At what point does it become too hard to do your own taxes?

Question

A bit of background, I did my taxes myself for the first time last year. It was the first time I had a salary job and/or sold some stocks, and my dad had previously done them for me while I was looking over his shoulder because he had the H&R software, I was in college, working only summer jobs, or made less than the filing requirement. I bought a primary residence that I'm house hacking and a triplex this year. My primary residence is a conventional loan and the triplex was a private loan from someone in my network (I am paying them interest). Should I get a CPA this year? What forms do I need to make sure to fill out if I do them myself? Any tips or advice would be useful!

Julien J. · Answer

I'm a CPA and I use a CPA who has the expertise to handle my situation.

I've learned over the years the DIY approach slows you down as you dedicate precious time scratching the surface of too many topics. Penny wise, dollar foolish.

Building relationship with experts in their field is invaluable as your business grows.

Michael Plaks · Answer

@William Ring

It depends on how you look at DIY in general. A lot of things in life can be DIY-ed, including taxes. In terms of pure money, of course DIY is cheaper, save for some monumental screwups. Don't ask me how I know.

Besides the $ figure, there're other things: how much time would it take for you to figure it out and how much do you value your time? how much are the potential tax savings from using an expert (not always all that big, but your mileage will vary)? how paranoid are you about the IRS audits? how averse are you to getting yourself into the exciting IRS rules? etc.

Here is a helpful (I hope) take on the value of CPA services: https://www.biggerpockets.com/forums/51/topics/1088325-expla...

Joseph Palmiero · Answer

I might be biased, but once you buy you first investment property, it is easy to "screw things up". Therefore, I would find a qualified real estate tax professional to help you get it correct.

Basit Siddiqi · Answer

If you decide to do the returns yourself, you likely will need to include the following forms

Schedule E - to report the rental activity
Form 4652 - To report the depreciation
Form 8582 - to report any passive loss carryforwards(if any)
Schedule A - to report the prorated taxes and interest from the house-hack

However, I think you likely would benefit by hiring a professional.

Jaron Walling · Answer

Yes. Get with a CPA that understands RE. We own a handful of properties and doing taxes is terrible. This was last year we're doing it ourselves. It only gets worse the more properties you own. As a rental property owner you can claim deductions to offset rental income. You can deduct mortgage interest, property taxes, advertising, utilities, maintenance, and repair costs. You also have depreciation (27.5 or 39 yrs). You can even deduct legal and professional fees (CPA costs)! These deductions add up hence why most investors pay nothing (on paper) for taxes.
This IRS website gets into the weeds on forms and what you can and cannot deduct. Cheers.

https://www.irs.gov/businesses/small-businesses-self-employe...

Ana Garcia · Answer

@William Ring

Yes, get an expert. If you are already doubting whether you should continue to do your own taxes or not, get help, outsource it, and focus on finding more deals and growing your wealth. It looks like you are off to a good start with real estate investing - don't stop.

If you get a CPA who is a tax strategist (there are plenty here on BP), even better, because he/she will find you tax savings so you can achieve your goals (retire early, purchase more investment properties, pay for your children's private education, travel more...)

Our clients who used to prepare their own taxes start saving thousands in taxes per year...thousands! These clients think they are saving money because they are not paying an expert, but it is actually costing them money. The tax code is complicated.

Happy investing!

William Ring · Answer

Thanks everyone for the helpful feedback!

At what point does it become too hard to do your own taxes?

At what point does it become too hard to do your own taxes?

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