How to make your tax accountants job easy!(ier)

Question

What are the top things I need to be doing to make my tax accounts job easier?

What systems do you utilize in your small or large real estate business to track and log all your real estate transactions. 1 to make your accountants job easier. 2 to make sure you get the maximum return on your taxes from all the improvements done to the property. And 3 to make your life smoother.

Lance Lvovsky · Answer

Top things in no particular order:

1. Provide clean set of books and records. Depending on size of business, this may include the following financials:

General ledger, balance sheet, profit and loss, trial balance

2. Provide bank and cc statements so CPA can tie out your ending balance sheet for cash and cc liability.

3. For any real estate purchases/sales, provide closing documents. Your CPA may need to make adjusting journal entries after analyzing the HUD settlement statement.

4. For any rental properties, provide leases. Why? Because this has valuable data, such as security deposits, which need to be recorded as a liability on your balance sheet. Also advises CPA as to built in rent increases, who is responsible for taxes/insurance/etc., amongst other items.

5. Pay expenses out of the correct account. Do not commingle funds.

6. Call your CPA before entering a transaction. Tell them what you are contemplating. There may be something to consider from a tax perspective before proceeding.

7. Respond to open items and emails from your CPA promptly.

8. The list can go on, but it has been a long day for me. :)

Ahad Ali · Answer

The previous posts have already mentioned a lot of good practices that can be done to help out not only your tax preparer but yourself.

1) Clear records financial statements like income and expenses categorized, Balance Sheets, etc.

2) Tax Documents and other crucial documents such as closing disclosures, sale of property etc. being maintained and presented accurately for the respective properties. Do not submit unnecessary documents such as minor, consistent receipts. Tax preparers primarily will not need the proof behind the expenses to report if they are just doing the taxes. That is more so utilized in the events where you need to validate the transactions such as an audit.3) Being involved and understanding what is going on between the properties to be able to answer any questions or concerns that may rise.

As mentioned by others as well, this ultimately depends on the CPA you are working with. Everyone has their own style and preferences to how they operate and may prefer a more hands on approach while others may like to may the process as streamlined as possible.

You can always ask what the CPA would prefer to have a clear idea.

Kory Reynolds · Answer

@Michael Plaks is exactly right - have that conversation with who you are going to work with.  Different accountants will have different standards and requirements.

That said, the list from @Lance Lvovsky is a great starting point.  For myself it will depend heavily on the sophistication of the client - I have a number that I would never bother asking them for various statements to tie out to their financials or supporting statements for standard accruals since they have a full accounting department responsible for their financials and reconciling their accounts.

Which goes into a very good mind set to take when providing records for whoever your tax accountant is - you have not hired them as a bookkeeper, and you have not hired them as an auditor - those are very different services.  Take the time to review your financials before sending them and verify they make sense - check that your balance sheet reconciles to your statements, or any other changes in your balance sheet accounts make sense to your expectations.  Review your P&L for what might be misclassified, misposted, personal expenses, etc.

If your tax accountant needs to piece together your financials, not only is it going to cost you significantly more, but it distracts from what you are hiring them to do (tax compliance and advisory).

Michael Plaks · Answer

@Patrick Flanagan

All good tips from the earlier replies. However, ultimately it's up to your CPA. It does not matter how much you love your system or how many other people on BP do. If your CPA cannot seamlessly extract the data they need - you will have a frustrating and expensive experience during the tax time.

So, either reach out to your current CPA and adopt what they recommend - or take BP recommendations but be prepared for additional troubles if your accountant does not like your data. Well, you can also switch accountants, but it's usually the most expensive and frustrating of the options.

Sergey A. Petrov · Answer

Hire a bookkeeper once the volume warrants. In the meantime, learn how to prep actual financial reports. Giving your CPA a box of receipts or non-compliant financials will just add billable hours to your CPA bill. The goal is reporting that is industry standard and your CPA doesn’t have to second guess what your numbers may represent and how they translate to a tax return

John Underwood · Answer

I make sure I capture every receipt and possible deduction in a spreadsheet and I have every category added up and broke down by property.

I have many properties and we only have to meet for an hour to do my taxes.

He has told me I am the most organized of his clients.

How to make your tax accountants job easy!(ier)

Most Popular Reply