Newbie needs your advice. Should I hire a CPA or use Turbotax?

Tax, SDIRAs & Cost Segregation
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Newbie needs your advice. Should I hire a CPA or use Turbotax?

Elio Guillen
Rental Property Investor · Agoura Hills · Member since 2016 · 16 posts · 8 votes

I purchased a turnkey investment property mid December 2016 and now it's time to file my taxes. In hindsight, I should have probably waited to make the purchase early January to avoid this issue, but I guess you live and you learn. I was originally planning to hire a CPA to complete my 2017 taxes, but now I'm wondering if should hire a CPA sooner to help me complete my 2016 taxes. 

My taxes aren't too complicated - I basically have my W2, a few hundred dollars of index fund dividend income, and my turnkey property I bought mid December 2016. I typically use Turbotax, but I'm stuck since I don't know how to find the land value of my property. Should I use the land value listed on a site like realtor.com or should I use the land value listed on the property appraisal? I'm sure this would be a piece of cake for a CPA, to answer but should I hire a CPA if I only had one property for about two weeks in 2016?

Thanks. I appreciate all of your responses.

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Lance LvovskyPro Member
Accountant · Fort Lauderdale, FL · Member since 2013 · 1k+ posts · 753 votes
9y
Generally you would do an allocation of your purchase price to the land and building portion based on the allocation done by the county property appraiser. As to your question about hiring a CPA, I am probably biased as I am a CPA, but I think ultimately you need to do what's best for you. While you may be able to get away doing your taxes yourself this year, you will need a CPA as you grow portfolio. I will also tell you that far too often I have seen people file incorrect taxes. So in summary, a CPA can add real value to your tax return. Plus, a good CPA can assist you with tax planning - and that's where things get really exciting. Feel free to reach out or post here with questions.
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  • Steve Kontos
    Investor · Great Neck, NY · Member since 2016 · 679 posts · 467 votes
    9y

    @Elio Guillen

    Based on what you state here I would talk to a CPA (most offer a free consultation) and get his or her advice before ultimately making that decision.  Keep in mind, if you put this deal under a legal entity, that needs to be filed separately.  

    0Reply
  • Lance LvovskyPro Member
    Accountant · Fort Lauderdale, FL · Member since 2013 · 1k+ posts · 753 votes
    9y
    Generally you would do an allocation of your purchase price to the land and building portion based on the allocation done by the county property appraiser. As to your question about hiring a CPA, I am probably biased as I am a CPA, but I think ultimately you need to do what's best for you. While you may be able to get away doing your taxes yourself this year, you will need a CPA as you grow portfolio. I will also tell you that far too often I have seen people file incorrect taxes. So in summary, a CPA can add real value to your tax return. Plus, a good CPA can assist you with tax planning - and that's where things get really exciting. Feel free to reach out or post here with questions.
    3Reply
  • Oren K.
    Rental Property Investor · Toronto, Ontario · Member since 2012 · 538 posts · 298 votes
    9y

    Ello,

    Another option is to hire a CPA for this year and see / ask questions about what they are doing and various considerations.

    Not to take business away from Lance but unless there are unusual circumstances, it is not rocket science. Next year, if you feel you can handle it, you can go it alone.

    On the other hand, as you add properties and perhaps entities, it does become more involved and don't forget that you get to deduct the cost of the CPA.

    Oren

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  • Steven Hamilton IIPro Member
    Accountant, Enrolled Agent · Grayslake, IL · Member since 2011 · 5k+ posts · 2k+ votes
    9y
    Originally posted by @Steve Kontos:

    @Elio Guillen

    Based on what you state here I would talk to a CPA (most offer a free consultation) and get his or her advice before ultimately making that decision.  Keep in mind, if you put this deal under a legal entity, that needs to be filed separately.  

     Most of us don't have a whole lot of time for consultations right now.

    [email protected]224-381-2660
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  • Steve Kontos
    Investor · Great Neck, NY · Member since 2016 · 679 posts · 467 votes
    9y

    @Steven Hamilton II

    Excellent point!

    0Reply
  • Elio Guillen
    OP
    Rental Property Investor · Agoura Hills · Member since 2016 · 16 posts · 8 votes
    9y

    What are my chances of hiring a good CPA in the Los Angeles area for under $500. Is that realistic considering my tax situation? 

    I wont mind paying whatever market rates are next year since I hope to own at least four properties by then, but the idea of paying more than $500 this year gives me a little heartache. Am I being penny wise and pound foolish?

    Thanks for all of your input.

    0Reply
  • Natalie KolodijBusiness Member
    Moderator
    Tax Strategist| National Tax Educator| Accepting New Clients · Member since 2014 · 3k+ posts · 4k+ votes
    9y

    If you can find a CPA who will take your return right now without mentioning filing an extension they're likely not a good CPA. They should be slammed with work.

    We've been slammed for months now- any one who's come to me any point since February 1st has been told they're likely filing an extension. 

    Podcast Guest on Show Pay Less Tax to the IRS This Year With THESE Real Estate Tax Strategies
    Kolodij Tax & Consulting
    WebsiteView Page
    1Reply
  • Brandon Hall
    CPA · Raleigh, NC · Member since 2013 · 1k+ posts · 2k+ votes
    9y

    @Elio Guillen you don't need a CPA for one or two properties as long as you don't mind putting in the time to do all the research and make sure your returns are compliant. In all honesty, to fully understand the federal and state regulations for a simple turnkey property, it will likely cost you around 100 hours of research, study, and application. 

    So I guess my question is: how do you value your time? Is $500 really a lot considering the time you're saving?

    1Reply
  • Jason Hsiao
    Investor · Pasadena, CA · Member since 2015 · 269 posts · 189 votes
    9y

    It sounds like you're not comfortable enough to use TurboTax on your own. I would get a CPA on board, file for extension for 2016, have them complete it and next year follow what they did and do it yourself.

    The biggest thing is to make sure you take the depreciation deduction and have it count as passive income, not active. Use the land value that's listed with the county assessor.

    Disclosure: I'm not a CPA but I sure know a heck a lot. I did study accounting and work for PwC. On my simple properties I can handle the tax returns on my own and the complex ones I still pay a real pro to do it.

    1Reply
  • Wade Sikkink
    Real Estate Investor · Lincoln, NE · Member since 2013 · 584 posts · 353 votes
    9y

    Money spent on a good CPA is always money well spent.

    Just remember, the CPA can only do good for you if you are providing good data.  Shoe boxes full of receipts is not the way to run a business.

    0Reply
  • Elio Guillen
    OP
    Rental Property Investor · Agoura Hills · Member since 2016 · 16 posts · 8 votes
    8y

    Thanks for all the advice guys, but I ended up using Turbotax. However, I decided I need to have a professional complete my taxes this upcoming year and would like to find one by year end. Does anyone know of any good CPAs with real estate experience in the Los Angeles County or San Bernardino County area?

    Thanks again.

    0Reply
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