Will you do your own taxes this year?

Tax, SDIRAs & Cost Segregation
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Will you do your own taxes this year?

Kurt Gardner
Investor · Maryville, IL · Member since 2016 · 129 posts · 81 votes

I have searched the forums and blogs on the subject, and it seems to be slightly leaning toward CPA/professional preparation.

I have used a professional for the last 10 years and each year, my costs have increased (we are charged by the form, so with more forms [more properties] comes more cost).  Because I have had what I believe to be competent preparation in the past, I am considering the option of using those previous returns as a customized guide for self preparation this year.

I may give up halfway through and decide to acquire a professional before the deadline next year, but I feel like it's something I should try.

I am aware of the business version of turbotax and I also saw a reference to taxact.com as a method for personal preparation.

  • My situation is:
  • I have 5 SFH all occupied. 1 was acquired this year (rehabbed then rented).
  • I have 1 duplex acquired this year (neither side rented yet - completing rehab and expect to rent in the last month of the year or first of 2017).
  • I have a full time job.
  • My wife has a part time job.
  • We are a sole proprietorship regarding the business organization.
  • My total cost for preparation last year was $865.

Please comment...will you:

  1. Use a professional for your tax preparation, yes or no?
  2. If no, what software, program, method will you use to prepare your taxes? 
  3. If yes, what do you expect to pay as SP?
  4. If you prepare your own taxes, what has been the biggest help, learning moment, best advice you would pass along to a fellow investor.

Thank you for your time, and as always, I appreciate this community, the encouragement, and advice!

1Reply
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Most Popular Reply

Brandon Hicks
Investor · Avilla, IN · Member since 2013 · 796 posts · 769 votes
9y
I have 61 rental units, two other deals I'm holding paper on, a small painting biz and a wife with a W2 job. My tax prep is about a grand a year. I guess maybe you should shop around but at the end of the day, I'll gladly pay a pro for tax prep. Just as I'll gladly pay someone else to clean apts and deal with toilet repairs. Assuming you want to grow your business you should be able to add more value to you business by using that time finding your next deal. Just my two cent.
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  • Marco G.
    Investor · Dallas, TX · Member since 2015 · 446 posts · 197 votes
    9y
    I've done my own tax preparation my whole life, starting with my 1040-EZ back in the day. I used to make so little money that I qualified for the free filing and I would do it at the public library. For the past nearly 10 years I've used HR Block's Tax Cut online software. I don't do rehabs, but have acquired properties with five figure make readies at turn over due to deferred maintenance. It does take my quite a bit of time to do them even though I maintain an excel spreadsheet all year. But it gives me a greater understanding of my business and helps when making decisions on improvements and how much I'm contributing to my deferral accounts to make sure I can still take the passive activity loss deduction. I am a single filer with two W-2's, a Schedule C consulting business on the side, and multiple properties held in my own name, including personal residence with HELOC used as down payment source for a few investment properties. Most but not all properties professionally managed and maintained. As a tip, don't try and do it all in one sitting. It helps to break it up.
    5Reply
  • Marco G.
    Investor · Dallas, TX · Member since 2015 · 446 posts · 197 votes
    9y
    Oh, and it costs around $125 for software and filing fees. From a purely time vs money standpoint you may be better off with professional preparation, but again, I feel I benefit from the intimate knowledge it gives me.
    0Reply
  • Brandon Hicks
    Investor · Avilla, IN · Member since 2013 · 796 posts · 769 votes
    9y
    I have 61 rental units, two other deals I'm holding paper on, a small painting biz and a wife with a W2 job. My tax prep is about a grand a year. I guess maybe you should shop around but at the end of the day, I'll gladly pay a pro for tax prep. Just as I'll gladly pay someone else to clean apts and deal with toilet repairs. Assuming you want to grow your business you should be able to add more value to you business by using that time finding your next deal. Just my two cent.
    7Reply
  • Percy N.
    Developer · Philadelphia, PA · Member since 2015 · 2k+ posts · 904 votes
    9y
    Don't forget that a good tax professional does not just fill out the firms, but gives tax planning advise which can be worth it's weight in Gold..or more.
    7Reply
  • Kurt Gardner
    OP
    Investor · Maryville, IL · Member since 2016 · 129 posts · 81 votes
    9y

    @Marco G.  the intimate knowledge was a big factor in all the posts I read previously, and I have a good basic understanding, and I know I could benefit from this deeper dive.  Good suggestion on the "not all in one sitting."  I am a grinder, and I would try and get it all done in a day, lol!

    @Brandon Hicks I am a huge proponent of the phrase, "money well spent."  I contract out a large part of my business, and it seems a bit illogical to not contract this out...I guess I was just sticker shocked with the last year cost when compared to previous years of half that.  Still, I see it as a discipline and an opportunity, like Marco suggested, to get a more clear picture of my business...I have excel sheets with schedules and all types of tracking, so I'm not afraid to do a hard look at my numbers.  I guess I figure if I can set up all these other measures to keep an eye on my business, then perhaps I could be competent enough to do the taxes?

    @Percy N. two years ago, I lost the CPA who was doing my taxes because she retired, and THAT is a big factor in why I'm looking around for other options.  She did exactly as you said, offered me great advice and pointed out areas where I would not have thought to look for valuable savings.  Even though I have had my taxes done with her still working partner, there is no comparison.  Not only do I feel like she doesn't pay attention to my concerns, but I feel like she is rude and unresponsive when I contact her for questions.  It has left me with a bad taste, and I cringe at the thought of giving her another dime of my money to act in such a way.  I have feelers out there for other's experiences for competent CPA/preparers, and hopefully I will get a good lead or two so no matter which way I go, I can feel good about this time of year again.

    Thank you for the responses!

    1Reply
  • Steve Vaughan
    Rental Property Investor · East Wenatchee, WA · Member since 2014 · 10k+ posts · 16k+ votes
    9y

    I still do my own. I put in the work keeping good records throughout the year on my little rental property manager software (which is so old it won't update anymore:) so the filing itself isn't too bad.

    I have an s-corp, 2 LLCs and 34 rentals.  Sometimes I consult and wholesale through my s-corp, but it's not anymore work to add a little more income to a line.   I don't bother keeping track of mileage or a home office.  Because of depreciation mostly, my effective tax rate has been negative for 14 years anyway.

    I use turbotax premier and business.  I know CPAs laugh at it and whatnot, but for less than $200 annually I have survived so far.  To try and break-down and explain to a pro all aspects of what I'm doing would take weeks, so I plan to continue going solo.  More tax deductions isn't what I need, so I'm ok not fighting for every last little write-off.  I err on the side of caution if I'm unsure.  

    @Kurt Gardner - for like $30 you could get a basic rental property mgt software to help you. Super easy to use and will populate turbotax for you.  I use QRM.  Quickbooks will take a semester of advanced college to master. LOL  Keep up with it throughout the year so you can enjoy some spring weather at tax time!  

    5Reply
  • Thomas S.
    Member since 2016 · 13k+ posts · 12k+ votes
    9y

    I have used a accountant for at least 10 years and would never consider using my time to do taxes ever again. Bonus, it's a tax write off on the business.

    0Reply
  • Justin Fox
    Software Developer · Vidor, TX · Member since 2015 · 922 posts · 639 votes
    9y

    We will be doing our own this year.  We only have 2 rentals right now, so it's not that big of a deal.  

    I wrote myself a little software package that keeps track of tenant payments, mileage, expenses, carrying costs, construction costs and etc.  It's fun and gives me an excuse to 'work' haha.

    I would say the best advice is to keep track of the stuff throughout the year and be organized.  So basically, keep up with receipts and logging your mileage (if you do).  Also, keeping up with closing itemization (if you cash out or whatever) so you're not waiting on the title company for extra deductions and new cost basis.  Stuff like that.

    1Reply
  • Anthony GaydenPro Member
    Rental Property Investor · Omaha, NE · Member since 2014 · 2k+ posts · 3k+ votes
    9y

    I reached the point a few years ago when I realized I neither had the time or skill to prepare my taxes in the most effective manner. 

    I pay my accountant around $500 a year and it is worth every penny.

    I never imagined my taxes would be so complicated when I was younger. I remember the good old days with the 1040 EZ........LOL!!!

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  • Jassem A.
    Investor · PA · Member since 2013 · 1k+ posts · 602 votes
    9y

    I use express1040 or freetaxusa websites and file federal free and state is like 12 bucks after the 10% off coupon code

    0Reply
  • Cary F.
    Investor · Lakewood, OH · Member since 2016 · 203 posts · 191 votes
    9y

    @Kurt Gardner @Justin Fox @Steve Vaughan

    Are you going to do your own dental work or surgery as well??? Haha...  I mean, you've probably all seen the shows and kind of get how surgery works, right?

    So a good accountant, especially a real estate investor, will understand the intricacies of the tax code that you could only ever hope to understand. This in itself will provide a substantial return. 

    Now if you account for the increased probability and expense of an audit over you career as an investor, you just lost all the money you saved on doing your own taxes. If your operation gets large enough, you WILL get audited eventually. 

    0Reply
  • Justin Fox
    Software Developer · Vidor, TX · Member since 2015 · 922 posts · 639 votes
    9y
    Originally posted by @Cary F.:

    @Kurt Gardner @Justin Fox @Steve Vaughan

    Are you going to do your own dental work or surgery as well??? Haha...

    My wife is a dental hygienist and cleans my teeth at the house.  My brother in law is a physician and does my well checks.

    6Reply
  • Cary F.
    Investor · Lakewood, OH · Member since 2016 · 203 posts · 191 votes
    9y

    @Justin Fox Hahaha...   You sir, have life figured out. 

    2Reply
  • Steve Vaughan
    Rental Property Investor · East Wenatchee, WA · Member since 2014 · 10k+ posts · 16k+ votes
    9y

    Thanks for chiming in and sharing your situation @Cary F..  Oh wait - you didn't. So do you do your own?  Apparently not.  Have multiple businesses and rentals, or just an opinion and the tired argument of would you do your own surgery?   

    We are all better informed now thanks to your post.  Is the OP being over-charged as he asked?  Maybe you have a better handle on what quality tax work costs. 

     I don't do my own for the money I'm saving, it's the pain of having to go through everything with an accountant that may or may not be any good.  I didn't say I'm doing it the best way, just sharing for the OP what I've done and a sharing a suggestion for simple software to help him.  Thanks for critiquing what I do, though!

    3Reply
  • Cary F.
    Investor · Lakewood, OH · Member since 2016 · 203 posts · 191 votes
    9y

    @Steve Vaughan

    Technically I answered question #1 which automatically means I don't have to answer questions 2 - 4.

    Why did you think I was critiquing what you do? I wasn't. But now that I've viewed your profile and have seen how many assets you are controlling, I can easily critique you. 

    Using a CPA for this stuff is a standard best business practice in this industry or any other for that matter. Did you not learn this in business school?

    0Reply
  • Gina Worsham
    Wholesaler · North Little Rock, AR · Member since 2016 · 44 posts · 22 votes
    9y

    Hi Kurt,

    Please visit www.moneyledgers.com .  They have an affordable, easy program for bookkeeping that will make tax time easier.

    Gina Worhsam

    1Reply
  • Kurt Gardner
    OP
    Investor · Maryville, IL · Member since 2016 · 129 posts · 81 votes
    9y

    @Steve Vaughan @Justin Fox @Jassem A. because I keep the records (actually, I design the spreadsheets and my wife is the truly accountable one!), I figure I'm in a good position to do either...deliver a nice package to a tax preparer or be in a good starting point for doing them myself...I feel like it's worth the try.

    @Cary F. because a tailor makes clothes doesn't mean you can't learn to dress yourself.  I appreciate your attempt to be humorous, and in your haste, you missed #3.  Probably the right thing to have a preparer do your work as they are paid to pay attention to detail.

    @Gina Worsham thank you, that's a helpful suggestion!  I will add that to my list!

    Thank you guys for the discussion!

    2Reply
  • Steve Vaughan
    Rental Property Investor · East Wenatchee, WA · Member since 2014 · 10k+ posts · 16k+ votes
    9y
    Originally posted by @Cary F.:

    @Steve Vaughan

    Technically I answered question #1 which automatically means I don't have to answer questions 2 - 4.

    Why did you think I was critiquing what you do? I wasn't. But now that I've viewed your profile and have seen how many assets you are controlling, I can easily critique you. 

    Using a CPA for this stuff is a standard best business practice in this industry or any other for that matter. Did you not learn this in business school?

     I liked your previous comment better.  You were right.  A 4-year-old could see what you were saying.  Proof that nothing of value was contributed. That fact remains after your revision.

    Be on your high horse or whatever if you like. We don't know if you're new or experienced because you don't say. Getting an accountant to your e-z form for you?  Who knows.

    So how much should the OP pay for services in his situation?  (Loved the do you get a tailor to dress you comment, Kurt!)

    This was a thread to share what we do in regards to taxes.  I shared what I do.  Never said it was the best way.  If one chooses not to share their experience but only advise others they are doing it wrong-  out of the blue with no backing - it is critiquing in my book.   

    I'm definitely open to learning from others and have.  They shared their experiences and situations, though.  

    3Reply
  • JD MartinBusiness Member
    Moderator
    Rock Star Extraordinaire · Northeast, TN · Member since 2015 · 10k+ posts · 16k+ votes
    9y

    I do my own, and have always done my own since a long time ago (almost 30 years ago) I lost a refund because of a screw-up by a paid tax prep firm. I have a long memory, so I have always done them myself since then. I am like @Steve Vaughan and keep good records through the year, so it's not too bad, but I will admit I am starting to get tired of doing them myself. If I do them myself this year, it may or may not be my last year of doing them myself. Every year, honestly, the code seems to get more complex, and as my investment portfolio has become more complex it has really become a chore. I'm a pretty smart guy (I'm a doctor, after all) and good with numbers, but even with electronic software it is very easy to make big screw-ups. 

    I can't remember which software I used last year but I think I spent about $65 or so all told, including state returns. 

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  • Brendon Woirhaye
    Rental Property Investor · Whittier, CA · Member since 2014 · 324 posts · 268 votes
    9y
    1. I do not use a pro but do my own.  Have used professionals in the past.
    2. I have used turbotax in recent years.  Although not flawless, it does what I need.
    3. n/a
    4. The biggest help is in growing my understanding how the tax system works, being able to model different scenarios, and learning the tax code.  

    It is definitely more work to do my own than using a pro and I frequently have this nagging concern that I am missing something.  Every three years after I have prepared my own, I have then done a consultation with a professional to have them review, and have found that I have done it right most of the time.

    I have been called into the IRS office once on an audit, and my paid preparer was nowhere to be found when I needed their help.  I was able to work through it with the auditor reasonably well.  This is what first drove me back to doing my own.

    2Reply
  • Cary F.
    Investor · Lakewood, OH · Member since 2016 · 203 posts · 191 votes
    9y

    @Steve Vaughan

    Okay I'm done being inflammatory. I'm very good at it...

    I'm sure you're a good dude and I'm guessing we have a lot in common. I was never trying to upset anyone in the first place.

    2Reply
  • JD MartinBusiness Member
    Moderator
    Rock Star Extraordinaire · Northeast, TN · Member since 2015 · 10k+ posts · 16k+ votes
    9y

    Although I'm certain Steve can defend himself, the comment above is actually kind of offensive to other people besides Steve. I have a lot of assets and have always done my own taxes, and while I'm not sure how you arrived at the conclusion that your IQ is higher than Steve, if it's because of the high honors college graduate - with a 4 year degree, I'm assuming here? - then I'll see your bachelors and raise you a doctorate, with a side of ten years of major university graduate school professorship tossed in.

    I don't see it as an either/or proposition. There are pros and cons both ways. I have been involved in audits for 20 years and have personally witnessed major screw ups by CPA firms. Being an accountant does not make you foolproof. As I said, I am about at the point of not doing it any more, but not because I think a CPA is going to be better at it than me - I'm just tired of doing it. Just like when I hire someone to put in a new set of locks on one of my rentals - they can't do a better job than me, I probably just don't feel like doing it any more.  

    EDIT: I see you edited your comment. Good call! Sometimes we all get a little worked up here. Steve is a smart guy and you appear to be a smart guy as well. There's lots of paths out there. 

    @Steve Vaughan @Cary F.

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  • Cary F.
    Investor · Lakewood, OH · Member since 2016 · 203 posts · 191 votes
    9y

    @JD Martin 

    Yeah I changed that comment. I don't want to be inflammatory on BP. You guys all have awesome stuff to share and I'd rather be on the learning end of the spectrum at BP. Sorry about that. 

    1Reply
  • JD MartinBusiness Member
    Moderator
    Rock Star Extraordinaire · Northeast, TN · Member since 2015 · 10k+ posts · 16k+ votes
    9y
    Originally posted by @Cary F.:

    @JD Martin 

    Yeah I changed that comment. I don't want to be inflammatory on BP. You guys all have awesome stuff to share and I'd rather be on the learning end of the spectrum at BP. Sorry about that. 

     No worries! If I had to carry around all the stuff I've said over the years, I'd need at least several Sherpas! :D

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  • Kurt Gardner
    OP
    Investor · Maryville, IL · Member since 2016 · 129 posts · 81 votes
    9y

    The dialectic in this forum is why I very much LOVE this place.  There can be very passionate positions and even a spark or two, but 99% of the people who actively participate are genuine, good, and helpful people.

    Thank you all for maintaining this standard and decorum.

    3Reply
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