What should my LLC tax returns cost?

Question

I've only used an accountant for taxes since setting up the LLC a couple for years ago, and I was looking for any feedback on what is considered market rate for preparing the state and federal returns for an LLC filing as a S-corp holding 3 properties. 2017 cost $770 just for that return, which seems like a lot to me. Probably I'm only interested in high cost states similar to NJ, no doubt TX or AR would be cheaper.

I would guess it's harder to compare our personal return, we have 2 form C's. That cost $250.

Basit Siddiqi · Answer

@Johann JellsFirst and foremost - it is normally not advisable to hold real estate(buy and hold) within an S-corp. If you are flipping then that is a different story and that is fine.Back to the topic of cost and whether the cost is high...the answer is it depends...

1)Does your accountant include providing suggestions/feedback throughout the year.
2)Is he open to answering any questions that you have
3) Are all the properties located in one state
4) Is he required to also do the books and records? If he is - are you providing him a shoe-box of receipts or a P&L and Balance sheet that are easy for him to analyze

My opinion1) If the $770 includes communications throughout the year, he does the books, and the properties are in multiple states - then you are getting a good price.2) If you do the books, properties are in one states, and no communication - then the price might be a little much but not by much3) $250 for a personal return with 2 schedule C's and ownership in an S-corp sounds like a deal to meAgain this all depends that your accountant is doing everything accurately and will be able to back you up if you ever get a letter from the IRS/State.

Terrell Garren · Answer

Sweet Jesus, I love reading posts by smart Accountants like @Basit Siddiqi and @Natalie Kolodij.  Professional advice at no cost. Thank you BP!

Natalie Kolodij · Answer

.....Reporting your rentals is always passive income regardless of what type of entity it in. The type of activity determines how it's taxed- not what it's being reported in. You now just have an S corp reporting passive income on a K-1 that you report.

Flipping houses or wholesaling would generate active income, subject to SE taxes. Rental income is always passive.

Also, another misconception. An LLC filing as an S corp IS now an "actual" S corp.

The biggest reason is there a so many triggers for tax. Ever want to move into one of those homes as your primary? Guess what- you're now paying gains as though you sold it at FMV. How about change it to your personal name for refinancing? Again, triggers gain. There are a ton of downfalls to holding long term property in an S corp. Another tax pro on here Amanda Han wrote a blog about it that you can read.

https://www.biggerpockets.com/renewsblog/2016/02/2...

Your tax professional should have addressed this day one.

Also- the pricing is average if not low. However a better tax professional would likely cost more, but provided better guidance as well.

Basit Siddiqi · Answer

@Johann JellsChanging the entity type from an S-Corp to a disregarded entity is fairly simple. All you need to do is complete the check the box rules(form 8832).

However, there can be dire consequences for doing so. This may be considered a taxable event.You should seek 1v1 advice before doing so.

Matt Anderson · Answer

I actually file my taxes in AR and it cost me $620 this year to file for my LLC.  I send my accountant all my spreadsheets at the end of the year and she figures everything out.  There is usually some communication through the year but not much.  Maybe I'm paying too much, maybe I'm not, I don't really know but it seems fair to me.  It did cost me an extra $150 this year for her to create a 10-99 for me since I manage my own properties and then pay myself each month. This hasn't happened in past years and I have since started looking for alternative options.

Ahad Ali · Answer

@Johann Jells, Yes there is way to terminate  your S-Corp election and revert back to partnership or whatever it is that you want.

Johann Jells · Answer

@Ahad Ali  He really does not do much unrelated to returns, our situation as buy and hold owners of cash flowing property is pretty simple when it comes down to it.  I don't know what to make of the S vs LLC situation, I thought we were an LLC filing as an S. We made the election to file as an S. Is this reversable if need be?

Ahad Ali · Answer

Hi Johann.

I agree with some of the answers above and I also want to add this:

The prices your paying for the S-Corp tax returns is not too much if he also helps you come up with tax strategies and advises and answers your questions throughout the year. If all he is does is fills out the forms based on summaries you provided then that fee might be a little bit much. Sometime some CPA's need to do legwork to put number together or summarize data so they charge for that, doesn't seem like that's the case for you.

And yes I always recommend my clients to hold properties in LLC's because of various reasons mentioned the article shared above.

Hope this helps.

Johann Jells · Answer

CPA does nothing but prepare the taxes, I provide him summaries ready to enter line by line of our expenses and finances from our Quicken reports. I did our own on TurboTax for many years. He bills for four and a half hours for this.

Lord, I can't even remember all the arguments about which kind of Corporation to do. Note, it's an LLC filing as an S not an actual S if that makes a difference. What pushed us to incorporate was trying to take the real estate business from passive to active for reasons of financial aid.

Do either of you care to elaborate or point to a resource that explains why the S Corp is a bad idea?

Natalie Kolodij · Answer

I'm  agree with @Basit Siddiqi 100%. Almost NEVER hold long term properties in an S corp.

Is your current Accountant who set that up and or advised you on that? If so- that alone warrants switching.

What should my LLC tax returns cost?

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