Astonished at my tax services bill!

Louisville, Kentucky

Tax, SDIRAs & Cost Segregation

Astonished at my tax services bill!

Real Estate Investor · Louisville, KY · Member since 2014 · 7 posts · 6 votes

I have 6 rental properties, all Single Family Homes. I was previously paying a tax professional around $800 to $900 to prepare my tax returns for my 6 properties as well as my personal. I am using a new tax professional on the recommendation of another investor, who has since passed away- he recommended his daughter. I understand that pricing can vary from one tax professional to another, and I honestly expected $1,000 up to $1,600, but I had to scrape my Jaw off of the floor when I opened the email with my invoice to see that it was $3,000!

$3,000 for a personal return (filing single) and 6 properties (no LLC or Corp) does not seem reasonable. I only have experience with my previous tax professional as an investor, so I have nothing else to compare this to. I was with them from the time I had 1 up to all 6 properties. Is this consistent with what I should expect to pay for the returns I had performed? I had zero one-on-one time consulting or tax strategization, only submission of my tax criteria and completion of my returns. This is roughly $500 per door! If I had 100 doors, would I expect a $50,000 bill?

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Michael PlaksPro Member

Tax Accountant / Enrolled Agent · Houston, TX · Member since 2014 · 5k+ posts · 6k+ votes

The amount of refund is a completely meaningless number. All it shows is how much you overpaid from your paychecks throughout the year. It tells you nothing about how efficient your taxes are.

Analogy: grocery store. What you get back as a change from the cashier does not tell you if your $5 purchase was a good price. Your "refund" depends solely on what bill you handed the cashier earlier. You give her $10 - your "refund" is $5. You give her $100 - you "refund" is $95, yay!!! You give her $5 - you get nothing back, at all. While your $5 out of pocket cost remains exactly the same.

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Eric Vann
Member since 2019 · 2 posts · 0 votes
2y
Quote from @Mike Wells:

I have 6 rental properties, all Single Family Homes. I was previously paying a tax professional around $800 to $900 to prepare my tax returns for my 6 properties as well as my personal. I am using a new tax professional on the recommendation of another investor, who has since passed away- he recommended his daughter. I understand that pricing can vary from one tax professional to another, and I honestly expected $1,000 up to $1,600, but I had to scrape my Jaw off of the floor when I opened the email with my invoice to see that it was $3,000!

$3,000 for a personal return (filing single) and 6 properties (no LLC or Corp) does not seem reasonable. I only have experience with my previous tax professional as an investor, so I have nothing else to compare this to. I was with them from the time I had 1 up to all 6 properties. Is this consistent with what I should expect to pay for the returns I had performed? I had zero one-on-one time consulting or tax strategization, only submission of my tax criteria and completion of my returns. This is roughly $500 per door! If I had 100 doors, would I expect a $50,000 bill?

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Eric Vann
Member since 2019 · 2 posts · 0 votes
2y
Quote from @Eric Vann: I only pay $800 for 5 rents in NC. That does sound high to me too. I would look around and find someone else.

Quote from @Mike Wells:

I have 6 rental properties, all Single Family Homes. I was previously paying a tax professional around $800 to $900 to prepare my tax returns for my 6 properties as well as my personal. I am using a new tax professional on the recommendation of another investor, who has since passed away- he recommended his daughter. I understand that pricing can vary from one tax professional to another, and I honestly expected $1,000 up to $1,600, but I had to scrape my Jaw off of the floor when I opened the email with my invoice to see that it was $3,000!

$3,000 for a personal return (filing single) and 6 properties (no LLC or Corp) does not seem reasonable. I only have experience with my previous tax professional as an investor, so I have nothing else to compare this to. I was with them from the time I had 1 up to all 6 properties. Is this consistent with what I should expect to pay for the returns I had performed? I had zero one-on-one time consulting or tax strategization, only submission of my tax criteria and completion of my returns. This is roughly $500 per door! If I had 100 doors, would I expect a $50,000 bill?

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Michael PlaksPro Member
Tax Accountant / Enrolled Agent · Houston, TX · Member since 2014 · 5k+ posts · 6k+ votes
2y
@Mike Wells
Normally the price of any project, including tax preparation, is discussed up front.
These two posts may provide some insight for the future:
https://www.biggerpockets.com/forums/51/topics/998718-explai...
https://www.biggerpockets.com/forums/51/topics/1088325-expla...
2 Reply
Russell BrazilBusiness Member
Moderator
Real Estate Agent · Washington, D.C. · Member since 2012 · 17k+ posts · 30k+ votes
2y
The price doesn't sound abnormal to me for a real tax pro. Someone charing like $800 like you were paying before, is what I might expect at say an H&R Block type of preparer.
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Jason WatsonBusiness Member
CPA · Colorado Springs, CO · Member since 2024 · 98 posts · 83 votes
2y
Not sure about the context here... a W-2 and 6 rentals might seem steep... but were there a bunch of hair on your rentals? A dozen 1031 exchanges that needed to be traced out? Keep in mind that once a tax pro prepares a tax return, they largely inherent and own the historical data warts and all.

How many states? 94 fixed assets to setup including a lawnmower at $275?

Did you have a bunch of crud outside of the rentals? 14 brokerage accounts? Nine 1099-Rs?

At first blush it does seem like a $1,600 to $1,800 tax return... but you add 1031s, states and bunch of other tax docs... $3,000 might not be bad.
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Account Closed
Accountant · San Diego, CA · Member since 2019 · 1k+ posts · 552 votes
2y
Quote from @Mike Wells:

I have 6 rental properties, all Single Family Homes. I was previously paying a tax professional around $800 to $900 to prepare my tax returns for my 6 properties as well as my personal. I am using a new tax professional on the recommendation of another investor, who has since passed away- he recommended his daughter. I understand that pricing can vary from one tax professional to another, and I honestly expected $1,000 up to $1,600, but I had to scrape my Jaw off of the floor when I opened the email with my invoice to see that it was $3,000!

$3,000 for a personal return (filing single) and 6 properties (no LLC or Corp) does not seem reasonable. I only have experience with my previous tax professional as an investor, so I have nothing else to compare this to. I was with them from the time I had 1 up to all 6 properties. Is this consistent with what I should expect to pay for the returns I had performed? I had zero one-on-one time consulting or tax strategization, only submission of my tax criteria and completion of my returns. This is roughly $500 per door! If I had 100 doors, would I expect a $50,000 bill?

While we dont charge that much, Its not unreasonable. How much did your tax pro save you? If they saved you 30k, then you made 10x on your investment. Thats pretty good.
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Basit SiddiqiBusiness Member
Accountant · New York, NY · Member since 2015 · 8k+ posts · 3k+ votes
2y
I agree with @Michael Plaks that the pricing should be discussed prior to the start of the engagement.

My firm does not like the hourly invoice method because I find it can potentially cause anxiety to clients who may not know the final price.

if you were a nice client and paid an hourly fee, maybe there was a lot of time towards 'setting' you up as a client(inputting your properties, prior year carryforwards, depreciation schedule, etc) which won't be a cost for you going forward.

Best of luck.
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Joshua ThompsonBusiness Member
Accountant · Melissa, TX (Remote) · Member since 2017 · 210 posts · 135 votes
2y
Hey Mike!
I would say this, if you wanted to find cheaper tax preparation you 100% could but it might cost you more in the form of incorrect tax returns or inflated amounts of tax due. I agree with just about everyone above that the price should be either discussed upfront or in the engagement letter before services began.
It's different to know how much they saved you because tax preparation typically isn't a service to save you taxes, you'll want to meet with them during the year for this. However, some elections and decisions can be made during tax preparation that could benefit you but most clients aren't aware of these small changes that saved them money.
I would say focus on the relationship, if it's a good relationship and you trust them then keep working together. If cost is a big factor which I completely understand during these times, then search around but know finding that real estate-friendly accountant that is in the $1,300 (depending on your situation) range and having a good relationship with them might be difficult to find.
Lastly, ask her if additional services come with that price. 99% of the time the answer is no, but some firms offer free mid-year calls or check-ins for being a tax preparation client.
If you're comfortable reaching out to remote firms contact anyone here in the forums. I believe someone above said they aren't that expensive.
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Gregory Wilson
Member since 2024 · 238 posts · 132 votes
2y
$3000 is completely reasonable. But, your first mistake is putting all those properties in your personal name. If something horrible happens (like your handy man who you have given the keys to all the properties rapes your female tenant (you didn't know he just got out of prison for rape) (no insurance coverage for you by the way because intentional torts are uninsurable) you will lose everything you own. Or, when the lawn boy goes to get lawnmower gas in his uninsured car and wrecks into someone on your business. Also no insurance.
Finally, the IRS Audit likelihood for a 1040 with 6 Schedule E properties is about 10 times as likely as a 1065 (with your spouse) or an S-Corp.
Then you can get a single K-1 and do your own tax with Turbo Tax.
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Benjamin WeinhartBusiness Member
Accountant · Cincinnati OH 45245, USA · Member since 2022 · 112 posts · 112 votes
2y
Based on the prices that I charge for a similar return, assuming there were clean records provided and not a ton in the way of depreciable assets needing to be analyzed, then $3,000 is a bit much. I would fall much closer to your initial thought of $1,000 to $1,500. If there was a substantial amount of extra work needed, however, I could easily see how it could get up to $3,000 or even more.
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Scott Mac
Austin, TX · Member since 2019 · 5k+ posts · 5k+ votes
2y
You did not ask for an estimate up front?
Lesson learned.
Good Luck!
1 Reply
Alan F.
Flipper/Rehabber · CA · Member since 2023 · 1k+ posts · 1k+ votes
2y
Quote from @Mike Wells:

I have 6 rental properties, all Single Family Homes. I was previously paying a tax professional around $800 to $900 to prepare my tax returns for my 6 properties as well as my personal. I am using a new tax professional on the recommendation of another investor, who has since passed away- he recommended his daughter. I understand that pricing can vary from one tax professional to another, and I honestly expected $1,000 up to $1,600, but I had to scrape my Jaw off of the floor when I opened the email with my invoice to see that it was $3,000!

$3,000 for a personal return (filing single) and 6 properties (no LLC or Corp) does not seem reasonable. I only have experience with my previous tax professional as an investor, so I have nothing else to compare this to. I was with them from the time I had 1 up to all 6 properties. Is this consistent with what I should expect to pay for the returns I had performed? I had zero one-on-one time consulting or tax strategization, only submission of my tax criteria and completion of my returns. This is roughly $500 per door! If I had 100 doors, would I expect a $50,000 bill?
Self employed here, average $3k for prep and pay 37% effective tax rate. Just make more $
0 Reply
Dave Skow
Lender · Seattle, WA · Member since 2014 · 2k+ posts · 899 votes
2y
@Mike Wells- seems steep ....always ask for a price estimate in the future ....go back to your previous CPA ( or another )
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Mike Wells
OP
Real Estate Investor · Louisville, KY · Member since 2014 · 7 posts · 6 votes
2y
Quote from @Account Closed:

Quote from @Mike Wells:

I have 6 rental properties, all Single Family Homes. I was previously paying a tax professional around $800 to $900 to prepare my tax returns for my 6 properties as well as my personal. I am using a new tax professional on the recommendation of another investor, who has since passed away- he recommended his daughter. I understand that pricing can vary from one tax professional to another, and I honestly expected $1,000 up to $1,600, but I had to scrape my Jaw off of the floor when I opened the email with my invoice to see that it was $3,000!

$3,000 for a personal return (filing single) and 6 properties (no LLC or Corp) does not seem reasonable. I only have experience with my previous tax professional as an investor, so I have nothing else to compare this to. I was with them from the time I had 1 up to all 6 properties. Is this consistent with what I should expect to pay for the returns I had performed? I had zero one-on-one time consulting or tax strategization, only submission of my tax criteria and completion of my returns. This is roughly $500 per door! If I had 100 doors, would I expect a $50,000 bill?

While we dont charge that much, Its not unreasonable. How much did your tax pro save you? If they saved you 30k, then you made 10x on your investment. Thats pretty good.
I typically get back $1,000 to $1,500, which is what I also received this year. No additional savings to offset the additional cost of the service
1 Reply
Mike Wells
OP
Real Estate Investor · Louisville, KY · Member since 2014 · 7 posts · 6 votes
2y
Quote from @Basit Siddiqi:

I agree with @Michael Plaks that the pricing should be discussed prior to the start of the engagement.

My firm does not like the hourly invoice method because I find it can potentially cause anxiety to clients who may not know the final price.

if you were a nice client and paid an hourly fee, maybe there was a lot of time towards 'setting' you up as a client(inputting your properties, prior year carryforwards, depreciation schedule, etc) which won't be a cost for you going forward.

Best of luck.

I was indeed told that there was additional cost initially this year to setting me up as a new client, and next year wouldn't be as significant, probably only $2,500. That's still $1,000 to $1,200 more than I think is reasonable for what I am having done.
When I turned in my taxes, she expressed that she was shocked at how organized my tax prep was. Everything is organized with an index page, separated and typed onto spreadsheets. NO receipts to copy or review because all receipts are consolidated onto a spreadsheet by house with a description for each purchase. I try to be courteous and spend tens of hours into my tax prep before I ever send them off to reduce the time and frustration of the person preparing my returns.
2 Reply
Mike Wells
OP
Real Estate Investor · Louisville, KY · Member since 2014 · 7 posts · 6 votes
2y
Quote from @Scott Mac:

You did not ask for an estimate up front?
Lesson learned.
Good Luck!
You are correct!
1 Reply
Mike Wells
OP
Real Estate Investor · Louisville, KY · Member since 2014 · 7 posts · 6 votes
2y
Quote from @Alan F.:

Quote from @Mike Wells:

I have 6 rental properties, all Single Family Homes. I was previously paying a tax professional around $800 to $900 to prepare my tax returns for my 6 properties as well as my personal. I am using a new tax professional on the recommendation of another investor, who has since passed away- he recommended his daughter. I understand that pricing can vary from one tax professional to another, and I honestly expected $1,000 up to $1,600, but I had to scrape my Jaw off of the floor when I opened the email with my invoice to see that it was $3,000!

$3,000 for a personal return (filing single) and 6 properties (no LLC or Corp) does not seem reasonable. I only have experience with my previous tax professional as an investor, so I have nothing else to compare this to. I was with them from the time I had 1 up to all 6 properties. Is this consistent with what I should expect to pay for the returns I had performed? I had zero one-on-one time consulting or tax strategization, only submission of my tax criteria and completion of my returns. This is roughly $500 per door! If I had 100 doors, would I expect a $50,000 bill?
Self employed here, average $3k for prep and pay 37% effective tax rate. Just make more $

I dont think $3k is expensive for a self-employed return. That could get rather complicated. I dont think our situations are comparable at all.
0 Reply
Becca F.
Rental Property Investor · San Francisco Bay Area · Member since 2022 · 1k+ posts · 1k+ votes
2y
I received a preliminary estimates for $3625 to $4000 (just for preparing the return, federal and 2 states). I'm W2 employee with 5 rentals (4 SFH and 1 multi-family, co-owned with other investors), no Corps and no LLCs either. In my case the Multi-family complicates it a little. Phone calls are additional cost and tax strategy is $6000. This CPA is highly recommended and used by my investor friends. CPA is in the Bay Area.

I received another quote from a well known CPA firm based in North Carolina and it was minimum $2500 for filing and $4950 for tax strategy. They strongly prefer to do everything holistically so I don't think I could have just picked having the returns done.

I don't think the $3000 is unreasonable but it's a little high since you have all your tax prep organized.

1 Reply
Theresa HarrisPro Member
Member since 2019 · 15k+ posts · 11k+ votes
2y
Why not go back to your previous person? Also how did your tax return differ in terms of what you paid or got back from the IRS?
0 Reply
Henry T.
Member since 2022 · 1k+ posts · 1k+ votes
2y
On the face of it, way too high. Go somewhere else.
0 Reply
Michael PlaksPro Member
Tax Accountant / Enrolled Agent · Houston, TX · Member since 2014 · 5k+ posts · 6k+ votes
2y
The amount of refund is a completely meaningless number. All it shows is how much you overpaid from your paychecks throughout the year. It tells you nothing about how efficient your taxes are.

Analogy: grocery store. What you get back as a change from the cashier does not tell you if your $5 purchase was a good price. Your "refund" depends solely on what bill you handed the cashier earlier. You give her $10 - your "refund" is $5. You give her $100 - you "refund" is $95, yay!!! You give her $5 - you get nothing back, at all. While your $5 out of pocket cost remains exactly the same.
3 Reply
Account Closed
Accountant · San Diego, CA · Member since 2019 · 1k+ posts · 552 votes
2y
Quote from @Mike Wells:

Quote from @Account Closed:

Quote from @Mike Wells:

I have 6 rental properties, all Single Family Homes. I was previously paying a tax professional around $800 to $900 to prepare my tax returns for my 6 properties as well as my personal. I am using a new tax professional on the recommendation of another investor, who has since passed away- he recommended his daughter. I understand that pricing can vary from one tax professional to another, and I honestly expected $1,000 up to $1,600, but I had to scrape my Jaw off of the floor when I opened the email with my invoice to see that it was $3,000!

$3,000 for a personal return (filing single) and 6 properties (no LLC or Corp) does not seem reasonable. I only have experience with my previous tax professional as an investor, so I have nothing else to compare this to. I was with them from the time I had 1 up to all 6 properties. Is this consistent with what I should expect to pay for the returns I had performed? I had zero one-on-one time consulting or tax strategization, only submission of my tax criteria and completion of my returns. This is roughly $500 per door! If I had 100 doors, would I expect a $50,000 bill?

While we dont charge that much, Its not unreasonable. How much did your tax pro save you? If they saved you 30k, then you made 10x on your investment. Thats pretty good.
I typically get back $1,000 to $1,500, which is what I also received this year. No additional savings to offset the additional cost of the service

Hmmm yeah perhaps isnt worth it then if you would prefer to do it yourself. But then that's time your giving up to do it!
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Don KonipolBusiness Member
Investor · The Woodlands TX / Avon, CT · Member since 2009 · 6k+ posts · 10k+ votes
2y
When dealing with service providers, you can easily be shocked if you did not discuss pricing upfront, and even if you did you could easily be shocked - LOL.
What you needed was a letter of engagement spelling out the fees that will or may be incurred - in detail. I learned this the hard way years ago.
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Alecia LovelessPro Member
Member since 2019 · 3k+ posts · 2k+ votes
2y
@Mike Wells Thanks for the post. Through a combination of odd circumstances I find myself looking for a new tax preparer and will be sure to ask up front now about expected costs.
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Sean O'KeefePro Member
CPA | Accepting new clients | 50 States · Member since 2022 · 1k+ posts · 871 votes
2y
Good feedback on this thread.
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