When investing into Hawaii real estate, there a number of aspects that people make mistakes on that cost them hundreds of dollars. Probably the biggest mistake is allowing workers to work on the property on what people term off the books. Why do people do this? Simply because they do not want to pay taxes on the wages that they are paying these people. So what type of activities do investors try to scam the IRS on? There are a number of things, such as construction work, as well as maintaining the building or the grounds.
So what should the investor do in order to make sure that these kinds of problems do not happen? For starters, you should always pay your workers on the books. Meaning you should have the proof of these payments to the workers, and making sure that your workers file their income taxes. If your workers do not file income taxes, you can be held responsible for these unpaid taxes, which could bite into your profit or even result in the loss of the real estate property that you have invested in. You need to have a IRS Form 1099 per worker for every worker that you pay more than $600 to.
In addition, there are a few tips that you need to keep in mind to further protect yourself. For starters, only hire those contractors that are part of a corporation. This is because as a corporation they will have to document their earnings. You run a risk of the above situation occurring if you just hire those that you consider to be good with tools.
Secondly, you will need proof that the workers carry insurance. If not, then do not do any dealings with them. In the event that they do get hurt, you face dire consequences. And even risk losing the investment all together. Also, in order to protect yourself and your real estate investment, then you should have proof that you are not the sole employer of the workers. This will limit your liability in any situation that is tax related.
There are many other problems that as an investor you need to be aware of. But this is perhaps the biggest problem that could result in financial loss. It is important that you read the state laws for the location in which your real estate investment is located, and go from there. If you ever question an aspect, then ask someone for a clear answer so that you can ensure that you are being completely legal in your real estate investment.