Rental Property Receipts, Tracking Expenses & CPA's

[Matt Moldenhauer]

I'm curious to know how other people handle their receipts with their CPA. This past season was the first time we claimed our first rental property on our taxes. We only had a few receipts to turn in to our CPA, so i just gave them to her in a folder with all of our other paperwork. This next year will be a different story though. We've done a lot of minor things to our rental house and plan on purchasing two more before the end of the year. We will keep all of the houses and expenses separate. Looking at the Schedule E, is that something I should go through my receipts for each property and fill out to the best of my ability? Or should I just hand over the file for each house and let her do all of the work so everything gets classified correctly?

[Brandon Hall]

@Matt Moldenhauer you should not be handing your CPA a folder of receipts unless you are willing to pay double or triple the normal cost for tax prep. You may certainly have the CPA do all of your accounting at year end, but at my firm, that's the difference between an $800 and a $2,500+ bill.

Tax preparation is compliance focused. We take the information you provide us and that we believe we can reasonably rely on, and prepare your returns. It's much more than simply "entering it into our computer" as we are constantly interpreting regs and how much weight to give one code section over another.

If it were as simple as entering it into the computer, everyone would use TurboTax. However as one investor who refused my services due to price is now finding out (I know this only because I saw him post a couple days ago asking for "free" help) the tax code applicable to real estate is quite complicated and there is a lot of behind the scenes work that our clients often don't see.

That said, I generally want an itemized listing (in excel, not paper receipts) of expenses in their various categories. I request this for the reason you cited - I want to double check how the client classified repairs, improvements, meals, and travel.

If you're not comfortable with your CPA, interview new ones after tax season. At the end of the day, your CPA should be offering some sort of tax planning or education (that you will certainly need to pay for) rather than solely being a tax prep person.