Should I hire a CPA

Question

Hello!

I've always filed my own taxes and am starting to think this might be the year I need a CPA. In the last year I converted a townhome into a rental and purchased a duplex with a partner. My wife and I also have W2 jobs on top of that and made some larger home improvements to my home. I'm planning to purchase another 3 properties this year so am trying to gauge if biting the bullet and hiring a professional now makes the most sense of if I'm overthinking and can simply file my own returns again. Please feel free to let me know!

I've interviewed a few CPA's and am always hesitant due to cost, any thoughts around this are also appreciated!

Account Closed · Answer

Hey @Darian Gore,

While I am a bit biased, I would 100% recommend you work with a tax pro for your taxes. Especially as your property portfolio grows you will need a tax prep and advisory firm to ensure you don't make costly mistakes and to help with advanced strategies to lower taxes.

To help you in your search: be sure to find an accountant that is willing to grow with you, and is not too high priced fee wise. Not to 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 small business and invest in rental properties all over the US for example 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. Im sure we could help here if you would like, feel free to checkout our website in my bio and fill out the contact form if you think its a fit.

Best of luck in your search!

Sean O'Keefe · Answer

@Darian Gore Here are the things that many CPAs support their clients with:

• Understanding tax impact of short-term vs. long-term vs. flip before you buy
• Which entity structure is best for goals and investment property type
• Tax and compliance on LLC or S-Corp
• How to transfer property out of personal name into LLC (hard to buy 1st through entity)
• Ways to optimize taxes throughout the year
• How best to set up accounting to track income and expenses (doing this late is a mess)
• Feedback on property management systems, accounting systems. systems, etc
• Estimated payments to avoid penalties
• Knowing when to file and getting things in on time

Maybe a few things I missed, but this is the high-level ….. if you can get answers to the above questions on your own, plan, and file your own taxes then you can avoid the expense of a CPA. Some investors are better at doing their research, financials, and taxes than others - it depends on the investor.
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*This post does not create a CPA-client relationship. The information contained in this post is not to be relied upon. Readers are advised to seek professional advice.

Jake Baker · Answer

@Darian Gore

I would 100% hire a CPA. They will catch things that you will miss.

As a flipper with a small rental portfolio, I would also suggest hiring a real estate-focused bookkeeper. Good bookkeeping is a big reason why I was able to scale to 20 flips per year.

Nate Meeker · Answer

@Darian Gore - I'm sure you could do it yourself after spending a few hundred hours reading tax law haha, question is, can you get a better return on your time elsewhere? Could you be missing out on great tax savings?

Markus Shobe · Answer

Yes definitely get a CPA to file your taxes. You want to find one that is real estate focused. Yes it may cost a little more but it will be well worth it. Getting one that doesn't know about real estate will cost you in the long run. This is one area that you don't want to mess around with as it will cost you in the long run.

Alecia Loveless · Answer

@Darian Gore I have worked with a very good accountant for 27 going on 28 years now. This past tax season he recommended I hire a bookkeeper as he felt that with my W-2 and my expanding real estate portfolio that I wasn’t able to keep good enough records to provide him with what he needed in order to properly prepare the best set of taxes for me.

While you may not yet have scaled to this level yet I would suggest hiring someone to do your taxes. If you’ve interviewed people then I’d suggest you pick one of them and do a trial run with this year’s set of taxes.

If it turns out you’re not that happy with the results you can always look for someone else next year. Just because one person does your taxes one year doesn’t necessarily mean they have to do them the following year. Yes it can be easier if you have a continuous chain of events but until you find the right person it’s not necessary.

I have 7 properties, 1 W-2, several K-1s and a few other small things. I usually pay around $1500 for my tax return preparation. This is for a state tax return and a federal tax return.

Obviously this may vary if you live in a larger city or have different things on your return and based on your preparer. I am a single filer. But just to give you an idea.

Darian Gore · Answer

Good afternoon!

No major improvements last year (new roof this year on the primary)

And we bought it under our own names for DTI reasons

Basit Siddiqi · Answer

If you made some home improvements, you want to see if you qualify for any energy efficient credits.Furthermore, you mentioned buying something with a 'partner', I assume you mean someone else besides your spouse.If yes, how did you buy the property, through an entity or are you and the partner directly listed on the deed(tenants in common).

Sean O'Keefe · Answer

Maybe

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