So I met with a CPA yesterday (whose name I got from Bigger Pockets actually) in my area. I loved him about as much as a straight man can love another man within minutes. Downside is... He charges about $750 per year to do taxes. He admitted up front the fee was high for most folks, and that his services were usually for folks pulling income from multiple states and sources, who had complicated returns. As of now I have 2 homes, trade some stocks, and am married without kids so far. My taxes are complicated enough to shop for CPA's, but not so simple that I want to do them myself. 

So with that over-explained context in mind, how do you do your taxes every year and what does it cost you? 

My CPA started me at $300 when I owned 2 properties. Now it has increased to about $500, but I’m married filing jointly, have split properties with family members, and a few different state returns to file. Next year I will have LLCs to figure out too so I expect to pay a bit more.

I will say though, my CPA is so good that I’ve recommended about other 8 friends that use him. He gives me a little discount because he knows I am bringing him new business.

Possibly you could negotiate a discount based on referring new business to him? Just a thought.

Good luck!

I think that figure is too high. We have a complex tax return and our CPA charged less than $500.

@James R. Copeland I think you need to look at what you are getting. Does he charge for emails? What is his rate for phone calls?

Keep in mind that a return prepared by a CPA is viewed more favorably by lenders.

For two rentals and stock trades, I’d probably charge $600-700. But we don’t price per return anymore. Our minimum annual rate is $3,000. We bundle services up, such as email support and strategy calls in that $3,000. 

I did this because I recognized that tax prep, while a valuable service, isn’t where you get the “bang for you buck.” Tax strategy sessions are where you save money, adjust your plan, etc. If you are trying to save money during tax prep, it’s already too late.

I think $750 is somewhat reasonable. The real question is: what does he charge for tax strategy? That’s where you’re going to save money. Not during tax prep.

By the way, if you got along with him and he’s super responsive, you should fork up the $750 in a heart beat. We win a lot of clients from CPAs and EAs on BP simply because they are not responsive. People are happy to pay a higher price for someone that will answer their questions quickly. Don’t get sucked into saving $250 by hiring someone who takes two weeks and three follow ups to answer your question.

@Brandon Hall (Is that how mentioning works? Still figuring this site out. 

You hit the nail on the head, and that's why I've been strongly considering it. He charges nothing for phone calls or emails and is very responsive. They pride their business on building relationships with their clients, or at least that was the sales pitch. My current CPA is somewhere in the range of $450 but hasn't always been responsive and doesn't do much with real estate. I asked a question about 1031's a couple months back, no response, asked again and his response was basically 'Yeah I did one of those about 20 years ago for someone, but am not really well versed' (Not a direct quote, paraphrasing). 

80 bucks (turbo tax, and i own 40 places) cpas are overpriced and use the same software to do exactly the same thing i do. An accountants true value existed when everything was done by hand.

Do you intend to grow your portfolio? Although you may not think $750 is reasonable for the work for your current situation, it may be worth it to start with this CPA now so 10 years from now when your portfolio has grown, you’re working with a CPA you’ve built a relationship with over the years.

I’ve been interviewing CPAs who can help me maximize deductions from my RE and after my experience I think $750 is very low cost. Most of the folks I have talked with want 3-4K for their “tax strategy” yearly and are charging 1200 for a personal return and 1400 for EACH LLC return. It’s ridiculous so I’m still looking. If the guy you’re talking about is good, responsive, helping you plan for taxes ahead of time and does all your returns for 750 I think you’re getting a good deal!

Thank you Brad and Lee, good to hear from both sides of the debate, appreciate the feedback!

What “tax strategy” are these high priced CPAs implementing for their clients with a few rental properties? Last high priced CPA I interviewed basically suggested that I “produce” more receipts that can be used for deductions. Said someone with my financial profile should have at least $4-5k in additional deductions. Needless to say I never made the appointment for him to prepare my return.

I would breakdown tax requirements in 2 ways .... 

1) Basic or Public Knowledge/ Transactional : Basic stuff or Public Knowledge . Any CPA can do it or can be found is we google it and spend 5-10 hrs on the web. Typically this category gets replaced by Turbo Tax or other software. Based on user knowledge and willingness to learn sometime Turbo Tax etc can produce better results. Jack of all trades CPA are typically in this category.

2) Semi Public Knowledge /Mastery or Deeper understanding on Domain: When transactions are getting bigger/more frequent which would call for additional layer of information then CPA is truly needed. and yes... Domain specific CPAs' are typically would be in this category with deeper understanding of rules and would be able to help clients with optimizations etc such as @Brandon Hall  . Audit becomes more important in this category as well 

Also at the end... Paying for CPA service = Value added improvement to you team which should increase "Cash Flow" ..  And the moment the investment does't hold up to return ..  we all should exit from that service. Happy thanksgiving everyone :) 

I have always asked myself the question "how much money has my CPA saved me?" I look at the money I spend with him as an investment instead of an expense. Let me explain. I switched firms 16 years ago. The first thing my CPA did was to look at my previous years return and then amend it. The IRS came back and said no. The CPA fired off a letter explaining his reasoning. We won and I got $25,000. back from the previous year PLUS interest from the IRS! My guy charges $200 / hour and I think he is worth every penny - a good investment. I'm selling one of my businesses now and he put his team of CPA's on it. Looks like they will save me another 50-60,000! This is an area where you really get what you pay for.

$750 is a pretty fair fee. Most of mine are actually a lot more than that. You get what you pay for -I run into issues all the time where clients overpaid in prior years where they did it themselves or used a cheap CPA. If you use a cheap CPA chances are that CPA is in the volume business and is going to rush through your return to get it done as quickly as possible because they have to do 500 or so returns to make any money. We get into tax credits and tax advantaged investments in addition to the regular tax compliance services.

10 Ideas on CPA's 

1. Interview, Interview, Interview CPA's - these sessions are free  (do this in the summer when they are not busy)
2. Most CPA firms (and all consulting firms) SELL YOU with 1rst team, Service you with the 2nd team.
3. Millionaire guy once told me he pays 2 CPA's each year to do his taxes - the returns are always different he said. Crazy right?!
4. Some CPA's can be more aggressive than others (this is because they take on "Audit liability" - most CPA's don't want ANY TROUBLE.
5. Turbo tax deluxe offers return/audit protection for ~$150 and then maybe you can pay $200/hr for consulting/auditing on that return.
6. Find a CPA who will audit last year returns (you can go back 3 yrs as I understand) (why not offer 10% of everything can get  you.. in addition to $250)
7. The TAX STRATEGY SESSIONS (as Brandon Hall) highlighted is where the GOLD IS. These can be done with ANYONE (other investors, lawyers, realtors, etc..)
8. a Millionaire told me he buys this book every year >> US Master Tax Guide - 2018 cost me $100.https://www.amazon.com/gp/product/0808047744/ref=o...
9. Give up on the idea that CPA's are going to "creatively" solve your problems. Kiyosaki said on a CD that he comes up with creative ideas and then hashes it out with his black/white thinking CPA
10. Setup an alert on Bigger pockets for tax related topics you want to learn about!  hehe

Originally posted by @Eric C. :

What “tax strategy” are these high priced CPAs implementing for their clients with a few rental properties?

• How to take advantage of suspended passive losses
• Which entity is most advantageous
• Tax implications of house hacking
• How to deal with the proposed tax reform
• How to properly calculate basis
• How to maximize depreciation and when to consider a cost segregation study
• When/How to accelerate expenses and defer income
• How to properly deduct travel expenses
• When/How to hire family members
• Etc.
• Etc.
• Etc.

http://www.keystonecpa.com/ctspvideo.php

@Eric C.

See link above for an example. I don't know what the strategy is but most of them are not that obscure. Save receipts, account for all deductions, maximize deductions, plan your trips to your rental property so they can be claimed, hold your properties in pass-through entities instead of doing a schedule E. Instead of calling it a tax plan they should just say that they charge 3500/year for their services plus they charge x for returns. I'm seeing some really high prices for returns when I know that they are just going to input whatever numbers I give them. I have been trying to get a CPA to answer the simple question related to using a company like this to maximize my depreciation on two small properties. 

http://www.kbkg.com/residential-costsegregator

My goal is to use my investment properties to offset my W2 income, which I can do for up to 25k a year according to my research. I'm fine with paying professionals for their work but when I'm going to pay 5000/year to a tax professional for 4000 in depreciation it doesn't really make a ton of sense. 

$750 seems reasonable to me, depending upon the level of advice you are receiving.  Some DIY people will prepare their own tax returns because they want to save money, and end up costing themselves far more than any fees they saved.

Originally posted by @James R. Copeland :

@Brandon Hall (Is that how mentioning works? Still figuring this site out. 

You hit the nail on the head, and that's why I've been strongly considering it. He charges nothing for phone calls or emails and is very responsive. They pride their business on building relationships with their clients, or at least that was the sales pitch. My current CPA is somewhere in the range of $450 but hasn't always been responsive and doesn't do much with real estate. I asked a question about 1031's a couple months back, no response, asked again and his response was basically 'Yeah I did one of those about 20 years ago for someone, but am not really well versed' (Not a direct quote, paraphrasing). 

@James R. Copeland Could you share the CPA you are working with now at the $750? Thank you so much!

Mine charges about 600 per tax filing. But I’ve got rentals in different states and live in a different state on top of that. I also look at the time he saves me and how responsive he is. Any question I have, I can email him and have an answer a day later. That is way easier than trying t decipher tax code on my own. I know the basics but it’s good to have someone who really knows it.

It may be possible to do it now when I only have a few properties, but what about in 3-5 years when I have 10 plus? That can get complicated very quickly.

My dad (who filed his own taxes) showed me his return one year and it was about 60-80 pages. I will gladly pay someone some money to do that for me.

All great advice in this thread. I am a new investor looking for a CPA that can assist me. I bought my house in September and have been house hacking since. Not a lengthy REI time frame but from the sounds of everyone's post, seems it would be smart to get a professional to help me out.

Any recommendations for CPA's familiar with CA RE laws?

@James R. Copeland , @Joel O'Leary , @Karen Young

If you are still working with the CPAs you mentioned on this post, would you mind sending me their info? I have rentals in 4 different states, so maybe I am on the "complex" side, but my CPA charges me over $1700 to prepare my tax returns, and that does not include any tax strategy sessions or anything like that. His team is usually pretty responsive, but I do also sometimes get charged for the time they spend answering my questions via email. Wondering if I should be expecting more value for the amount I'm paying them. Thanks!

@David Saxton

$1,700 for rentals in 4 states is pretty reasonable, in my opinion. You can find it cheaper, and you can find it more expensive. What is far more important is whether your CPA is doing a good job which is not directly related to his charges.

Lack of strategy sessions that you mentioned brings a question - did you ever ask? Does he offer tax planning? If he does - is he competent to provide such planning? 

You may or may not have a good CPA on your team, but it's not about $1,700.

@David Saxton I'll PM you my CPA's info.  I still use him for my taxes (annually) but haven't connected or consulted with him in some time. This is mostly due to me not purchasing any more rentals the past few years and moving on to syndication investments.

@David Saxton

"I do also sometimes get charged for the time they spend answering my questions via email."

Are your questions inside or outside the scope of an open engagement?

Not sure how your CPA does it, but my firm does bill out for time used for informal consulting that is outside the scope of any open engagement.  If you take issue with this, you're expecting your CPA to make an exception for you and work for free, and that is a little unreasonable.  An analogy might be your boss asking you to work 15 minutes late every few weeks and expect you to do it without pay, because "it's just 15 minutes here and there".

As already noted, a $1,700 compliance fee for a 1040 with four rentals and up to four state returns might be reasonable, but we don't have all the facts.