Hire CPA for taxes worth it?

Question

I'm a relatively new real estate investor. My question is simple. Given my current situation, is it worth it to spend the money to hire a CPA to do my taxes.

I own my home and one investment property which was rented in October (that property was my previous primary residence). I also bought and sold stocks in 2016. My primary source of income comes from my career as an Engineer.

I understand that having a CPA is vital when you own several properties where things like deductions can be found everywhere. But with one rental property...are there enough tax benefits to be found to justify the cost?

If not, do I go to somewhere like HR Block or Turbotax?

Any advice is much appreciated!

-Brent

Brandon Hall · Answer

@Brent Langlois at this point, for 2016 taxes, the value of hiring a CPA is demonstrated with accurate tax returns that are compliant with federal, state, and local governments. It's too late to implement 2016 tax strategies because your 2016 facts are already written in stone.

When you hire a CPA, the true value they bring to the table is the ongoing advice. That's not something TurboTax or HR Block does. But I'd start your hiring process for 2017 taxes now because you truly need an ongoing advisor.

Brent Langlois · Answer

Thanks very much for all the responses. Lots of positive response toward hiring a CPA.

I definitely plan to research CPAs moving forward, however it may not be justified for my relatively trivial tax return.

@Steven Hamilton II thanks for the response and references, I will check these out.

@Natalie Vane Your a civil engineer, agent, and RE investor...so what do you do in your free time (ha!). I'm a geotech engineer and I struggle to find free time. Thanks very much for your advice!

Steven Hamilton II · Answer

I agree 100% with @Brandon Hall. My clients don't pay me to prepare a tax return, they pay me to give them advice. Your accountant is your CFO make sure you ask and give them enough information to advise you.You definitely need someone qualified, does not have to be a CPA, could be an Enrolled Agent or an attorney. Just make sure they specialize in tax and have significant experience dealing with real estate investors. There are a few great accountants here worth reaching out to.

Here is a great list of questions to ask a potential accountant: http://www.biggerpockets.com/forums/51/topics/7044...

Also check out the www.NAEA.org page in your search. It should help you find someone local. If someone comes to me, I'll send them your way.

If you need help in your search or want to verify something don't hesitate to ask.

For example: I have clients worldwide and things are just as easy as I e-mail them, talking on the phone. I even use Skype and TeamViewer to communicate with clients so I'd highly recommend looking for one of the best with great references that interviews well with you.

So look for someone you can connect with that works out for your situation.

Feel free to ask here if you have questions

Bryan Wilson · Answer

Not sure if I missed it skimming through the responses to this, but having a CPA/Enrolled Agent is really beneficial to keep track of your cost basis in the properties and knowing where you stand on depreciation deductions.  Granted you can do this yourself.  I'm an accountant with a wife that specializes in taxes.  I prefer not messing with taxes if I don't have to.  Time consuming and easy to make a mistake misinterpreting what you are doing.  I'd rather have the peace of mind and know that if Audited the CPA is capable of handling my audit for me.

Brent Langlois · Answer

Thanks @Justin B.

I think I'm similar to you in that I'm very good at record keeping, working with numbers, and I'm willing to put time and effort to educate myself by looking up each detail. I'm leaning towards hiring a professional this first time, since my tax knowledge is basic/minimal.

I just bought the BP book by Amanda Han though for RE tax though, so I may blow through that and change my mind.

Thanks again

Justin B. · Answer

So I have 21 properties across 2 companies and I use TurboTax.  There is definitely some "hacking" I have to do in TurboTax in a couple of places to get it to come out correctly (going into forms mode and manually editing, not difficult), but it works.  so far, it's only been for the depreciation pieces which can take some finesse depending on what you're doing.

I would recommend that whenever you get to the point of needing a CPA, I'd have the CPA firm do your bookkeeping and then it's very easy for them to do your taxes.  A bookkeeper at the firm would do your bookkeeping as opposed to a true CPA, but the CPA will review and do the taxes.  Depending on where you live and the number of properties, you could expect $2.5k-$5k/year for this.  I'm not quite ready as it only takes me an hour each month to do the books and maybe 4-8 hours each year to do the taxes.  At some point, the complexity and time involved will be worth the expenditure.

I'm certainly not a CPA, but I'm good with numbers and was able to look up 95% of what I needed to know.  I do have a CPA buddy that I've asked questions of a few times and I send him a gift card or something for his time anytime I use it.  I'll eventually use his firm to do everything, but I'm not there yet.  So it really depends on how comfortable you are with it all (which in the world of real estate can be fairly easy depending on what you're doing.  If you're doing 1031 exchanges, a lot of selling, or other complicated things, it might be worth it.

Brent Langlois · Answer

@Jesse M.

Thanks for chiming in. I was considering using TurboTax this time around, but now I'm re-thinking that. I like your idea to really test the CPA to see the value they can bring at tax time by preparing your own. I may do the same and consult a CPA or local accountant.

Jesse M. · Answer

So I started renting my first property late last year and took a stab at doing my own taxes just this last weekend. I've been using TurboTax for years. I will be going to a CPA. There were many sections that didn't have any explanations on what to do or where to find information. I had to pull my paperwork from when I purchased the condo (in 2009)! Is that normal? No clue. I also didn't know how to calculate Fair Market Value or properly schedule the depreciation. Again, no help from TurboTax on that front. What I was intending to do was prepare my own taxes and then see the CPA to see if she could find any mistakes or get me more in the return. I assumed the inputs would be relatively simple (earnings, expenses, write offs, etc) but it turned out to be more difficult than I thought.

Matt Lavinder · Answer

Our business has grown from a couple of rentals to several plus three flips a month.  I've made several mistakes along the way.  But, the biggest and most expensive was not getting a high quality real estate savvy cpa on day one.  I have an accounting degree, but I made mistakes setting up qb.  When we started scaling fast,  my accounting systems couldn't keep up.  It required an expensive and painful fix. Of all the decisions we've made along the way, this is the one I wish I could have changed.

Hire CPA for taxes worth it?

Most Popular Reply