First tax season tips

4 Replies

Hi BP! I'm wondering if anyone can share some tips and/or advice regarding questions to ask the CPA as A real estate investor in their first tax season?

I basically have no idea what it should look like on the other side of this thing, and I'm wondering what a newbie might bring to the table to ensure the CPA has the best tools.

Also, are there any red flags we should look for upon meeting with a CPA? Things telling us that this CPA may not be the type of accountant that we're looking for?

Or, am I just worrying too much? I can't help but think, if the first one is not the one I'm looking for, then I'll have to wait a whole year to start looking again.. and what if the mistakes are vert costly? 

Thank you so much for your time and any advice! Feel free to ask your own follow up questions on this thread, as they may help us all out!

@Clayton Crawford

You might want to start with questions such as:

- In general, how do you view yourself as being helpful to someone in my particular situation?

- What percentage of your client base are real estate investors?

- How would we be communicating? By phone, email, in person?

- What is your fee structure?

I think the main thing is to find someone with a good reputation in the real estate industry and that connects with your personality type. Look for someone who will keep you compliant, save you money, and will be a trusted advisor for years to come.

Hi @Clayton Crawford ,

I would start looking for a CPA soon.  It may be more difficult to find a good CPA willing to take on more clients later in tax season when everything is very busy.

I would always start out by asking the CPA if he/she works with other investors, and what type of investing they do.  If the CPA says yes, but it only people who happen to own 1 rental property and aren't actively pursuing real estate investing the CPA might not have the level of experience you are looking for.

I would also ask how the CPA would recommend that you structure your business, or whether you should be using an entity at all. A good REI CPA will recommend different structures based upon what type of investing you are doing and what your goals are.

I would also try to make sure that the CPA is competent in real estate by asking a few basic questions about Sections 121 and 1031.  Know the answer to your questions first, and see if the CPA is giving you the correct information.  For example, if you do fix and flips, ask how you would do a 1031 exchange on it.  The answer is that you cannot (unless you end up holding the property for a while as a rental) because if you are a flipper then houses are considered inventory, and inventory cannot be used for 1031 exchanges.  You can also ask if you live in a flip whether you can take advantage of the Section 121 capital gain exclusion.  What you would be looking for here is what follow-up questions the CPA asks you (i.e. would it be your principal residence, how long would you be living in it, etc.).

Thank you all for the advice this will surely help me get started this tax season.

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