0:01
to apply the rule and you’ve got these
0:03
events and uh rental amounts and uh all
0:07
the paperwork. Okay, but your CPA
0:09
doesn’t know any of this. How do you
0:11
communicate with them? Well, you really
0:13
don’t. The app does it all for you. In
0:15
the old way, you’d have to gather
0:16
everything up, make sure you had each of
0:19
your events, all your check stubs,
0:21
substantiating documentation, put it in
0:23
a giant folder, and cart it over to your
0:25
CPA’s office. or maybe if you’re
0:27
advanced, you’d scan it and email it to
0:29
them. The app is even better than that.
0:31
It’s already all there. It’s already
0:32
stored. When you click a one button, it
0:35
sends the entire packet to your CPA. Not
0:38
only do they have all the substantiating
0:39
documentation, but they have the ability
0:42
to reference it at any time themselves.
0:44
And on top of that, they have complete
0:46
instructions on how to file properly.
0:48
When your business pays rent, it’s
0:51
expected to issue a 1099 to those
0:53
receiving the rent. So, your business
0:55
will issue you, per our instructions to
0:57
the CPA, a 1099 because that’s what the
1:00
IRS expects to see. And when you give
1:02
the nice bureaucrats what they expect to
1:04
see, they’re less likely to dig. When
1:07
they get what they don’t expect to see,
1:10
they start asking questions. So, give
1:12
the friendly bureaucrat what they expect
1:14
to see, the 1099. We also want
1:16
consistency. This is a business
1:18
deduction. We’re treating it the way we
1:19
would treat any other business
1:21
deduction. We’re sending a 1099. But
1:23
wait, won’t that cause Skynet to look
1:26
more closely at you? Unlikely. You could
1:29
get a letter. We’ve seen a few of those
1:31
and we’ve successfully dealt with all of
1:33
them in short order. So, what happens on
1:36
schedule E of your form 1040, you’re
1:38
going to report rental income. Why?
1:40
Skynet expects to see the income. So, if
1:43
you don’t put it there, the IRS computer
1:46
may flag you for audit or a letter. We
1:48
want to avoid that. We want them to see
1:50
the income. That’s why we’re reporting
1:52
it on schedule E and instructing your
1:54
CPA to do that. You don’t have to do
1:56
that. We take care of that. Then there’s
1:58
an offsetting deduction of exactly the
2:01
same amount of rent and it refers to the
2:03
Augusta rule and to code section 280 cap
2:07
A G2 and why you don’t actually owe any
2:12
tax on that particular amount. So we
2:15
satisfy Skynet and there’s a small note
2:17
on the return because should Skynet be
2:19
triggered anyway perhaps over something
2:22
then we want an explanation. What
2:24
happens is if Skynet’s triggered let’s
2:27
say for some other reason it flags your
2:29
return and decides hey sorry but you’re
2:31
getting an audit. Normally a human or an
2:34
IRS agent looks at the return and when
2:37
we put a note on the return explaining
2:39
why we did what we did the odds of an
2:43
audit go down. I’ve actually spoken to
2:44
agents, both current and retired, who
2:47
have confirmed that if there’s a good
2:48
note on the return, explaining why a
2:51
thing that looked strange to Skynet
2:53
actually makes sense, they will often
2:55
put aside the return and undo the flag
2:58
that Skynet put on it, meaning no audit.
3:01
So in summary, we automatically get the
3:03
accountant the information they need,
3:05
the data, but we also explain to them
3:07
what to do and why this approach is the
3:10
superior approach, taking into account
3:13
the nature of both Skynet and the agents
3:16
behind Skynet.