Sylvia Ho is joined by tax planner Lisa Ryckman of Plan With Pathway to talk about income taxes for landlords. Lisa details the top three mistakes landlords make when filing their taxes and explains why those mistakes can be costly.

The three mistakes are 1) not tracking expenses properly, 2) not recording all deductions, and 3) not tracking mileage. Sylvia and Lisa discuss each of these mistakes in depth so landlords can understand exactly how much money they are potentially leaving on the table by making these mistakes. Lisa helps clients through these roadblocks every day and can walk anyone through how to properly track items.

Sylvia learns what happens when a new client calls Lisa and what they can expect when booking a meeting with her.  She also finds out what software Lisa recommends for bookkeeping needs, how to build good tracking habits, and when the best time to start tax planning is. Lisa can assist landlords in becoming organized and claiming all vital deductions on taxes so their real estate endeavors are on strong footing at tax time. 

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Sylvia Ho: schedule a call | facebook | linkedin | youtube | instagram

Lisa Ryckman | Tax Planner, Plan With Pathway: phone (226) 894-3635 | email | website | linkedin

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Transcript

Sylvia Ho: [00:00:05] Hey friends, have you ever wondered how you can pay off your mortgage faster? Or maybe you like to help your kids get into the real estate market? Or better yet, retire with some passive income? Well, you're in the right place. Welcome to the Sylvia Ho Mortgage Podcast. My name is Sylvia. I'm here to teach you how to achieve your goals simply by owning just one more property.

Sylvia Ho: [00:00:28] Welcome to the JOMP podcast. Today we have Lisa, and Lisa is a tax planner. She's been working with clients for the last 15 years, and she's also a partner at the Pathway, which is a full cycle tax and accounting firm. Today, she's going to talk to us about the three biggest mistakes that landlords do when they file their income taxes. She specializes in advising small businesses and property owners how to maximize profits and minimize taxes. She's a natural connector and loves bringing people with a need to others who can solve that need. In her free time, Lisa enjoys spending time with her family, her plants, reading fantasy novels, and finding new ways to make her home a more inviting space for her friends and her husband, who is her partner in her business and her four cats. Welcome, Lisa, to today's podcast.

Sylvia Ho: [00:01:19] Hello everyone. Thanks for listening in to the JOMP podcast. Today we have Lisa Ryckman here. Lisa, welcome to the podcast.

Lisa Ryckman: [00:01:27] Hi. Thanks for having me.

Sylvia Ho: [00:01:29] Thank you for being here. So, Lisa, talk to me a little bit more about what you can do to help my clients. Like a lot of my clients are landlords and landlords are running a landlord business. A lot of my clients are T4'd individuals. They don't know what it's like to, you know, file income taxes with expenses. Right? It's like, what? What do you mean, what are you talking about expenses? My expenses are deducted on my paycheck every single time I get paid. Right? So as a tax planner for the last 15 years, what would you say are your top three mistakes made by landlords? Let's start with mistake number one first.

Lisa Ryckman: [00:02:09] So I'd have to say there's a number of challenges because I always track everything that everybody's doing. So if you come to me as a brand new, fresh landlord, if you just purchased a property, then I'm going to walk you through what my expectations are and we're going to talk about what expenses I want you to track. And we're going to have a couple of meetings to actually go through that. So I'd have to say first thing out of the gate would be just based on purchase, right? So if you purchase a property, you are going to receive closing paperwork. And a lot of people, they're either not reviewing that paperwork or they're either not separating the expenses and they're giving me a clump. So I'm just getting this one total. And one of the problems we have with that is, you know, we've got categories that we have to define on the tax software because Canada Revenue wants to understand, oh, you have $50,000 in expenses. Well what is that? Can you break that down for us. Right? Because we always want to avoid an audit. One of the key pieces that I find is that people are always trying to write off their land transfer tax, and you're not allowed to do that. So I want to be able to make sure that you have everything tracked correctly. So I'll provide you with a spreadsheet if you want to use it. You can, if you don't, don't. If you want to use software, please go ahead and purchase something that works well with you and your personality.

Sylvia Ho: [00:03:43] You're telling landlords to, you know, track your expenses. And one big part of that expense is being a new landlord is the legal fees that you are paying, the land transfer taxes that you are paying, probably some accumulation of property taxes that you paid at the lawyer's office, but not with your property tax bill because it's on the lawyer's bill. Right? Because the other old, the old owners paid it. So stuff like that is just tracking all of that paperwork. And you'll provide as a tax planner, you have a consultation with a landlord and you help them, you give them, would you say, a spreadsheet for them to track all of those things?

Lisa Ryckman: [00:04:21] Exactly that. And I'll ask for that final closing paperwork as well, so that I can take a review and see if there's anything that's amiss so that, you know, we don't have any blended numbers.

Sylvia Ho: [00:04:33] So tracking expenses properly, that's a big part of running a brand new landlord business. And then the big takeaway right now guys, is if you just bought a property, a big chunk of your money is going to pay land transfer taxes. And right now what you're telling us is that land transfer taxes is not a deduction.

Lisa Ryckman: [00:04:55] That is correct, Sylvia. You can't, it is not a deduction.

Sylvia Ho: [00:04:59] Okay. What's mistake number two that landlords have to look out for?

Lisa Ryckman: [00:05:02] Oh not recording all their deductions. I find that there's a fear. So there's a huge fear with people. They're either in two categories, they're in, I don't care if I'm reviewed. I'm going to write off absolutely everything. And then there's the, I'm afraid of Canada Revenue knocking on my door and taking my home. So I'm not going to write off everything that I have. And I hear that all the time. Eligible expenses. You have an eligible expense, your opportunity is to write that off. So let's utilize that. So it's getting over that fear. And I find that most people do have a slight fear of Canada Revenue and making a mistake. But lo and behold, what I found over the last 15 years is they're actually quite lovely to deal with. So I've never had anybody yell at me. I've never had anybody scream at me. You know, they're there to help you work on the problem and get it fixed. So if you make a mistake, then there's always a way to back it out and to fix it. So if last year you did your own taxes and you didn't, you know, file all your expenses and you came to me this year, then I would ask you, based on what I'm looking at, well, how come you have $5,000 more than this year over last year? Because I always take a look at last year and do a comparison. And if you tell me, well, I didn't write it all off, I'm going to say, okay, we need to take advantage of the opportunities. So let's go ahead and make an adjustment. Right? And so then we can go back and we can file an adjustment so that you can capture that expense deduction. And we'll also have the paperwork to back it up. So as long as you have the expenses, the expense paperwork to back it up, then there's no reason why we can't fix it.

Sylvia Ho: [00:06:57] Okay, so you're saying that there are clients that like to expense everything, and that's me. I'm like, here, take it all, expense it all. And then there's other individuals where I never thought about which are scared for eligible. They don't do all of their deductions. So then my next question to you is, as a new landlord that is not used to deductions, what are the eligible deductions that landlords can make?

Lisa Ryckman: [00:07:25] Oh, all the utilities that you're paying on the building, that's a huge one. So even if you have your your tenants paying for their hydro, most likely you're paying for the water. You know, you're paying for the sewage. So you need to remember to keep all of your statements. And if you don't, then that can be a problem in the future because we need to keep them for ten years. Oh mortgage interest, huge. So a lot of folks that I've bumped into have been calculating the mortgage that they're actually paying on the property, rather than taking a look at their final mortgage statement that comes out in January for December. So it'll itemize exactly how much mortgage interest you paid on that property. And that could be really huge. Your property taxes are going to be large, but your mortgage interest is going to be bigger. And so if you have 11,000, 12,000 even, of course, if you're a landlord, you're going to have a bigger number than that, right, of mortgage interest, so that could scare people. Major renovations. Right? So if you have somebody, if you're, you know, you have a triplex and you're redoing it one unit at a time, then you could have so many different expenses. And that's where you really need to sit down and figure out your own personality and how you are most comfortable with tracking all of those types of items. If you're not a spreadsheet person and you'd rather just, you know, log everything in a notebook and keep a shoebox with you, that's fine, but at least put things in envelopes and divide them by categories, right? And if you need assistance with that, then I can certainly help you.

Sylvia Ho: [00:09:13] What I hear about eligible expenses is definitely the interest that you pay on the mortgage, on the rental property. And that number is dictated on the annual mortgage statement that we get from our lenders every January, February time. Utilities are are another expense. Property taxes are another expense. So keep all of those bills. Any kind of major renovation bills, keep all of those. So my question to you is as a new landlord, how about like internet or like advertising or... supplies. How about those kind of things? What are your thoughts on that?

Lisa Ryckman: [00:09:52] If you're out of pocket expense for your tenants, if you're paying for the internet, then absolutely. If it's for you personally, well, it depends how many units you actually have as to whether we're going to write off home base expenses. Supplies...

Sylvia Ho: [00:10:07] Let's talk separately, separate. Let's not talk about a home and rental. Let's just keep a rental on their own, because that's what a majority of clients are. Yeah.

Lisa Ryckman: [00:10:16] So if you have supplies that you need to purchase for that space, then absolutely go ahead and do that and go ahead and write off that expense. If you're, for instance, taking care of the yard work, right? Then you need to purchase fertilizer. You need to make sure that you maybe buy some seed for the grass. You know, there could be plants that you'd like to put in, do your own landscaping. So there's definitely supplies that you can purchase, salt, things like that. Anything that is the cost of doing business, you've got to think of it that way. You now have a business and there's an ownership that you're taking there, right? So any time that you spend money, I would keep the receipt just in case it actually is an expense. Here's one, if you go to Costco and you're purchasing things from Costco for your business, then of course that Costco membership is an expense. It's a write off. So you need to remember that, you know, you've got to keep that receipt when you go ahead and you pay for your membership on it on an annual basis, and the mileage that goes along with that. Right? So if you're going to Home Depot and you're doing all of these trips because you have things to pick up, because you've got to take care of your property, and perhaps you're just putting in a new tab and you went to Lowe's then, you know, yes, you've got the receipt for the supply, but you also need to make sure that you track your miles, because it's important that you don't forget that piece. And that's probably another challenge that I would say that I have with my clients is their mileage tracking.

Sylvia Ho: [00:11:53] Okay. And I'm assuming that, you know, as a client speaks to you and hires you as their tax planner, you'll give them the tips and tricks in how to do all these things.

Lisa Ryckman: [00:12:02] Oh absolutely.

Sylvia Ho: [00:12:04] Beautiful. Okay. So I hear challenge number one is tracking expenses. Challenge number two is actually not claiming all of the expenses, right? So mistake number two, so what would you say to a brand new landlord would be mistake number three that you're, like, please stop doing this. You're leaving money on the table.

Lisa Ryckman: [00:12:22] Oh it would be mileage. It's huge. It's huge. Yes. I'll give you an example. Can I give you an example?

Sylvia Ho: [00:12:28] Yes.

Lisa Ryckman: [00:12:29] So I have a client that I took on a couple of years ago that purchased a property in Woodstock, and that was great. They live in Brampton. They didn't keep track of everything. So you can imagine the distance between Brampton and Woodstock. So they weren't tracking the amount of times that they actually went there. And they went there quite often because they needed tenants and they needed to let the tenants in. And, you know, you're trying to rent your space, but, you have to be there. And, you know, people don't show up, so, okay, people don't show up. So then you have to drive back to Brampton, but you still were there for a specific reason, right? So if you don't keep that tracking then you've just driven your van, which is, you know, not a small vehicle, to Woodstock. You've lost the kilometers on that. The other thing that I'm finding with the mileage is people don't keep their gas receipts, and I need them to keep their gas receipts for their vehicles.

Lisa Ryckman: [00:13:31] So this client ended up buying another property. The second property was in Ingersoll. It still is. And they were back and forth. Brampton. So Brampton to Ingersoll, it's even a further distance, not tracking the miles. So they're a little bit behind in their tax filing. And so we've had a number of meetings, and this is recent because I'm asking them, Okay let's go back. Let's go back, right? How many times did you actually drive to Ingersoll to let tenants in? To let a prospective tenant in? To have a viewing? What did you fix? Were you there for the plumber? What were you in Ingersoll for? What was that specific reason for the trip? And I cannot tell you, we are at 1000km, of course, already, and we've just talked about a couple of trips. So, you know, if you think about it, each trip that you take, I can probably capture $0.61 per kilometer. So. Every hundred makes a thousand. And if you're looking for a really good refund at the end of the year, one of the places that I'm going to look is it's going to be your mileage, right?

Sylvia Ho: [00:14:53] So it almost sounds like, as you're talking, it almost sounds like makes sense to keep record of it. Right? Of what you're doing when you're doing it. Or maybe, I don't know, I just thought about like a little book in your glove compartment. Like, if you are doing these things back and forth, just keeping track of them.

Lisa Ryckman: [00:15:10] We have mileage logs!

Sylvia Ho: [00:15:11] Okay, obviously I don't use them. Um, okay. So that sounds good. So mileage, keeping track of expenses, making sure you write off all of your expenses, would be your top three. Now, as a tax planner, what would a typical client look like for you that you're like, hey, this is a client that I can help, that I can work with, if someone was just going to give you a call and say, hey, my name is Sylvia, I heard you're a tax planner. Tell me, what do you do, Lisa?

Lisa Ryckman: [00:15:40] Well, the first thing I do is I interview the potential client and see exactly what it is that their challenges are. Right. So they're calling me for a reason. And, you know, it may be just to prepare their taxes, but most people have a lot of questions for me. They have something. There's something that they've wanted to know or something that's been bothering them, and they need to understand it. Or perhaps they don't feel that their tax refunds have been substantial enough. I had a client a couple of months back who contacted me. They're involved in a leveraging situation, and they had a feeling that they just weren't getting a big enough refund on that leverage side, and they wanted me to review their tax returns. So that's what I did. So I took a look and they were getting excellent refunds. So it was just being placed on a different side of the tax return. And so because they couldn't see it, it was, and it dawned on me when I looked at their tax return, I went, oh, they only received a 43 cent deduction. Why could, why is this, right? So this is what concerned them, they're like $0.43. Why am I only getting $0.43? Well of course that's a huge red flag. But it was on the other side of the return. So, you know, I pointed that out, walked them through it, explained how the accountant at the time justified the expense, and there was nothing wrong with the way it was prepared. It was just pivoted on to the other side, and they just needed to understand why. And so we just went through it. And so they're happy, they have their answers, and I'll see them at tax time. So I'll have a new client.

Sylvia Ho: [00:17:25] Okay. And then so you'll have a chat with the client, you'll answer their questions, you'll review their tax returns, and then you prepare their tax returns during tax time. So the busy March / April time. Right? And then you'll actually file the income taxes for them.

Lisa Ryckman: [00:17:42] We're going to have a meeting, though.

Sylvia Ho: [00:17:44] Have a meeting.

Lisa Ryckman: [00:17:44] So that's one thing that I absolutely insist on, is that we have a meeting. So each and every year we need to have a connection because I need to understand what's changed in your life. So I have no idea if, you know, your spouse has passed away, if you've had another child, what's going on in your world? Have you started a new job? Is there something new in your life? Right? And why is your tax return not as high as last year? So how come your expenses are down? So I need to understand that.

Sylvia Ho: [00:18:18] So having a meeting. So when you're talking about having a meeting, is that a face to face meeting or is that a Zoom meeting? Because a lot of my clients are here in Toronto and I know you're you're outside of Toronto, correct?

Lisa Ryckman: [00:18:28] That's true. So I had potentially maybe five face to face meetings throughout tax season. All of the rest of them were virtual. So the pandemic has been, that's a positive thing with the pandemic is most people want to actually have that virtual meeting now, which is fantastic, and we can do that at any time. So during tax season, I expand my hours. So I'm available from 7:00 in the morning. If you want to talk at 7:00, I'm available. And you know, we can chat at seven at night and we'll go through and look for opportunities because that's what I'm looking for. So I'll take you through a list of items. So if I send out a list to every single person that books a meeting and I want you to complete that list, and if I look at your tax return and I've known you for a couple of years, then I'm going to ask you, like, what are we doing here? How come we don't have any investments this year? You know, this is something that you normally do and, you know, so we'll have a good conversation about potential opportunities, where you want to see yourself in the future. Do you have, you know, retirement planning happening, and if so, then here's an idea for you as to what that's - so this is the tax planning part. So I'd rather take time to do some tax planning and conduct some tax planning with everybody. If they send me everything in advance, then we can spend our 20 minutes chatting and getting some planning done, and then we'll go from there if they want further consultations and we can book some.

Sylvia Ho: [00:20:11] Okay, so in regards to planning time, when is the best time to start planning for your income taxes? I know everybody's scrambling and like - well, I'm scrambling, I don't know about everybody else - scrambling in March / April to try to meet that, you know, end of April deadline. I'm assuming that there's probably a better time to do that kind of planning? You tell us listeners, when is, in your opinion, is the best time to do this kind of conversation planning? Do we wait all the way to tax time or do we do it earlier? Like, do we do it now?

Lisa Ryckman: [00:20:41] Yeah, I think as soon as you have that thought that you're questioning yourself, when do I do my planning? Then you have a chat with me, right? And because a lot of it has to do with bookkeeping, right? Getting everything set up, getting getting everything organized, understanding yourself, how you track stuff. So you know it has to be based on your personality, not mine.

Sylvia Ho: [00:21:09] So whenever a client is thinking about, okay, it's it's time to start thinking about am I doing this properly? Am I running my landlord business properly? That's when it is a perfect time to have that conversation with you. You brought up bookkeeping. I hate bookkeeping. I've been doing bookkeeping for years and years. It feels like decades, and I'm just like, I've just never found the perfect way. I used to do it all by paper with a shoe box. And then I went on to excel, and I thought I was really, really smart. And then Excel blew up on me. And now I'm using the online version of QuickBooks. Right? So what is your opinion like for a new landlord to start? Just start simple or actually go to a QuickBooks situation?

Lisa Ryckman: [00:21:53] I'd go to a QuickBooks situation.

Sylvia Ho: [00:21:55] Okay.

Lisa Ryckman: [00:21:56] Yeah. So it's very inexpensive. So you do need expenses when it comes to your landlord business. So there's a number of different QuickBooks versions, right? I certainly wouldn't start with the lowest version which is $16 a month, but I would go to the next version. So QuickBooks Essential is I think $28 a month through us. So we resell it. And so it's a lot, it's less expensive than it is online. But QuickBooks, you know, gives you an opportunity to actually try their software. So you can go and try it, get it for a really good price for six months, and then you have to pay full price after that. But, you know, you don't lose your data. So if you decide that you don't like it, your data always has to stay in QuickBooks. So they're not going to throw it out on you. And if you, you know, the software, you decide later on, well, maybe this is what I need to do. Maybe my wife's going to take care of this for me. And she likes QuickBooks so... or my partner, whatever the situation is, you know, I think that it has a lot of value because if you're the kind of person that you go to the gas station and you have a gas receipt, or you go to Lowe's and you purchase something, you have the opportunity with QuickBooks to download the app to your phone, and you can take a picture of your receipt and it's going to upload it to your account. So that's really nice.

Sylvia Ho: [00:23:21] So no more shoeboxes.

Lisa Ryckman: [00:23:22] No more shoeboxes.

Sylvia Ho: [00:23:24] Or piles of receipts.

Lisa Ryckman: [00:23:26] Nope.

Sylvia Ho: [00:23:26] And it's only 16 bucks per month or $28 per month.

Lisa Ryckman: [00:23:32] Yeah, $28 a month. So you know, you've got, what, a $300 expense at the end of the year. You got to think about it this way. How much is your time worth and how much frustration are you actually going to be going through when you're trying to manage your books? So some people like the spreadsheet option and going and writing it all in. I like the report option. I like to go into QuickBooks, and I like to pull up a report so that I can see your profit and loss, and then I can see the areas that potentially you might be missing opportunities, and then we can have a discussion about that. Because if your goal is, you know, potentially you own ten properties one day, you know, you might want to be a real estate mogul, who knows? And if that's your goal, then you need to be super organized in a different manner. And so we need to make sure that you set yourself up for success at the beginning, right? So if you start a habit at property one, by the time you get to property ten, you're going to be teaching that realtor all your tricks about how you're running your realty business, right? Exactly.

Sylvia Ho: [00:24:49] Okay, beautiful. Now, Lisa, for the listeners out there, how do we get hold of you? Is it the best way, is that via email? Is it phone number? What's the best way to get hold of you?

Lisa Ryckman: [00:24:59] Oh, email is fantastic. If you're a phone person, you can call me. Leave a message though. So it's Lisa at... so it's [email protected].

Sylvia Ho: [00:25:14] Lisa @ plan w i t h p a t h w a y.ca.

Lisa Ryckman: [00:25:23] Correct.

Sylvia Ho: [00:25:23] Okay. So, [email protected]. Okay. And if they're not the type of person that likes to do email because they're like, I really want to just talk to someone on the phone. What is your number?

Lisa Ryckman: [00:25:37] (226) 894-3635.

Sylvia Ho: [00:25:42] Okay. And they could just leave a message there if you don't pick up.

Lisa Ryckman: [00:25:44] They can leave a message. And I love technology changes. So this is actually our office line. And so you can text if you want as well. So I find that very convenient. If they would like to text they can, if they want to call and leave a voicemail, they can. Whatever they'd like to do. We'll get back to them.

Sylvia Ho: [00:26:02] Excellent. Thank you so much, Lisa. Before we end this podcast, any last minute advice you want to give the new landlords that are listening in today?

Lisa Ryckman: [00:26:12] Don't be afraid to grow.

Sylvia Ho: [00:26:14] Okay. Don't be afraid to grow. Beautiful. Thank you. Oh, sorry. Go ahead. No. Did you have something to add? I just cut you off.

Lisa Ryckman: [00:26:21] I would also like to say, don't be afraid of losses. Because sometimes, yeah, because sometimes you've got to go through losses in order to have, like, a wonderful, bountiful garden of growth. Right? So I think that after speaking to you last week and you talking about landlords who are finding themselves in a position where they're experiencing a lot of loss, if you can afford that loss, you're going to have a wonderful tax return at the end of the year that's going to pay you back for it. So if you can manage the loss for 12 months, just remember your tenants are paying your mortgage. If you let your tax return pay you back for the debt that you've incurred, it's on to the next year.

Sylvia Ho: [00:27:11] Very nice. That ties in nicely with the new program that I have going on right now called Cash Damming. So for you listeners out there, if you are a landlord and you are a landlord that is in negative cash flow and you're trying to figure out how to deal with that loss every single month, and you're just wondering if there is a better way, please be in contact with me. There is a program for you that Lisa totally understands as well, and will put you in a better financial position. Thank you again, Lisa. I really appreciate your time. People know how to get hold of you. If you guys have any questions, do touch base with us. Thank you so much. Talk to you guys all later.

Lisa Ryckman: [00:27:50] Thank you for having me.

Sylvia Ho: [00:27:53] We just heard from Lisa Ryckman. She is a tax planner and she just talked to us about three top tips, mistakes that new landlords make when they file their income taxes. It was really, really eye opening. Even I learned a lot of stuff. So do reach out to her if you have any questions, you can reach her at (226) 894-3635. Again it's (226) 894-3635. She works really well with texting that number as well. Or you can reach her at her email which is [email protected]. Again it's [email protected]. Talk to you guys later. Bye now.

Sylvia Ho: [00:28:43] Hey friends, thanks so much for listening to the Sylvia Ho Mortgage podcast. We'll catch you on the next episode. You want to learn more about the JOMP program? Please connect with me at SylviaHo.ca. Love to hear from you. All it takes is 15 minutes for us to chat to see if this will work for you. Thanks, guys.

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