CPA, do we need a CPA?

CPA, do we need a CPA?

Member since 2019 · 22 posts · 5 votes

Newbies here, and we have some questions in regards to taxes and if we need a CPA or if we are good to wait till next year?

Here is our current situation:

Early in 2020 we put money into a deal with a partner to purchase a home to flip. We put a small amount of money into this deal, the main purpose was for this partner to show us how things can go when flipping a house and some tips and tricks.

We put $12,000 into the deal and made $2,669.

Next, we decided to make our own purchase and get our first rental. July 4th we bought our first investment property using a hard money lender. House was rehabbed by Oct 10th but we decided to try and sell it instead, after not having any luck and running our numbers again we refinanced and kept the house as a rental. Tenants moved in Dec 28th, 2020 and the house was refinanced Dec 30th, 2020. The prorated rent was given back to the tenants dues to issues out of our control but caused a bit of an inconvenience to the tenant. So we did not receive any income from the property in the year of 2020, but had all the expenses from the rehab. This is where all our questions come in, and also questions we probably are not even thinking of being this is our first property.

Do we need a CPA this early into our investment journey or can we tackle our 2020 taxes without a problem?

Do we use a schedule E?

For the property with the partner: How do we record the money from the flip? Can we also claim all the expenses that went into the flip?

For our rental: Do we claim the money that went into the rehab?

What are some questions we may need to be asking but are not thinking of?

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Member since 2023 · 5 posts · 4 votes
3y
Quote from @Eamonn McElroy:

If this CPA's anecdote means anything: Roughly 50% of prospects who contact my firm and DIYed previously need 1-3 years of amended returns upon review.

Your situation is never as simple as you think it is.  You don't know what you don't know, especially when it comes to tax law.


 Hello! I'm looking for accountant that can work with CA taxes, can you recommend someone or are you available to take on  new clients? 

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  • Rental Property Investor · Northern Virginia · Member since 2019 · 793 posts · 620 votes
    5y

    @MaryAnne Burrows I am not an accountant, but advocate to always have a CPA on your team to help you through not only doing your taxes, but to help you think about maximizing your write offs and other financial planning throughout the year. Whatever financial decision you make whether personal or business, I would run it through the CPA because they may be able to come up with a strategy to qualify for "legal" deductions. This is an advantage of having a business like real estate. There are a lot of things you can deduct.

    The CPA can also help you sort through the tax question you have asked in your post. 

    Good luck!

  • Real Estate Consultant · Cleveland · Member since 2020 · 6k+ posts · 3k+ votes
    5y

    @MaryAnne Burrows of course you need an accountant, 

  • Accountant · Atlanta, GA · Member since 2015 · 1k+ posts · 1k+ votes
    5y

    If this CPA's anecdote means anything: Roughly 50% of prospects who contact my firm and DIYed previously need 1-3 years of amended returns upon review.

    Your situation is never as simple as you think it is.  You don't know what you don't know, especially when it comes to tax law.

  • Investor · Chicago, IL · Member since 2014 · 169 posts · 29 votes
    5y

    Do your research and get a good CPA that is familiar with RE. They're an invaluable part of a team if you plan on continuing to invest in RE. 

  • Member since 2019 · 22 posts · 5 votes
    5y

    Thank you ALL for your input and response to our question. 

    @Aaron W. Thank you for giving us your input from a non CPA point of view and helping us to realize other reason why we should consider a CPA now instead of later.

    @Eamonn McElroy Thank you for giving us your input from a CPAs point of view. Since this is our first rental property and plan to have many more we want to make sure we are doing things right from the start, instead of having to fix problems in the future. 

  • Rental Property Investor · Orlando, FL · Member since 2017 · 5 posts · 0 votes
    5y

    Hi @MaryAnne Burrows, yes, definitely recommend getting in touch with a CPA who specializes in RE.  I have a client that has a somewhat similar situation and we're helping them through it.  Although your situation isn't overly complicated, you have enough going on where you'll definitely want to engage a CPA to help you prepare your taxes appropriately.  This way you don't get that dreaded IRS notice in a year or so... Happy to help in any way that I can! 

    - Kevin 

  • Member since 2023 · 5 posts · 4 votes
    3y
    Quote from @Eamonn McElroy:

    If this CPA's anecdote means anything: Roughly 50% of prospects who contact my firm and DIYed previously need 1-3 years of amended returns upon review.

    Your situation is never as simple as you think it is.  You don't know what you don't know, especially when it comes to tax law.


     Hello! I'm looking for accountant that can work with CA taxes, can you recommend someone or are you available to take on  new clients? 

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