Hire a CPA for my 2017 taxes?

Question

I've always filed my own taxes, with TurboTax. Given the simplicity of my income sources and lack of deductions, this was an easy and less expensive way to handle it. I now have 2 investment properties that I purchased in 2017. This makes taxes and deductions a little more complicated. My intention is to maximize my tax return. By hiring a tax professional, I certainly do not want to offset the net income I would be receiving by hiring a tax profession/getting bigger tax return vs. using turbo tax/getting slightly less of a return. I've been good about tracking/documenting all income and expenses of my properties. However, I am unsure of how to go about claiming them, as I've never done so.

Therefore, my question is - should I continue to file my own taxes? Is knowing how to claim deductions something I could learn quickly to ensure I'm getting the most out of my tax return? Or is this sort of thing best left to a professional? I am in Durham, NC. Anyone in this area who is a professional in this area, or has a recommendation for this area, I may be looking further into this.

Thank you

Therefore, my question is - should I continue to file my own taxes?  Is knowing how to claim deductions something I could learn quickly to ensure I'm getting the most out of my tax return?  Or is this sort of thing best left to a professional?  I am in Durham, NC.  Anyone in this area who is a professional in this area, or has a recommendation for this area, I may be looking further into this.

Thank you

Brandon Hall · Answer

@Ben Kirchner if you are expecting a CPA to get you a refund larger than the fees you pay, you're not going about this the right way.

For instance, let's assume in 2017 that your tax liability is $20,000 but you only withheld $18,000. Thus, you owe $2,000. It's not the CPA's fault that you underwithheld, but the CPA should coach you in proper withholding so that we're closer to $0 next year.

On the other hand, let's say your tax liability is $20,000 but you accidentally withheld $22,000. You are refunded $2,000 whether or not you use a CPA.

A CPA should help you reduce your effective tax rate, Line 63 on your 1040 divided by total income, over time. That will be difficult to achieve if you shop around for the lowest price every year and expect them to get you a refund in excess of the fees.

It's not about the refund, it's about your effective tax rate. And it's going to be difficult to change your facts now that 2017 is over.

Example: you make $100k and your tax liability is $50k. You withheld $60k so you are refunded $10k. Are you happy? I hope not, because you paid 50% in taxes on every dollar you earned. Yikes.

We have clients that owe $20k every year and are thrilled with that result.

Brian Schmelzlen · Answer

I would at least get a free consultation with a CPA.  That person, if ethical, will tell you if your situation is still simple enough that you should be doing it yourself.

Go in with a list of questions so you are learning regardless of whether you ultimately hire the CPA.  Even if you do hire a professional, you should understand your taxes.  Also, it would be helpful for you to find out if you would potentially be missing large deductions (or inadvertently taking too large of deductions that might get you in trouble with the IRS).  Knowing that should help you then decide if you are at a point where it makes sense to hire someone to do your taxes for you.

Vlad K. · Answer

@Ben Kirchner, Although the effort to prepare your own taxes is admirable, you have to admit that if preparing a return which now has two investment properties makes you feel uncomfortable, may be it is the time to have a professional do it for you.

Also, a professional will make sure that you maximize your deductions fully and, MORE IMPORTANTLY, correctly.

True professional will make sure that the cost basis for your property is correct, and you are claiming proper amount of depreciation.

There are just many nuances that you would not know, or would still require a professional opinion on.

And then there is time... How long will it take you, how much effort will you put into your 2017 return?

Shawn Ward · Answer

@Ben Kirchner I HIGHLY recommend you hire a CPA to do your taxes. And I'd recommend it even if you didn't get into REI.

A good accountant will get you every dime you deserve and leave nothing on the table...all legally of course.

Reach out to the 10 smartest people you know and get recommendation for a CPA and find out their pricing.

If you need an 11th recommendation, DM me and I'll do an intro to my guy.

All the best!

sjw

Joe Splitrock · Answer

@Ben Kirchner I would hire a CPA. Part of the reason is that you don't know what you don't know. Things like: in service date, basis cost and depreciation can be hard to understand. After they complete your taxes, go through them in detail and fully understand what they did. Ask questions if you don't understand something. After the first year, you may decide to do it yourself in the future. You can deduct your CPA expense on your taxes against your rental income.

I like the fact that my CPA does taxes for many landlords and he is an expert. He updates me on new rules and understands how to maximize deductions without attracting an audit.

Just a quick observation here, but @Brandon Hall is a frequent contributor on BP and is a knowledgeable person from what I have observed. He is located in Raleigh, so it would be worth your time to connect with him.

Basit Siddiqi · Answer

• To provide Tax Advice/Tax Planning
• Time saver - Do you want to research the changes to the tax forms; research what forms you need to file. Focus on investing in real estate while your accountant focuses on you filing a proper return.
• Assurance/confident - if you were to do your own return; how confident would you feel that you did it correctly

Brandon Hall · Answer

@Ben Kirchner check out the Nolo book on taxes for landlords. Once you read that, you can likely manage your own tax prep with a small portfolio.

I always tell people that you need to hire a professional who is going to advise you. Tax prep is a compliance based service utilizing your prior facts. To change your facts, you need proactive advice, not once-a-year tax prep.

Ben Kirchner · Answer

@Brandon Hall what are your thoughts on whether I should file as married separate, or married jointly?  Properties/deductions being in my name?  Also, is there a standard formula to calculate depreciation of a property?  Thanks

Michael Plaks · Answer

Expecting under $500 for a quality job with rental properties is unrealistic. Such low prices are possible, but I would not expect them from an experienced person who understand real estate - meaning you are not really better off than doing it yourself.

Asking whether the cost of service results in an equal increase of tax refund is missing the point. Maybe it will, maybe tenfold the cost - and maybe it won't. You're not just paying for a refund, you're paying for sound sleep and preventing costly problems down the road.

And the most important contribution from a tax pro is advising you forward: tax planning, business practices and such. This is where the real value is.

Hire a CPA for my 2017 taxes?

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