I have searched the forums and blogs on the subject, and it seems to be slightly leaning toward CPA/professional preparation. I have used a professional for the last 10 years and each year, my costs have increased (we are charged by the form, so with more forms [more properties] comes more cost). Because I have had what I believe to be competent preparation in the past, I am considering the option of using those previous returns as a customized guide for self preparation this year. I may give up halfway through and decide to acquire a professional before the deadline next year, but I feel like it's something I should try. I am aware of the business version of turbotax and I also saw a reference to taxact.com as a method for personal preparation. • My situation is: • I have 5 SFH all occupied. 1 was acquired this year (rehabbed then rented). • I have 1 duplex acquired this year (neither side rented yet - completing rehab and expect to rent in the last month of the year or first of 2017). • I have a full time job. • My wife has a part time job. • We are a sole proprietorship regarding the business organization. • My total cost for preparation last year was $865. Please comment...will you: • Use a professional for your tax preparation, yes or no? • If no, what software, program, method will you use to prepare your taxes? • If yes, what do you expect to pay as SP? • If you prepare your own taxes, what has been the biggest help, learning moment, best advice you would pass along to a fellow investor. Thank you for your time, and as always, I appreciate this community, the encouragement, and advice!

My wife is a dental hygienist and cleans my teeth at the house. My brother in law is a physician and does my well checks.

I still do my own. I put in the work keeping good records throughout the year on my little rental property manager software (which is so old it won't update anymore:) so the filing itself isn't too bad. I have an s-corp, 2 LLCs and 34 rentals. Sometimes I consult and wholesale through my s-corp, but it's not anymore work to add a little more income to a line. I don't bother keeping track of mileage or a home office. Because of depreciation mostly, my effective tax rate has been negative for 14 years anyway. I use turbotax premier and business. I know CPAs laugh at it and whatnot, but for less than $200 annually I have survived so far. To try and break-down and explain to a pro all aspects of what I'm doing would take weeks, so I plan to continue going solo. More tax deductions isn't what I need, so I'm ok not fighting for every last little write-off. I err on the side of caution if I'm unsure. @Kurt Gardner - for like $30 you could get a basic rental property mgt software to help you. Super easy to use and will populate turbotax for you. I use QRM. Quickbooks will take a semester of advanced college to master. LOL Keep up with it throughout the year so you can enjoy some spring weather at tax time!

I hope your uncle is not a proctologist...

Will you do your own taxes this year?

Derek Daun

Investor · Sacramento, CA · Member since 2012 · 289 posts · 151 votes

9y

My CPA is also my real estate agent. I give him enough business either through me or through referrals that he does my taxes for free.

2 Reply

Deanna McCormick

Minneapolis, MN · Member since 2013 · 2k+ posts · 1k+ votes

9y

I personally agree, have a good system for yourself for record keeping, I'm small so I just use quicken. But I submit taxes for 4

rental business, trust, personal, and a family members trust.

I'm basically doing tax prep all year keeping receipts, records, like the rest of us.

I try to do a dry run of taxes before year end and get my deductions for expenses organized and look over profit margins.

December is CRUNCH month and I try and see if paying insurance or seasonal maintenance for the upcoming year will make a difference on expenses before year ends if I choose to pay it early.

Kind of like getting that last minute Donation in before the 31st.

1 Reply

Steve Vaughan

Rental Property Investor · East Wenatchee, WA · Member since 2014 · 10k+ posts · 16k+ votes

9y

Originally posted by @Gerald Peters:

So you get an accountant. The account will recommend you get a book keeper. Then they will recommend asset protection. So you start with more insurance...umbrella policy maybe... then people will scare you with you might be sued...So you need a lawyer. He will say could could easily sued so you need to form a entity. Which results in you filing another set of tax returns which means you pay your account and often your State more. Soon you share most of your profits with all the "professionals" you surround yourself with.

Good points, Gerald. If we're not careful we can be so 'professionaled up' we no longer know what we have or have any money left. Reminds me of all the new folks forming their power team. Most will be going in 5 different directions and paying heavily for the privilege.

We have to be in charge of what we are doing and where we are going. Take all professional advice knowing what they're angle is. When I see a tailor, they recommend a new suit. A barber - a haircut. An a/c guy - a new system. A realtor - to buy or sell. On and on.

We must ask what the probability of what we are protecting ourselves from actually happening is and understand how it works together in our overall picture and plan. Cause and effect.

3 Reply

Jana CainPro Member

Enrolled Agent · Richmond, CA · Member since 2016 · 225 posts · 148 votes

9y

@Kurt Gardner I'm a bit biased, as I'm a tax pro (Enrolled Agent), so yes I will do my own taxes, and I tend to recommend that others hire pros to help them. However, if you feel comfortable doing your own, and it's not a just a "I don't want to pay $xxx for someone to help me", by all means go for it. It sucks that you've been burned before - I totally get how that can make anyone not want to go back (same goes for any other professional service). I have a number of friends who do their own taxes (and their situations range from super simple (1040 + Sch A) to more involved real estate and investment matters) and as long as they are satisfied with the outcome, I advise them to continue doing what they're doing. Until they mention something to me that sounds illegal, lol.

One note I'd like to make for the DIYers is that should you run into issues, it may end up costing you more to have a pro help fix it than if you had enlisted their help to begin with. In the firm with which I work, the cost to have a return "reviewed" is the same as if we prepared it - because we will do the return from scratch to pinpoint the errors. And then charge on top of that to move forward with rectifying the issue. So now you're looking at a charge to redo the return, likely amend it ($xxx), and then possibly file a POA for prior years ($xxxx), and then actually execute on the representation ($xxxx). I know every firm is different, but it is something to keep in mind.

@Natalie Kolodij I write all of the abatement offers for the firm I work with, and it really is amazing what ends up being accepted. The IRS is surprisingly broad in what counts as a justifiable reason for incurring a penalty.

4 Reply

Brandon Hall

CPA · Raleigh, NC · Member since 2013 · 1k+ posts · 2k+ votes

9y

@Gerald Peters You may already know it, but the real question is: why are you wasting your time on low value tasks?

I try to explain this to every business owner I meet. As a business owner, your time is valuable. If you decide to plow your time into cost drivers (bookkeeping, taxes, and research), then you're going to have a really tough time scaling.

I know plenty of mildly successful people preparing their own taxes, doing their own bookkeeping, researching tax code, and trying to figure it all out. I know very, very few highly successful people who aren't outsourcing all of that.

It's all about scale. Just ask @Jay Hinrichs. He just indicated he spends almost $100k per year on CPAs. Per your post, Gerald, Jay is clueless because he's paying and not receiving any value. He could do it himself!

Yet his business grosses $25MM per year. I think Jay's on to something...

2 Reply

Gerald Peters

Investor · Huntsville, TX · Member since 2015 · 43 posts · 65 votes

9y

Yes, I would most certainly agree if your building to scale of 25M range you need help, without a doubt. I forget sometimes some people are trying to do that. I'm a 20 houses and done guy. I have fairly rich friend who like you said outsources everything. He doing multi-million dollar deals he surrounded with people assisting. I do think you can take the wasting your time of "low value" task to far. His kids have never seen him mow a yard, cleaned their own pool or painted a house, clean a house or change oil. Maybe I am wrong, but there is something satisfying and of "value" of learning to work with your hands and solve your own problems and be able to care for yourself without the assistance of others.

1 Reply

Loren Clive

Residential Real Estate Broker · Paia, HI · Member since 2016 · 479 posts · 311 votes

9y

No. Laws change all the time and it's well worth it to pay a professional to do it for you, especially if you own multiple properties.

Basic business checklist:

1. Good attorney

2. Good accountant

3. Good lender

Even Donald Trump uses accountants. C'mon people!

2 Reply

Mike CumbieBusiness Member

REALTOR® · Brockport, NY · Member since 2015 · 3k+ posts · 4k+ votes

9y

I'll have to join the let a pro handle it crowd. The laws change so much and having someone who speaks that language is worth the cost to me.

I have always been asked questions that make me scratch my head and then... pow... it helped somehow. There are places I will do things myself to save some money but dealing with the IRS is not one of them for me. Everyone is different though and some things I feel comfortable with you may not... and vice versa. I think it comes down to where your comfort level is with a task. Tax code is not up there with me. A good accountant will tell you to buy a car this year, but lease next year as it is better for you.

Good luck in whatever you decide!

0 Reply

William Lewis

Investor · Jenkintown, PA · Member since 2016 · 32 posts · 23 votes

9y

My wife and I have used an accountant since we married. Between owning, working, RE managing, and moving between various states, we've never been in a consistent situation from one year to the next. This year will be no different. For this reason, we've used an accountant each year. I'd like to say that I'll eventually do it myself, because that's the type of person that I am, but I've come to realize that some things (like taxes) aren't worth my time. I would much rather work on my house, develop better systems for my projects, or just enjoy my family.

Whatever you choose, dive deep into it and get as much as you can from the experience, then teach someone else.

1 Reply

Keith N.

Investor · Raleigh, NC · Member since 2015 · 189 posts · 102 votes

9y

@Kurt Gardner I will not. My first year of owning a rental (last year), I paid my young CPA friend to do my taxes. I'll pay him again this year. I figure it's a win win win. He learns more about preparing taxes, I get my taxes done professionally and cheap, and I have a relationship with someone who can become familiar with my finances and keep doing them year after year.

1 Reply

Jay HinrichsBusiness Member

Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes

9y

@Gerald Peters your funny.... we all have things we like to do ourselves.. for me I like to fly my own airplane don't want someone doing that for me... I have an electric car so I don't need oil changes or pump my own gas.

I love to work in the yard I spend half a day each weekend tending my gardens half the year... I tear the paper towels in half so I don't waste them.. I was a apprentice painter once but hated it...

also sold fuller brush's door to door.. pumped gas , bagged groceries... etc etc.. but I found my calling in Real estate sales and I rather like that and finance and building..

And I agree with you I am not a big asset protection guy.. LLC and umbrella keeps me sleeping at night .. I don't need an LLC for each prop like some espouse .

But what I won't do is do anything that will bring the wrath of the IRS down on me... and I have zero interest in tax returns or even looking at them other than to see GROSS income and taxable income as it relates to how much money my bank will lend me.. :)

We all have our things.. nothing wrong with doing your own tax's taking title in your own name and self insuring ones self.. If I had a bunch of rentals that were paid for I would not have fire insurance I can tell you that I would just have liability. And running rentals really has no interest to me personally.. so we like different things.

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Andrey Y.

Specialist · Honolulu, HI · Member since 2014 · 1k+ posts · 1k+ votes

9y

Originally posted by @Natalie Kolodij:

Originally posted by @Gerald Peters:

I've never met an accountant that added value that I didn't know already. Turbo tax and little study all u need I think. Accountants count money few make a lot of money. I know more let them do my books then I'd let my real estate agent buy my rental houses. Maybe others have had better experience. Count your own money

This is a borderline offensive comment.

I'm pretty sure a masters degree in taxation and passing an exam that in most states is harder than the Bar exam qualifies us to do a little more than "count money"

But hey- shoot me your email and next time I'm stumped on something I'll make sure to ask you.

The Bar exam is not considered hard. But, I do think his comments were genuine in that it was from HIS OWN EXPERIENCE or maybe naivety?

0 Reply

Gita FaustBusiness Member

Accountant · Richboro - Philadelphia, PA · Member since 2008 · 901 posts · 246 votes

9y

Oh yes, I do file my own tax return just because I got educated via seminars, attending meetings and an extensive network whom I am not afraid to share everything and ask a questions.

OK let's back up, All that education took time away from building my successful business and what I loved to do. We did have a tax practice and then sold it. But just reading and attending sessions were not enough. I wanted to give strategic advice where clients could grow their business and save more and it only comes with a mindset, experience and educating yourself every week.

Today we as a team and I do what we love to do. In that we found value for our clients and us to know what their equity is at the end of the day. End of EVERYDAY. So you can make the next deal with a snap of your fingers.

Trust me that is just a part of a puzzle in running a business. Immaterial if you have one property or 1000's.

0 Reply

Kurt Gardner

OP

Investor · Maryville, IL · Member since 2016 · 129 posts · 81 votes

9y

@Mike Dymski will do.

@Gerald Peters if i had not had the experience with the preparer up until two years ago, i would weigh in whole heartedly with your sentiment (H&R Block and then the most recent one really turned my stomach). I was very blessed and spoiled with the woman who so professionally prepared, counseled and just chatted with me as a friend before, that my standards are now set extremely high. I'm sure they exist, and I'm weighing the cost of my time and the fees against the trouble to find someone who is that good, again...(lol, i sound like a lamenting love song, right?).

@Jay Hinrichs i see that humblebrag...and i envy your sweet gardening time!

@Jim Kennedy @Loren Clive @Mike Cumbie @William Lewis @Keith N. thank you. can you address some of my previous questions regarding what your situation is and approximately what you pay/are willing to pay for these services?

@Derek Daun that is a sweet deal and I'm also a little envious of that sweet gig!

@Deanna McCormick you are EXACTLY where i am now...looking ahead and trying to do the value to return calculations...with this conversation, i am really leaning toward the "get a pro" aspect again...I'm just not sure I'm ready to "put myself out in the dating scene again!"

@Jana Cain yup. i have taken apart so many things in my life and put them back together with leftover screws and bolts...i do not want to face any horror stories with my finances. I have found that having those leftovers does NOT mean i made the item better and more efficient!

@Brandon Hall scale is the big question for me, here, and that's a great point. There is NO WAY I'd ever consider doing my own taxes in the "Jay-realm." I'm just getting to a point where we are looking seriously into a property management option. I'm weighing the value of buying back my time so i can pursue future investment options more efficiently. I know it's a matter of priority, margin and long-term security. So far, all three of those have been solid, and i am a little loathe to mess up one for the sake of another (eg. look seriously into PM and offset some of that cost by doing my own taxes). Just writing that seems like an action i would look back on and say, "and that's where it started getting messy..." hmmmmm.

@Gita Faust you have a greater love for numbers than i have, i suspect! If you do what you love, however, it's more fun, right?

Thank you all, again, for such a well chronicled discussion and summary of the good, the bad, and the ugly (baby brain syndrome, that is priceless!).

1 Reply

Gerald Peters

Investor · Huntsville, TX · Member since 2015 · 43 posts · 65 votes

9y

I think I secretly hold a small grudge against accounts and even lawyers. In my opinion accounts seem to get a pass for a lot of unethical behavior. Enron was made possible by accounts and lawyers but the CEO was the blame and the accountants flew under the radar. Virtually all wall street, banking, housing crisis and even the govt budgeting and spending is all made possible by accounts and lawyers. Yet we never blame the accounts. You can't commit fraud on large scale without the help of an account.

0 Reply

Kurt Gardner

OP

Investor · Maryville, IL · Member since 2016 · 129 posts · 81 votes

9y

@Gerald Peters I'm pretty sure the "secret" is out, ha!

be well, sir.

2 Reply

Natalie KolodijBusiness Member

Moderator

Tax Strategist| National Tax Educator| Accepting New Clients · Member since 2014 · 3k+ posts · 4k+ votes

9y

Originally posted by @Gerald Peters:

I think I secretly hold a small grudge against accounts and even lawyers. In my opinion accounts seem to get a pass for a lot of unethical behavior. Enron was made possible by accounts and lawyers but the CEO was the blame and the accountants flew under the radar. Virtually all wall street, banking, housing crisis and even the govt budgeting and spending is all made possible by accounts and lawyers. Yet we never blame the accounts. You can't commit fraud on large scale without the help of an account.

You've got this backwards. Enron was executed by the CEO and was facilitated by their accountants on staff. However all of the higher ups at Enron said they had no idea the accountants were doing it yada yada. The accountants had nothing to gain by the CEO making billions. They should just report the numbers, why would they fudge them without being instructed to- no benefit to them. There's an awesome documentary on the whole thing called the Smartest Guys in the Room.

So in 2002 they passed Sarbanes Oxley which holds EVERYONE to a much higher standard. Now everyone gets held accountable if Fraud is committed. If you signed off any where, you're getting jail time.

And no....The banking and housing crisis was made possible by bad LENDERS and poor regulation.

I'm not really sure what you're trying to blame us for? Or why you're wanting all accountants to be held accountable for things that 99.9% of accountants have literally never done. You realize that a CPA is held to an incredibly high ethical standard and there are a LOT of things that cause us to have our licenses revoked.

There are a few bad seeds in any industry.

I watched an episode of American Greed last night about a doctor who made billions falsely diagnosing & treating people for cancer they didn't have. Should we never go to a doctor again or not trust any because this one put his greed before his oath?

I get what you're saying but the majority of CPAs aren't greedy, or committing fraud, or doing any thing of that nature.

My job is literally to keep as much of my client's money from the government as possible, without doing anything fraudulent. Period.

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Loren Clive

Residential Real Estate Broker · Paia, HI · Member since 2016 · 479 posts · 311 votes

9y

I own a residential real estate brokerage, 6 properties plus 10 more with a partner, and flip a couple of houses a year. I pay my accountant, who is also my aunt, $100 monthly to reconcile my brokerage expenses.

I total all my property expenses at year end. We employ a bookkeeper at $60 for the partnership properties then my CPA prepares the K-1.

Annual tax returns run $835 personal, $500 business. People have remarked that I do not overpay given the complexity of my returns.

Ask around to find a good accountant who is a CPA. My aunt specializes in small business accounting, which caters to entrepreneurs like real estate investors.

1 Reply

Jerry W.Pro Member

Moderator

Investor · Thermopolis, WY · Member since 2012 · 4k+ posts · 4k+ votes

9y

I have my taxes done by two different firms, long story. I did my own taxes for about 10 years, and did them on a weekend. I felt doing them myself gave me a lot more understanding of my business dealings. Technically I could charge and do taxes for others, but just because I could does not mean I should. Eventually my wife who was a business major, talked me into having taxes done professionally. The cost ranges between $1,000 to $2,500 per year. I have one LLC doing business in Ohio, two Sub S corporations doing rentals, three rentals in my own name, a law office, and a W2 job, my wife has a W2 job and is also self employed. My rentals are 4 different states, and I hold a part interest in a note or two. While not having the time to do it is important, so is the lack of stress from doing them. My total units are 30 to 35 residential, and a commercial property.

2 Reply

Keith N.

Investor · Raleigh, NC · Member since 2015 · 189 posts · 102 votes

9y

@Kurt Gardner I think I paid $150-200 last year. But again this was a good friend of mine. He even sent me Excel spreadsheets showing exactly how he reported my income and kinda walked me through it. Very helpful

1 Reply

Bill Hamilton

Denver, CO · Member since 2015 · 251 posts · 123 votes

9y

So I actually go a slightly different route nowadays. Keep in mind that some of my background is being a mortgage broker and also an account executive for a wholesale lender; therefore I have lots of experience in RE financing but not from the ownership side. I also have a minor in accounting, experience in governmental accounting, have owned a number of LLC's, been 1099'd etc, etc.

What I have finally settled on is I use TurboTax or something similar to see what I think I my taxes should look like. But ultimately I use a tax attorney to file. The one I use now is an attorney, a CPA and a Certified Financial Planner. They only charge around $300-$500 per return and I get the benefit of true Attorney/Client privilege if I have questions about something. Also, the IRS won't even attempt to talk to me directly if my attorney filed my taxes. That gives me a level of comfort that is well worth the cost for him to file taxes for all my entities and for my personal taxes.

0 Reply

Chris MasonPro Member

Moderator

Lender · CA · Member since 2015 · 9k+ posts · 10k+ votes

9y

No, all of you BPers, none of you people are self-preparing this year, or ever again, because I don't want to deal with garbage non-compliant self-prepared tax returns! :P

Get a tax pro, and declare your income honestly, unless you want to sabotage yourself from getting a mortgage within the next 36 months.

Does anyone here have any further questions about how and why the are NOT doing their own taxes this year? I will be happy to explain in further detail about how I have $750,000 right here just for you to buy a fourplex with, but you're (probably) not getting a single penny of it if you self-prepare your tax returns. :)

Do you want $750,000, or not? Oh, you do? You want this $750,000? This $750,000 right here, you think it's pretty and green? To be clear, you're telling me that you DO want this seven hundred and fifty thousand dollars? This right here, you want some of THIS?

OK, glad we have that clear. Great.

Then....

Hire a tax professional to do your dang taxes!

It'll probably cost you three quarters of a million dollars of funding if you don't heed my advice.

This is not a negotiation, this is a fact.

4 Reply

Daniel HymanBusiness Member

CPA · Milwaukee, WI · Member since 2016 · 2k+ posts · 1k+ votes

9y

I'll certainly prepare my own since I do this professionally, but my take on this is that a non professional could give it a shot on their own provided that he/she:

a) has a relatively simple situation (eg: a W-2 and a rental or 2) and

b) good understanding of basic taxation and

c) is not risk adverse

Otherwise, yeah, I would definitely echo other sentiments here and hire a CPA.

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Natalie KolodijBusiness Member

Moderator

Tax Strategist| National Tax Educator| Accepting New Clients · Member since 2014 · 3k+ posts · 4k+ votes

9y

Originally posted by @Chris Mason:

No, all of you BPers, none of you people are self-preparing this year, or ever again, because I don't want to deal with any of your garbage non-compliant self-prepared tax returns! :P

Get a tax pro, and declare your income honestly, unless you want to sabotage yourself from getting a mortgage within the next 36 months.

Does anyone here have any further questions about how and why the are NOT doing their own taxes this year? I will be happy to explain in further detail about how I have $750,000 right here just for you to buy a fourplex with, but you're (probably) not getting a single penny of it if you self-prepare your tax returns. :)

Do you want $750,000, or not? Oh, you do? You want this $750,000? This $750,000 right here, you think it's pretty and green? To be clear, you're telling me that you DO want this seven hundred and fifty thousand dollars? This right here, you want some of THIS?

OK, glad we have that clear. Great.

Then....

Hire a tax professional do your dang taxes!

It'll probably cost you three quarters of a million dollars of funding if you don't heed my advice.

This is not a negotiation, this is a fact.

I wish I could upvote this twice.

Another good point- a friend of mine owns an art Gallery in Hawaii and he was saying how his local bank wouldn't approve his business loan without CPA completed tax returns and Financial Statement Preparations.

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Mike Dymski

Investor · Greenville, SC · Member since 2016 · 5k+ posts · 13k+ votes

9y

Hey Kurt, I just finished my vetting process and selected Brandon Hall. He's a BP member, regular blogger on the site, frequent poster and real estate specialist. We will see how it turns out.

I went through a more extensive process than I had anticipated but I never found the right fit until I spoke with Brandon. I vetted local firms and many of the real estate CPAs who market nationally through various channels (podcasts, books, blogs, articles, BP) and Brandon stood out from the others. First off, I spoke directly with him rather than a "client services" intake individual...with many of these firms, you don't get to speak with tax preparers. Second, and most importantly, he told me how he would handle my specific tax items so that I knew generally what his position was and, in turn, what I was getting. The other intake calls were too general, even when I pushed for specifics. I understand that you can't cover everything in a 30-45 minute consultation but, for a part-time investor with a W-2, you can cover a lot of ground in that time. If you are going to spend the time, may as well get started with the real stuff. Brandon's consultation was more like a consultation under retainer than a general intake consult. In my opinion, he markets differently than some of the others...he provides in depth actionable answers and that demonstrates expertise whereas some of the others provide a lot of basic content to get you in the door and you have to retain them to find out how they would handle your taxes. I value clarity and depth...we are too busy (and too smart) for fluff.

4 Reply

Will you do your own taxes this year?

Will you do your own taxes this year?

Most Popular Reply

78 Replies

Hire a tax professional to do your dang taxes!

Hire a tax professional do your dang taxes!