THREE TRAPS TO LOOK OUT FOR, BEFORE YOU HAND THE FORMS TO YOUR CPA:
The 1098 thing: Your Form 1098 shows mortgage interest. Your CPA plugs it into Schedule E. But banks miss points sometimes. Especially on refinances. And if you used a HELOC for personal stuff but paid it through the rental that 1098 number is wrong. Legally wrong.
The escrow problem: Check the property tax line on your 1098. Some lenders report what you paid into escrow and not what they paid the county. But the IRS only cares about what the county actually received. So if you trust just the 1098, you could miss thousands in deductions.
Phantom income on 1099s: Sold a property? You’ll get a 1099-S with a gross proceeds number that looks scary. If you hand that to your CPA without the closing disclosure, they can’t deduct your legal fees, commissions, or cost basis. You’re paying taxes on money you didn’t actually get—same thing with rent 1099s from property managers. Make sure you’re not paying taxes on gross income that went straight to a plumber.
IT ISN’T ABOUT BEING PERFECT. IT’S ABOUT BEING DONE.
By January, the year will have already told you whether your process worked. If you handled it during the year, tax season is manageable. If you didn't, you pay for it with your time. Let us all be on our A game. Repeat after me: “I will build the habit early, get W-9s, keep vendor files clean, and review my list before year-end. I'm already in a better place than most landlords.” Protect your process now, and you protect your peace of mind later.
PROTECT YOUR PROCESS NOW, AND YOU PROTECT YOUR PEACE OF MIND LATER.
GITA FAUST Fractional CFO, Controller & Bookkeeping Real Estate Financial Systems RealEstateAccounting.com
Gita Faust brings together real-world rental property experience and accounting expertise to help investors and property managers build stronger financial systems. Through QuickBooks courses, automation and workflow consulting, and bookkeeping and accounting services, she is known for her practical, approachable style and her ability to turn financial confusion into clarity and confident decisions.
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