When to hire a CPA?

Question

At what point in your RE Investing journey did you hire a CPA to do your taxes? At one rental? At ten rentals? After creating a business? Trying to determine how much longer I should do my own taxes. Thanks!

Julio Gonzalez · Answer

@Hannah Potter I usually tell investors that the sooner you get a CPA the better to ensure you are capturing as many tax benefits as possible. The tax code is very complex, so it's better to rely on someone who works with it full time rather than doing it ourselves. Whenever you do decide to look for a CPA, here are some questions that I would typically ask a CPA:

Are you experienced in working with my industry? Do you know the ins and outs of it? How long have you been working in the industry?
Do you work with any specialty tax firms to help us small business owners get access to R&D tax credits, cost segregation and other specialty tax credits?
Do you meet with us routinely to be proactive and do planning?
What real estate tax saving strategies have you utilized with other clients?

I've found that CPAs that focus on a niche area such as real estate rather than offering general services to everyone are typically much more knowledgeable about real estate tax incentives.

Hannah Potter · Answer

Thanks for the advice everyone! This was very helpful. I will focus on looking for an experienced, real estate-focused CPA when I get a little farther along in my journey, perhaps in the next couple years, since I currently have one rental.

Nate Meeker · Answer

@Hannah Potter - at what point did you stop DIY'ing your repairs? For me, if I am able to get a better return on my time somewhere else, I'll pay the expert. Same goes for a CPA.

One incorrect depreciation entry for one rental could impact you for 27.5 or 39 years and cause more filing fees to correct it.

Bette Hochberger · Answer

We get a lot of clients right after starting their business.

Account Closed · Answer

even at one rental, its probably a good idea to connect with one. Better to hire someone then to pay for someone to amend possible mistakes or missed strategies later!

Account Closed · Answer

I would say the best thing to do if your looking to save money and make as little mistakes as possible is get one for the first property and is willing to grow with you. As accountants we want to help people scale up via tax advisory so we can turn a small loyal client into a big loyal client. Having an accountant on your team can do wonders for your growth in that it will help you avoid a lot of mistakes that could cost you big.

Lane Kawaoka · Answer

Note not tax advice, this is more for the high income earner...

Simple Scenarios: Using TurboTax

• Primary Use: TurboTax and similar tax preparation software are best suited for relatively straightforward tax situations. This includes individuals who primarily have W-2 income from employment, basic investment income, and perhaps own a home or have standard deductions.
• Rental Property: If you have one or two rental properties and feel comfortable managing the related expenses and deductions, tax software can handle this level of complexity, especially if your transactions are straightforward and well-documented.

Complex Scenarios: Hiring a CPA

• When to Consider: As your financial life becomes more complex—such as owning multiple rental properties, running a business, dealing with investment incomes, or having special tax considerations (like inheritance or foreign income)—the benefits of hiring a CPA increase.
• Cost Consideration: Hiring a CPA typically costs at least $1,000 to file your taxes, which can increase based on the complexity of your return. This cost is often justified by the value added through their expert advice, ensuring compliance, optimizing your tax return, and potentially saving you from costly mistakes.
• Audit Support: Another significant advantage of a CPA is their ability to represent you in the event of an IRS audit. They provide peace of mind knowing that your taxes are prepared correctly and can defend your filings if questioned.

Benefits of a CPA for High-Income Individuals

• Tax Planning: CPAs do more than just prepare your taxes; they can offer year-round tax planning advice to help reduce your tax liability through strategic decisions about investments, deductions, and other financial moves.
• Customized Advice: A CPA can provide tailored advice based on your specific financial goals and life situation, such as planning for a child’s education, buying or selling real estate, or planning for retirement.

Decision Factors

• Cost vs. Benefit: Assess whether the cost of hiring a CPA is outweighed by the potential tax savings, reduced risk, and the value of your time saved.
• Your Comfort Level: Consider how confident you feel about handling your tax situation. If the thought of dealing with the IRS directly in an audit is daunting, a CPA’s expertise might be invaluable.

Kelly O'Keefe · Answer

I think you should look at working with a tax professional early. If you find yourself second guessing your own preparation or dealing with more difficult topics such as a cost segregation, then it is probably a great time to at least consult with a professional. It isn't uncommon for us to see a new client who could have been reducing their taxes in the past and lost thousands as a result. If you can meet with a real estate specific tax professional and discuss your tax strategy at the beginning of the year I think this would be worth the fee.

Jake Baker · Answer

@Hannah Potter

It depends on how much you like doing it yourself but tax prep is something you should outsource after your first rental.

After several rentals, consider hiring a bookkeeper if accounting isn't your thing.

When to hire a CPA?

Most Popular Reply