Hire CPA for taxes worth it?
Investor · Fort Pierce, FL · Member since 2016 · 47 posts · 16 votes
Hire CPA for taxes worth it?
Most Popular Reply
CPA · Raleigh, NC · Member since 2013 · 1k+ posts · 2k+ votes
9y@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.
15 Replies
- CPA · Raleigh, NC · Member since 2013 · 1k+ posts · 2k+ votes9y
@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.
- 9ySteven Hamilton IIPro MemberAccountant, Enrolled Agent · Grayslake, IL · Member since 2011 · 5k+ posts · 2k+ votes
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
- Boca Raton, FL · Member since 2015 · 249 posts · 52 votes9y
It depend on your current expertise and complexity of the return. I am a tax professional and prepare my own return. If you have basic understanding of tax, 1 rental property (solely owned, not in partnership or Corp), some stock investments, and a W-2 is not that complicated. Add anything like a partnership, Scorp,Corp, Disposition of business assets, like kind exchange, etc, hire a professional. And, I do not like to talk other businesses down, but the big chains like H&R Block do not even require a Bachelor's degree for their preparers. I have seen so many nightmare returns prepared by the chains. They worry more about returns being prepared quickly, rather than quality. They tend to aim for low income taxpayers who live off the refund and are not experienced for complex returns. If you have a simple return use the H&R, if not, big mistake.
- Investor · Evans, GA · Member since 2015 · 190 posts · 103 votes9y
Like @Brandon Hall said...the tax advice and guidance are priceless. As someone with a full time W-2 career, a rental portfolio, and other deals I'm spending time on...a good CPA is a full member of my investment team. Easy call to make.
- 9yDaniel HymanBusiness MemberCPA · Milwaukee, WI · Member since 2016 · 2k+ posts · 1k+ votesBrent Langlois A good CPA will save you money. Whether that's by keeping you compliant, making sure you don't leave money on the table, or helping you with tax planning, a good CPA will make you feel like you are underpaying for their services.
My Online Accountant572 Reviews - Gorham, ME · Member since 2016 · 224 posts · 116 votes9y
Let me begin this post by saying I am biased. I am a paid tax preparer and I do earn some of my living from this business. That being said, I have worked for a big chain tax preparer and I have worked for a small town CPA. There is absolutely no comparison. A big chain tax preparer will do just that... prepare your taxes. A good CPA will prepare your taxes but also give you advice that over the long term should far outweigh the cost.
I would suggest you interview a couple CPA's/EA's in your area. Tell them what your goals are and explain your current situation. Then ask them how they can add value to your situation beyond simply preparing your tax return.
Hope that helps.
Ed
- Real Estate Agent · Princeton, NJ · Member since 2016 · 1k+ posts · 1k+ votes9yBrent Langlois - CPAs provide great advice. Hire one immediately and for next year if anything below doesn't make sense to you. You can deduct the business expense of tax prep. I'm a civil engineer. If you are comfortable reading IRS rules, you can submit compliant returns using Turbotax Premier / Rental Property (roughly $100-120). I've used it for 7 years with no audits. I don't think I've overpaid/underpaid taxes either because I read the rules and deduct repairs as repairs, capitalize improvements, deduct business mileage as permitted, etc. Your Scottrade or whatever account will send you a form to tell you how to fill out your stock gains reporting. Really the only thing you can mess up is your schedule E for your rental property, and that's not that hard. Turbotax will auto calculate your schedule E from your numbers. Use your bank statements and credit card receipts to itemize your true rental income and expenses. If you have a question on if something is deductible, read the rule. It's usually clear enough to have a justifiable position for deducting it or not. The tricky thing on your 2016 return is changing your former primary residence to a depreciable asset. (You can use purchase price plus cap ex (your $$ into home improvements like new deck) or fair market value (your home's expected sale price), whichever is lower. You can only depreciate the building portion of that. Read the rules. Ex. $300k house is 50% land 50% building, you can depreciate $150k over 27.5 years). You can use % land from your tax assessment without question - document it. If you do something else, justify it. I'm a RE agent so I can do fair market value comps accurately. If you don't know how, hire an appraiser for $300 and save the report in your property file. My properties after deducting EVERYTHING don't have negative profits/cash flow. If yours do, understand that's an audit risk. If anything I've said is wrong. Feel free to correct my knowledge.
- 9yLance LvovskyPro MemberAccountant · Fort Lauderdale, FL · Member since 2013 · 1k+ posts · 753 votesI agree with the other posters here. A good CPA will provide you with tax planning advice that will far outweigh the costs of preparing the tax returns. It is one thing to prepare tax returns but another thing to provide planning advice. Don't get me wrong, tax compliance is very important. But by having your CPA do both tax compliance, and tax planning with you, you put yourself in the best position to succeed financially.
- 9yMatt LavinderPro MemberReal Estate Investor · Bristol, TN · Member since 2010 · 59 posts · 31 votes
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.
- Investor · Fort Pierce, FL · Member since 2016 · 47 posts · 16 votes9y
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 Schanne 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!
- Investor · Chicago, IL · Member since 2016 · 60 posts · 45 votes9y
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.
- Investor · Fort Pierce, FL · Member since 2016 · 47 posts · 16 votes9y
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.
- Investor · Gaithersburg, MD · Member since 2013 · 659 posts · 441 votes9y
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.
- Investor · Fort Pierce, FL · Member since 2016 · 47 posts · 16 votes9y
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
- Colorado Springs, CO · Member since 2017 · 74 posts · 41 votes9y
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.
Join the conversationCreate a free account to reply, vote on answers and follow this thread.