I have Outgrown my Accountant -Looking for Recommendations RE CPA

[Lisa Hall]

Hi-

I have properties in several states, and I am looking for a new accountant that specializes in Real Estate Investing and can make sure that I am receiving all of my deductions.

Do you have anyone you can recommend? My understanding is that most Accountants can work in any state. My current properties are in Hawaii, Utah, Nevada and Ohio.

We have been paying our current accountant $200 per year for over 20 years now, but we have definitely outgrown him.

Any recommendations with contact information would be GREATLY appreciated!

Thank You!

Kai Lisa

[Jim Kennedy]

I agree with all the previous responses here. You outgrew your $200/yr preparer. Your return wasn't very complicated at that time. Its the old "You get what you pay for".  You definitely need a higher level CPA because you're in the investor big leagues now. 

For instance, lets think about your depreciation. Standard tax protocol is to back out a portion for land (since we don't know how long land is good for) and take the rest over 27.5 years (Congress told us that number). Is that wrong to do that? No, but you may be leaving a lot of money on the table. Your next tax preparer should be experienced with cost segregation, which is a way to accelerate depreciation and get more deductions in the current year, rather than wait 27.5 years, to get all your cost back, especially if its the year of purchase. Then again, if you've had the properties for more than two years, your next preparer should be familiar with how to take a cumulative adjustment in the current year for ALL the years you owned the property, known as a Section 481(a) adjustment, AND how to complete the related 8 page Form 3115.

Next, let's talk about financial planning. If your next CPA is not a Certified Financial Planner, then you should engage one if you have significant assets - real, stocks, bond, cash, etc. A CFP (Certified Financial Planners) should excel at this. They should have the ability to match your goals to one of easily a dozen different types of retirement vehicles, NOT just try to sell you a variety of insurance policies, as well as explain it all to you in one and two syllable words. Fun fact: I'm a CPA but I don't do my own financial planning. I work with my CFP because that's what he geeks out on. Your next CPA and your CFO should work hand in hand to lower your taxes and prepare you for the future. Remember the 5 P's of the Marine's - Prior Planning Prevents Poor Performance

Then there's your state issues. Of the 44 states that have income tax,  no two are completely the same. State tax law does not always tag along with the Federal tax code. Each state is free to write their own rules. In NJ for example, you can deduct medical expenses in excess of 2% of your resident income and your property taxes. If you rent, there's an 18% tax credit for that, too. But you cant do that in Pennsylvania, although you can write off certain out of pocket business expenses there. But you can't in Massachusetts, but you can write off certain Social Security withholding amounts apart from the Federal rules. But you can't in Florida. Know why? There's no income tax in Florida! So your next CPA should be experienced in your states if investment.

So you should no longer be looking for a data-in, data-out CPA since you have a demonstrated level of complexity to your annual tax filing. Obviously your CPA is supposed to help you, but you should be prepared to help your CPA. He/she should ask probing questions whose answers help him/her help you - its the old saying "You gotta let help help you"

Your first question should no longer be, "How much will this cost", but "what is your background, experience, what services do you have available, and how often should we meet?" THEN you can inquire about billing. Why in that order? That way you have an idea of what you're getting for your investment, because you get what you pay for. Are the returns billed hourly, or per form? Do you have a secure online portal for me to upload my tax documents to? Will you bill me for every phone fax  and email? Somewhere here on BP is a list of good questions you should ask when selecting a CPA.

Especially listen to see how often you should meet. This years estimates are based on last years income, so if your income changes a lot either way, your tax outcome might too. While some business need to meet quarterly, others may need to meet only in December to keep an eye on tax results. Others may not need that at all, but instead may need to meet when a property is sold. Property sales are tricky too, because the gain is increased by the deprecation you've taken since you owned it, so the actual gain could be a rude awakening compared to what your expectation was and that's a problem because when I was in college (roughly 100 years ago) , my old Psychology professor taught us that "expectations are pre-planned resentments.

Its been a great year for sellers. I don't think we'll be seeing these levels of prices for many years to come. Me and the Mrs. sold off two duplexes this year (with two more currently on the market) and dumped it all into our retirement kitty, and yes, we took the appropriate related planning steps. All of this comes under the 5 P's of the Marines: Prior Planning Prevents Poor Performance.  Hopefully these seven paragraphs will help have a positive impact on your life. Good luck and happy investing! 

Jim Kennedy