My Cpa Retired in 2021 and i am doing my own taxes
My CPA retired in 2021. I am doing my own taxes for the first time in years with Turbo Tax program for 2022. I have multiple properties & small side business of less then $5000 a year. I have gone through the program and Looks about the same as previous returns. Pretty straight forward by just answering all the questions. I will file on Oct 16th. Any tips?
If you are not confident in your own abilities, why not get a new CPA?
Paying for taxes because of a misfiling will be more expensive than just getting another CPA.
CPA is $1000. per year. turbo tax is pretty easy. I have learned so much just by working on them myself! There are many things my CPA never explained to me. Also never gave me different ways to work with. I can do many thing and see what works best for be. I guess I want to be more involved now. Most pros...... say give me your info and i will do them and pay me! I want to learn about ME and make more decisions.
Quote from @David Lopez:
My CPA retired in 2021. I am doing my own taxes for the first time in years with Turbo Tax program for 2022. I have multiple properties & small side business of less then $5000 a year. I have gone through the program and Looks about the same as previous returns. Pretty straight forward by just answering all the questions. I will file on Oct 16th. Any tips?
The self-filing mistakes don't usually appear until you get a letter from the IRS, sell the property and need to fix it, or talk to other real estate investors and then realize you are missing out on thousands of $ in tax savings to save a few hundred $ in filing fees ...
Thank you for the CPA answer. Looks like i am heading to tax school :D
Fortunately, both my mother and my brother are practicing CPAs. Consequently, I have the privilege of gaining insights into the behind-the-scenes discussions that occur when individuals like "OP" walk into their office. Typically, those who opt for TurboTax tend to inundate these professionals with a barrage of nuanced questions, expecting to glean free expertise and believing they can handle their taxes independently.
The reality is that 99% of these individuals attempt a DIY approach and inevitably encounter problems, eventually come back for their assistance, often years later. This is a testament to the complexity of tax laws. Professionals in the field undergo initial and ongoing training, regularly attend IRS seminars to stay current, and accumulate a wealth of nuanced knowledge through decades of daily practice. Attempting a DIY approach without being deeply entrenched in the profession is a challenging endeavor. Moreover, the professionals often avoid explaining complex concepts quickly because it can lead to a cascade of further questions, which can be time-consuming. They are compensated for what they know, not just for what they do.
I understand that your aim may be to grasp the bigger picture so that you can speak intelligently about taxes. However, if you are serious about your financial affairs, you should seek a competent and trustworthy tax advisor.
What @Sean O'Keefe said is undeniably true. Firstly, DIY filing errors may not become apparent until years later when they come back to haunt you. At that point, you may find yourself paying a substantial sum to a CPA to rectify the situation, whereas you would have paid a fraction of that amount annually for professional guidance—similar to the concept of preventive maintenance versus repair maintenance. It always cost more because people have to undo the mess and redo. Secondly, you might be unaware of the potential tax savings you're missing out on, which often exceed the fees paid to a CPA. Thirdly, having a tax advisor can provide invaluable guidance for your financial decisions, leading to significant benefits or the avoidance of unnecessary tax costs in the future.
In conclusion, when it comes to handling your taxes, it's important to recognize that tax professionals bring a wealth of knowledge and experience to the table. While TurboTax and DIY approaches may seem tempting, the intricacies of tax laws and the potential for costly errors down the road make seeking expert guidance a wise choice.
@David Lopez
I use turbo tax as well and have 19 rentals. It’s easy to do and they walk you through everything. I pay the extra 80 bucks or whatever it is for audit representation if it ever happens. It’s definitely not rocket science DIY. And I like how turbo tax remembers your depreciation and cost seg schedules each year.
Hello David:
Years ago, I had a CPA who done my books and taxes for a few years, decided to quit accounting and go into politics. At the time, I had several rentals, a side software business, and then bought a business with 8 employees. I finished my MBA in finance, which included accounting courses, so I thought I know enough about accounting, especially depreciation,1031's, taxation that I can handle doing accounting and filing taxes myself.
At the time, I've been advised that I should have good CPA's and tax advisors if I'm engaged in so many businesses. In real estate, for instance, especially during the Reagan tax cuts, you need someone that's up to date with the changing tax laws. Another reason for using CPA's is if you run into problems, you'll have professionals who can answer to the authorities as to what went wrong so you can stay in the clear.
The business I took over had a CPA. With employees I have to get all kinds of insurance, and unemployment insurance, for one. Then one day, an inspector from a state agency showed up, asked me for all types of records. She's a bit nasty, demanding and had a bad attitude. I didn't know what to do and remembered the guy who sold me the business had a CPA. I found his number and fortunately he was in the office that day. He asked me to put the inspector on the phone. I heard him yelling at her over the phone "what are you doing there, you should talk to me first". The inspector was shocked and replied,"I'm sorry, I didn't know he's your client". She went from nasty to smiling and apologizing to me, and promptly left. I talked to the CPA later, and says she's the inspector for the area, chatted with her, and all is clear. Didn't charge me anything.
That caused me to get a local CPA to take a look at my taxes in real estate, my IT business, and he asked for the returns I submitted the last few years when I did it myself when my former CPA quit and switched fields. He found I missed a few large deductions, and he can file amended returns.
That's a while back, and I used CPAs since. I did most of the book-keeping myself but used the CPA's to file taxes and double check my work. For me, it's the cost of doing business.
Thank you all for your help and comments.
It is possible to do your own taxes correctly with TurboTax, but there are some things to watch out for. A big one is make sure you carried forward any unallowed passive losses from your previous year's form 8582, and other carry forward amounts from your previous tax return. If you have rental properties, there's a very good chance you had built up some unallowed passive losses, and if you don't find that info from your previous return and enter it in the software, it just goes away. Just this week I filed an amended return for a client that used a CPA/EA who did their taxes and completely neglected to enter their passive loss carry forward (even tax pros often make that mistake). And that means missing out on what can often be a huge tax savings in future tax years.
The other thing people tend to often get wrong when they do their own taxes is depreciation. It's not really optional, you essentially have to claim it, and this is another item where you have to be sure to correctly enter the past depreciation amounts from the previous tax return.
Other than that, mistakes related to expenses are common, and not electing things like the De Minimis Safe Harbor election, which can save you if you get audited.
An option you might want to consider if you do your own taxes is at least have a tax professional review your return after you complete it (but ideally before you file it). Not all tax professionals offer that as an option, but some of us do, and it can be a fairly inexpensive service.
Anyone have a tax professional that will review your return after you complete it for a fee with full references?
Anyone have a tax professional that will review your return after you complete it for a fee with full references?
#4 Tax, SDIRAs & Cost Segregation Contributor
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- NH
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#4 Tax, SDIRAs & Cost Segregation Contributor
- Accountant
- NH
Generally DIY with taxes doesn't work great. I have yet to have a prospective client come in that was a DIY preparer and that they didn't have material mistakes on rental properties, especially with depreciation / fixed assets / repairs and maintenance, missed deductions, missed opportunities, or they filed in a way that was advantageous to them but completely wrong.
You might not think its rocket science, and it isn't. But those in the field still spend 2080+ hours a year doing it, plus 20-40 hours of continuing education a year, and still regularly come across issues they need to research or toss around with experienced colleagues. You don't need the most expensive fanciest CPA/EA in the world for every situation, but if you are operating rentals and other businesses...I would highly recommend it. At the very least, your few thousand dollars a year saves you the dozens of hours that you'll spend trying to to stay on top of all these tax rules as they apply to your situation, understanding the nuance, and also filing your own return.
@David Lopez you are unlikely to find too many professionals that would be interested in providing that kind of service - most of us have more than enough work as is, so another engagement for a few hundred dollars to bog us down around April 15th is not too high on the services we are interested in offering.
Thank you for your answer. Better to get it done right the first time. I will keep looking for a service to review my taxes.
#5 Tax, SDIRAs & Cost Segregation Contributor
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#5 Tax, SDIRAs & Cost Segregation Contributor
- Accountant
- San Diego, CA
Hey @David Lopez,
I would strongly recommend getting a good accountant here. Its better to be pound wise and not stress the small fee in comparison to the headache and potential mistakes in my opinion.
Given we are accountants, we cannot promote our services on BP as its against the rules. To help in your search:
be sure to find an accountant who is willing to grow with you, and is not too high priced fee-wise. Not too low either, you don't want to go with someone who is just focused on price as this is a quality of a not-so-great accountant. Accountants are in such demand, that the best are not even accepting clients half the time.
The other problem I see often with accountants on here is that they specialize in larger investors, and have really high prices when you as a smaller investor do not need all the bells and whistles.
Another thing I see is folks thinking they need to have a tax professional in their state. We as a firm have investors working with us who have rental properties all over the US big and small.
Finding a real estate-focused tax professional and one who can help with advisory and grow with you would be my suggestion to focus your efforts on finding. Best of luck in your search!
Thank you!!