All Forum Posts by: Jake Hottenrott

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@John Mathewson - To keep it short (and if you want me to elaborate more, I'll do it in the AM) if you are doing flips in an LLC taxed as a partnership you are picking up all of your income as active income subject to self employment taxes. Other entities may lower your tax bill if structured properly.

@Nick G. - I wrote a blog post recently that gave a high level overview.   Hopefully it helps.  https://www.biggerpockets.com/blogs/5926/53215-que...  

If you have any follow up questions feel free to ask.  Make sure to find a CPA who focuses on real estate.  

@John Mathewson - I might review that selection with my CPA to make sure that's the correct entity based on how you are structuring your deals or find a new CPA going forward.

@Jacob Chambers - I covered this topic in a blog post.  Hopefully you find it worthwhile Should I form an LLC?

@Jay Hinrichs - Going eyeball to eyeball with your CPA?  I guess you've never heard the following joke.  In a circle of accountants talking, how do you pick out the out going one?  It's the one who compliments the others shoes.  :-)

You are a slightly different bird than most investors.  When you get into more continual transactions and more advanced planning sessions with that requested adviser, a face to face, golf, lunch type relationship might be what someone is needing.  Although, you can still get those same required touches, conversation and social aspects if planned well with a virtual CPA.  While I don't necessarily see some of my far flung clients every year, when they come to St. Louis or when I'm in their neck of the woods I make it a point to visit and catch up.

With that being said, most real estate investors don't need that many planned touches.  I welcome a client who wants a planned schedule and more touches.  The more I meet with someone, the better advice and planning we can do which makes my service more valuable to my client.  Most real estate investors need access. The access to ask their CPA specific questions regarding their situation, planning and potential acquisitions/disposals.  The access that they know they can get a quick, educated answer that can be explained to them in a way that they understand.  They need access to someone they trust and have built even a slight relationship with so that they know they can reach out and have someone in their corner.

I would never recommend an investor use turbo tax.  You might be fully capable of getting your best return done on your own, why would you hope that's the case when you can hire a professional?  Even if you have done it right the first year, was there any planning done for years 2, 3,4, etc?  After having done some rehab work myself, I know that you let the painters paint, the drywallers drywall and the accountants account.

@Grady L. - You won't need a state specific CPA.  While state tax laws can vary and there are some planning aspects to implementing a plan in each state, the majority of your planning will be done to the IRS Code and not the the state tax laws.  Any state nuances can be researched by your CPA.

@Grady L.- Don't limit yourself to a CPA who is local. Finding someone who is knowledgeable and able to communicate effectively is surprisingly easy these days. There are many CPAs on these threads who would be happy to work with you virtually. I've written a post awhile back on this topic as well. Does my CPA have to be local?

Best of luck in 2017! 

@Stephanie Knox - There are a few threads out there that mention what you can ask a CPA to see if they are knowledgeable about being a real estate focused tax accountant. I did write a blog post a while back that talks about how you as the investor can be prepared for your CPA.

Additionally, don't limit yourself to a CPA who is local. Finding someone who is knowledgeable and able to communicate effectively is surprisingly easy these days. There are many CPAs on these threads who would be happy to work with you virtually. 

Best of luck in 2017!

(I'm copying this to each post so that you get the answer and that it might help someone else in the future as well!) :-D

@Sukhwant Kaur alot of the previous posters covered a lot of the main points you were asking for. I recently wrote a blog post that discusses when an LLC is a good idea and when it's better to keep everything in your personal name. Questions as Common as the Cold - LLC

@Alan Walker - I wanted to jump in here and recommend that you browse around and see the active accountants here on the site.  Many are also investors and perform their duties remotely for their clients.  If you have any questions, feel free to reach out, I'd be happy to help.  Here's a post I wrote a while back about your accountant not needing to be local.  Blog Post

@Brody Jett - Good!  She will serve you well.  If you want to learn a little bit about why your CPA doesn't necessarily have to be local, feel free to read this past blog post I wrote.  https://www.biggerpockets.com/blogs/5926/41216-does-my-cpa-have-to-be-local