The Tax Man Cometh and Stayed and Stayed

I hated to be so absent on RCG the last couple of weeks, (took me several hours to catch up on posts. Ardell, you’ve outdone yourself, as usual, plus all those deals!Dont’ know how you do it). Here’s my excuse, I’ve had two audits this spring and they’ve both buried me. Plus I’ve been on two investment fact finding trips and hired two new agents for LTD just this week. (hmm, something about 2’s) I’ve been buried but wanted to share something that I thought my 2 (there it is again) tax attorneys and one real estate attorney should have prepared me for and had never heard of.

You try to listen to your attorney when he or she tells you to protect yourself and set up an LLC. but, if you’re like me and didn’t give much thought to how you share staff, leases, assets like office furniture, holdings, like real estate holdings, etc, etc, etc, please avoid the following that can cost thousands if found in an audit.

[photopress:taxman_1_2_3_4_5.JPG,full,alignright]For example, if I own two companies, a construction company and a company that buys property, subdivides, remodels, build new, etc., and if an employee from the construction company (where the liabiltiy and stop gap insurance is) builds for the venture company, then I must charge sales tax to myself!. Yes, I know the LLC’s and the Inc.s are their own entities, but it never occurred to me that I’d have to charge myself sales tax and give it to the state even if I’ve already paid sales tax at the point of sale. Similarly, if I bring my computer from home (or office furniture or ANYTHING and GIVE it to one of my companies, I must again pay sales tax. I own the computer, I own the company, I paid sales tax when I bought the computer. However, the state wants it’s $ so they consider that I sold the computer and therefore must pay sales tax.

Another example. If the construction company pays an architect for plans for the venture company, then I must charge tax and pay it to the state, even though architects are a service industry and don’t incur sales tax. I could elaborate but it’s just more of the same. Reminds me of my restaurants I had in the 80’s. I had a similar audit and because I gave free meals to my employees(100 of them at $2/day for 5 years), I had to pay sales tax to the state on those FREE meals. Go Figure.

So, I’m now much poorer and hope I’ve alerted at least someone out there to watch this on your books. I have 11 LLC’s, I’m just glad the audit is done and I won’t get in trouble next time. There is the possiblility that there will be some relief for this injustice in July, but it would probably only affect some of the issues.

But, lesson learned and I’m now cutting paychecks out of 4 different companies. Four sets of W-2’s, etc for each employee. Yuck

I’m going to start blogging on some cool strategies to invest 401K, Seps, IRA, Roth IRA in real estate when I get the time, but I wanted to alert you to a webinar that is excellent being given by a great custodial company, Pensco, in case you want to hear how to invest one of those entities in real estate and use leverage, even though most accountants will tell you you can’t. There will be many upcoming webinars about similar subjects. Click here for a description and to register.

And on a better note, sold a 1.3 million piece of waterfront land on Beach Dr.near Alki today. Gotta pay for those taxes somehow!

8 thoughts on “The Tax Man Cometh and Stayed and Stayed

  1. Pingback: The Tax Man Taketh at the Money & Investing Dogberry Patch

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