School of Law.

Deductible Rental Property Expenses: Insurance, Cleaning/Maintenance, and Repairs

Since you now are engaged in renting your property out to obtain profit, it is vital that you ensure that specific fees and professional services are properly set up and reported for taxation uses. We will take a look at some of these costs.


Just as in the majority of monthly premiums, it’s usually prepaid upfront for a particular length of time. Scenario: You bought an insurance policy for the property in March 2012 for $1200. The coverage time span is from April 2012 to March 31, 2013. Be aware that in this illustration, the present tax year is surpassed by the insurance policy protection period. Consequently you should allot just current tax year relevant insurance premiums when it comes to this year’s taxes,and report the remainder for the next period. This could mean $900 (9 months April to Dec 2012) or $100 per month of qualified rental property utilization would be your permitted premium.

Please note that many Insurance companies frequently bundle insurance premium plans between business and personal customers for a discount rate. Just the company rental property relevant portion can be deducted. You should use your individual income tax return to deduct any non-business or private utilization. You will include Title insurance within the Cost Basis of the property, as it is not an applicable expenditure.

Cleaning and Maintenance

The daily maintenance of the rental property is a deductible expense provided it is for general spaces and routine cleaning. These types of expenses are also restricted to the days that are allowed rental property days rather than personal use days. A lot of rental property owners have deals with local area services to maintain the rental property on an ongoing schedule to make sure it is in running and functional order. This can include such expert services as window cleaning, dusting, cleaning home appliances and upkeep. Major structural repairs and alterations aren’t deductible, so must be listed in the rental property’s Cost Basis.


From time to time, there might be some necessity to mend a home appliance, do a bit of painting, or any other undertaking that does not demand a serious renovation of the rental property structure. These expenses that are common and important are allowable in accordance with the leasing length of time.

Never include any time periods which would be looked at to be personal use days, since costs are only tax deductible in relation to the income of the rental property. The only expenditures which are authorized are the ones that are relevant to the approved leasing period, specifically.

  • On the IRS’s webpage, you will find the various reports that you need. If you want further information, see IRS Publication 527.

Renton CPA+John Huddleston has written extensively on tax related subjects of interest to small business owners. He is a graduate of Washington State University and the University of Washington School of Law.

Automobile and Travel Expenses which Are Deductible for Rental Property Owners and Landlords

When travel expenses are necessary and ordinary, they may be deductible. If you are using your vehicle for maintenance tasks and management of your rental property and/or to receive rent from your occupants, these are all deductible expenses. Note that commuting is a personal cost and is not deductible. Moreover, you may not deduct travel expenses incurred to to make improvements on a rental property. A cost recovery process just like depreciation will take care of this.

Actual Expenses

All travel expenses related to your property may be deducted this way. IRS Publication 463, Chapter 5 identifies just how those costs must be documented and supported with invoices. Certain software apps can be obtained by using iPod, Quick Books, Mint, and more to help back up your files; nevertheless, it is necessary to have paper records to validate any write offs. You will use a Schedule C or Schedule E to report expenses. If you’ve got more than one property, your expenditures should be allocated to the premises where the expenses incurred. Only vehicle use involving rental properties is permitted.

Mileage Method

Here you deduct just your actual mileage driven. For instance, if you traveled 1200 miles throughout 2012, you would utilize the latest standard mileage rate of $0.55.5 per mile in line with present tax rates.

Usage of Zip Cars, metro bus lines, and automobile rentals should have a principal relationship to the property and should include paperwork to back this. In order to show how the public transportation use is entirely business connected, it is encouraged that you allocate costs to a business account related to your property.

Quick Note: You can obtain the different documents outlined in this information on the IRS’s webpage. Refer to IRS Publication 527 to find out more.

Woodinville CPA+John Huddleston has written extensively on tax related subjects of interest to small business owners. He is a graduate of Washington State University and the University of Washington School of Law.

Required Tax Documents Concerning Reporting Rental Property Activity

For a property owner, to completely account for and report your rental property earnings to the IRS, you’ll need various IRS tax forms which will be specified within this article. As outlined here, the tax documents required change according to the kind of official company who possesses the property (individual, partnership, corporation, or LLC). For further information regarding legal entity rental property ownership, look at the article included in this Guide, titled Best Rental Property Ownership.

Quick Note: You can find the different documents mentioned just below on the Internal Revenue Service’s homepage: When you’re using tax prep software applications, the software will have the required documents.

Individual Ownership

This includes mutual ownership with a wife or husband, tenancy in common, or mutual tenancy with right of survivorship.

Form 1040. All individual people will need to use Form 1040, so this is the place you’ve got to get started. Your annual total rental property earnings or deficit subjected to tax will be found on line 17 in the first page of the Form 1040. Take note that as a landlord with leasing activity, you will not be able to take advantage of the shortened Forms 1040A or 1040-EZ.

Schedule E. Schedule E is one addendum of Form 1040. It actually has a variety of applications, yet the application that is related to your needs is reporting of rental property revenue and expenses. The one section of Schedule E that you must finish is the portion entitled “Part I”. There are a few relevant tips that you should keep in mind, which include: while reporting on a rental that you jointly own with anyone, other than your wife or husband, you only need to report the expenditures which you sustained and the profit you acquired. On top of that, do not forget that if you leased just for a portion of the entire year, or you are leasing a portion of your home, you will need to distribute costs relating to rental and non-rental purposes. For more information, take a look at Tax Deductible Rental Property Expenses, the article set that is included inside this Guide.

Form 4562. On line 18 of Schedule E, you’ll deduct the depreciation for your property, that you will employ Form 4562 to figure out. To get more tips, find the article entitled, Depreciation Expenses for Rental Property, which is included in this Guide.

Partnership/Corporate Ownership

For example a general or limited partnership, or S corporation.

Form 1065/1120-S. For people with a collaboration, you will need to use Form 1065, the form a partnership utilizes to report all of its business operations. An S corporation uses Form 1120-S to report its enterprise activities. Schedule K, line 2 of Form 1065 or 1120-S is where your net rental losses or revenue are reported (Schedule K is embedded inside those documents).

Form 8825. Form 8825 is made for partnerships and S corporations, yet functions just like Schedule E. It’s in essence a lot like Schedule E. Make certain that all profit and operating costs suffered by the corporation or partnership are included in their total amounts (these are going to be divided among each business partner or investor down the road).

Schedule K-1. This document reports the net leasing income or losses due to each partner or investor according to that business partner or shareholder’s ownership interest. Each partner gets her / his very own K-1 and should report the contents of that K-1 on his or her Form 1040, Schedule E, Part II.

Limited Liability Co-ownership

You may file like you’re an independent property owner as, for taxation requirements, a single-member LLC is actually a disregarded entity (look above). A multiple-member LLC has the option to be taxed either as a partnership or as an S corporation (see above).

Kent CPA+John Huddleston has written extensively on tax related subjects of interest to small business owners. He is a graduate of Washington State University and the University of Washington School of Law.

The Home Office Deduction for Landlords

There are few tax deductions taken by business owners that are more feared than home office deductions. Some business owners are convinced that claiming this tax deduction increases the chance of an audit, yet the IRS is adamant that this is just not the case. Either way, if you follow the rules, and maintain proper records, you should have nothing to fear.

Active owners of a rental property may qualify for the home office deduction. The key to this deduction is the word active. The landlord must do more than merely receive and deposit rental checks every month. You will need to consistently spend substantial time maintaining properties and preparing them for rent as well as seeking new tenants.

If you’ve met this qualifier you’ll also need to meet the basic home office deduction thresholds. First of all, you need to use the home office exclusively for your rental business on a regular basis.

Then you’ll also have to meet at least one of the following:

1. This office must be your principle space for running your business.

2. You must have no other location from where you run the administrative end of your property managment rental business.

3. You use the space to meet clients and potential clients.

4. You use some other structure on your property to conduct business.

After you have applied the threshold tests above and determined that the work area in your home does in fact meet the requirements for the home office deduction, you’ll have to look into what kind of expenses can be written off. There are direct and indirect types. Direct expenses exclusively benefit the home office area of the home such as painting or cleaning. Indirect expenses benefit the entire home and must be apportioned out between the office space and the rest of the house. Property tax, insurance, mortgage interest, and utilities are common examples of indirect expenses. Square footage is the standard method of calculating the proportion of the home office in relation to the entire house to come up with a percentage. A 2,000 square foot home with a 200 square foot home office area would mean 10% of the indirect expenses could be deducted as part of the home office deduction. You can also depreciate the house structure (not the value of the land) in the same percentage over 40 years. However, this may complicate matters when you sell the house.

As you don’t want any trouble if you do get audited, you are going to want to maintain good records to show that you were entitled to take the deduction and that the claim has been accurately reported. You should document the home office space by a diagram and/or photograph that supports your calculations. It is wise to use your home office address on any business cards and other forms of collateral and to have business mail delivered there. You should maintain a log of client meetings and other time spent working there. Records you should keep to prove expenses include: property tax statements, utility bills, insurance premium notices, 1098 mortgage interest statements and receipts for any other relevant home office expenses.

This is a basic guide to home office deductions. This is not a substitute for the expert counsel of a Bellevue Certified Public Accountant.

Bellevue Accountant +John Huddleston has written extensively on tax related subjects of interest to small business owners. He is a graduate of Washington State University and the University of Washington School of Law.

Small Business Webcast endorses tax experts who know all about tax prep, bookkeeping, Quickbooks, business valuations, and of course, helping you making your small business profitable.



Part 1: Tax Deducible Rental Property Expenses

This article from the Rental Property Tax Guide focuses on the different types of expenses that you may deduct from your gross rental income in order to figure net rental income. Because there is a variety deductible expenses, this guide divides the topic into four different variations. This first post will look at advertising, interest and professional fee expenses.


If you’re renting a room in your home, or if it is a duplex and you’re occupying the other unit, you will need to pro rate the mortgage expense. (See the article titled Personal Use of Rental Property, included in this guide, for more on how to calculate personal use). Now if you are renting the property as its own living unit, you can deduct all of the mortgage interest you paid on Schedule E. Also, if you own only a part interest in the rental, you must multiply the total amount of mortgage interest paid on the property by your ownership interest. Be aware, however, that certain expenses you pay to obtain a mortgage (such as title/recording fees and commissions) are capitalized as part of your depreciable basis for the property, and are not expensed. See the article titled Depreciation Expenses for Rental Property, included in this Guide, for more on depreciation expense. Other types of interest may also be deductible, if you incurred the interest solely for the benefit of the rental property.


Promoting your rental property on the open market, through marketing efforts such as posting newspaper ads or paying for internet marketing, is a tax deductible expense.

Professional fees

If you pay a legal counsel to set up a rental agreement or initiate legal actions for you to evict a tenant, you are able to deduct these charges. Additionally you can deduct fees paid to an accountant or CPA for prepping the Schedule E of your return from the previous year. Be sure to pro rate the overall fee between the rest of your return versus the Schedule E portion of you return based on time spent. Any fees unrelated to the Schedule E appear on Schedule A as personal tax preparation expenses. Also any commissions or management fees to professional realty groups for managing the property are deductible as well.

Seattle Accountant has written prolifically on accounting and other tax related subjects concerning small business owners. He is a graduate of Washington State University and the University of Washington School of Law.

Tax Deductions in Startup Expenses

This particular section of the rental property tax guide looks at deductible rental startup expenses. You are allowed to deduct certain expenses you incur while preparing your property for rental, that is prior to renting the property.

Note: Startup expenses laid out within this segment of the Landlord’s Tax Guide, are dissimilar from the expenses which qualify as deductible (under section 195 of the Internal Revenue Code.) Within this section, certain expenses incurred as startup expenditures in an active trade or business are deductible up to $5,000, with the balance amortizable over a fifteen-year period. Though, section 195 does not apply to rental property this is because renting isn’t viewed as an active business or trade, but rather it is regarded a passive activity. See the article Tax Deductible Rental Losses, included in this Guide, for more on passive activity rules.

Note: It isn’t when you’ve literally rented real estate that rental activity commences, but when you make the property available for rent.

The Expenses in Obtaining a Mortgage

Abstract fees, recording fees, and mortgage fees (amongst others) are capitalized and thus become part of your basis in the property. Rather than expensing these fees all at once, you need to depreciate the expenses. The Depreciation Expenses for Rental Properties article (within the Landlord Tax Guide) allows for a closer study of depreciation.


What are points? They are charges paid by a borrower to take out a mortgage or a loan. These charges may also be called loan origination fees, maximum loan charges, or premium charges. Points are deductible as interest, but require that you amortize the points over the life of the loan. Determining the amount of points to amortize per year, is task beyond the scope of this article. Talk with a certified public accountant.

Repairs versus Improvements

You must capitalize and depreciate all improvements to the property in advance of putting the property on the market. Improvements prolong the use of the property or materially add to the property’s market value. On the other hand, you may freely deduct all repair expenses. A repair aims to keep your property in good working condition, not to increase the market value or prolong use. Within the Landlord’s Tax Guide there is more on deductions and depreciation, you’d like to read further.

Tax Accountant has written articles about accounting and tax related subjects for many years. He is a graduate of Washington State University and the University of Washington.

Rental Property Ownership

This article will look at the different types of entities for the ownership of rental properties. As outlined below, different entities have their respective pluses and minuses. However, the aim in each case is to limit liability and guard your rental property from unsecured creditors.

Also consult with an attorney or a certified public accountant prior to establishing an entity and transferring ownership of a rental property. This is not a comprehensive replacement for expert council.

Note: This landlord tax guide wont serve to replace the expert council of a CPA or attorney. You should seek qualified professional counsel when establishing an entity and shifting ownership of a rental property.

Individual Ownership

This is the simpler and more popular method of taking ownership. This is when you purchase a rental property in your own name. A significant disadvantage of this type of ownership is that your creditors are able to force a sale of the rental property if they receive court mandate, or they could potentially compel you into involuntary bankruptcy. A main plus to this form of ownership is that the process is simple, without heavy filing fees or complex forms.

Legal Entity Ownership

Corporations, general partnerships, and limited liability companies are all examples of legal companies. The differences between these entities are important and outlined below. The main advantage to entity ownership is that your personal creditors are not able to force a sale of the rental property, since you don’t own it. The only type of entity that does not require registration with the Secretary of State is the general partnership. As far as taxes are concerned, the entity type chosen doesn’t matter a whole lot because in most cases, rental income “passes through” from the entity and is taxed on a personal tax return (but do note the cautionary note under corporations). See the article entitled Necessary Tax Forms for Reporting Rental Activity, included in this Guide, for more details on just how rental income is taxed.

General partnership. The partnership is an association of two or more people to carry on as co-owners of a for-profit business. In a general partnership, each partner has equal management rights, but is personally liable for the debts of this partnership. And regarding that liability, a general partnership is in general not recommended.

Limited partnership. This entity is more complex than a general partnership because it requires at least one limited partner and a general partner. The general partner has sole management rights, along with personal liability for any resulting debts. While, the limited partner is not personally liable for debts of the partnership and likewise is without management rights. This entity selection is generally not recommended.

Limited liability partnership/company (LLPs or LLCs). A limited liability partnership and a limited liability company are quite similar entities, both providing for limited liability to partners/members. This would mean that you will not be personally liable for the debts of the entity, except in cases when the debt is a result of your own wrongdoing. This kind of ownership is often preferable because of limited liability plus there are not as many formalities which require observance than with corporations.

Corporations. This type of ownership provides limited liability and allows for perpetual existence. Although they also require the upholding of special formalities in order to maintain this limited liability guard. Therefore for this reason that LLPs or LLCs are commonly more suiting to your aims. Also worth making note is that corporations have the distinction of being either s-corporation or c-corporation. When a corporate entity is taxed as a c-corporation, it will pay tax on rental income, and then you’ll pay tax (again) when the corporation pays dividends. And it’s best to avoid the double-taxation trap when you are able to.

Tax Accountant is an authority on tax and accounting and has written several articles on these topics. He is a graduate of Washington State University and the University of Washington.

Prior to Purchasing a Dental Practice

Deciding where to buy, how to do it, and what kind of dental practice to purchase is an important step in the career of a dentist. There are many essential decisions to make and key factors to examine as you search for the perfect dental practice that meets all of your needs.

Research Research Research

Dentists must not rush into a purchase, and need to manage their expectations, understanding that the process will take some time. There is no need to hurry through important steps and be impatient. Buying the right dental practice for you matters more than closing a deal quickly when the first opportunity presents itself.

Deciding on Location

Where is it that you would like to live? You’ll want to be a big part of this community, so you’ll need to make sure it’s a good fit. Participating in local activities and mingling with neighbors will help your business grow. A short to medium commute is an important consideration. When you can avoid the long commute, those hours you might have spent on the road can be paid forward and spent instead with family and friends.

What sort of community is the right fit for you and your family? Suburbs? Intercity? Rural? Let the location of your competition inform your decision. Will your spouse be able to find work? Will your kids end up in a school district that will nurture them and grant you piece of mind?

Choose the Ideal Practice for You

Take special care in determining the size and type of dental practice that matches your preferences and needs. Do you want to practice general dentistry or do you prefer an expensive practice that focuses on cosmetic dentistry? Do you prefer a long client list with a five-day-a-week-schedule? Or do you want a smaller practice, with a slower pace, that will allow you to work fewer hours? These decisions affect your finances and stress levels–what can you reasonably make work?

Seek a Valuation

Seek an appraisal through a certified public accountant. A professional with experience in this industry is preferable. This will help you establish a clearer point of view.

Establish a Support Net

Just as your business cannot operate without the support of patrons, you’ll never realize your full-potential without the aid of experienced professionals. There are many areas where you’ll need and benefit greatly from the expertise of others. In the long-run, investing in advisors will save you a lot of trouble. Here are a few people you’ll need:

  • A certified public accountant with a history of guiding dental care practices and other small businesses on maximizing deductions and remaining tax compliant. You will want a Certified public accountant who can do more than just prepare your tax returns. Find a certified public accountant to advise you on how to structure your small business (S-Corp, C-Corp, LLC, PLLC, Sole Proprietorship).
  • A Bookkeeper who is experienced in a small business accounting system like Quickbooks. A certified Quickbooks ProAdvisor is a title bestowed upon a bookkeeper which says the person is certified by the manufacturer of Quickbooks (Intuit Corporation) as knowledgeable with the accounting program.
  • Legal counsel to review all documents related to the sale and to legally protect your interests in the future.
  • A consultant for your new dental practice will most probably prove useful in the long run, helping you save money and avoid headaches.
  • From the beginning, you should establish a relationship with a bank. Getting prequalified will help you gain a handle on how to put in a good offer and how much you can afford.
  • An insurance representative will evaluate risk and assess the value of your business to see just how much coverage you will require.
  • It is intelligent to seek the counsel of a mentor or business confidant of some kind, perhaps a veteran dentist who once went through the same process you’re going through now.
  • A marketing expert-preferably someone with knowledge of internet marketing.

Setting up your dental practice is no small potatoes. Establish a team that can help you get it right.

Tax CPA John Huddleston has a law degree and masters in tax law from the University of Washington School of Law. He has been a guest tax expert on the radio. He advises small businesses in the Seattle Bellevue Tacoma & Everett area on various tax and accounting issues. His firm, Huddleston Tax CPAs, also provides tax preparation service, QuickBooks consulting, business valuation, general accounting and bookkeeping service. Profile information on CPA John Huddleston and the CPAs employed by Huddleston Tax CPAs is available at CPA tax accountant profile. Seattle CPA John Huddleston is a frequent publisher of tax saving ideas.

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  • Huddleston Tax Accountants / Huddleston Tax CPAs – Kirkland
    Certified Public Accountants Focused on Small Business
    11335 NE 122nd Way, Suite 105 Kirkland, WA 98034

    Huddleston Tax CPAs & accountants provide tax preparation, tax planning, business coaching,
    QuickBooks consulting, bookkeeping, payroll, and business valuation services for small business.

    We serve: Seattle, Bellevue, Woodinville, Redmond, Sammamish, Bothell, and areas throughout WA.
    We have a few meeting locations. Call to meet John C. Huddleston, J.D., LL.M., CPA, Lance Hulbert, CPA, Grace Lee-Choi, CPA, Jennifer Zhou, CPA, or Jessica Chisholm, CPA. Member WSCPA.