Account I hired seems incompetent to me...

Account I hired seems incompetent to me...

Rental Property Investor · Seattle, WA · Member since 2014 · 1k+ posts · 1k+ votes

I hired a chartered accountant three weeks ago to help me with my taxes due to a 1031 exchange. The taxes were supposed to be done three weeks ago. I had to point out to him that the settlement statements would be needed by him too since they are used in the basis calculation. He has changed his story three times on how the 1031 exchange basis is calculated (I have this in email, I'm not mis-remembering...). 

When I started to lose faith in his competence and ability to complete in time, I started doing it myself again like I usually do on one of the online tax software sites. So far his return has come back with a 3K refund (I usually get 10K) while mine has come back with an 11K refund. 

I'm torn on whether I should go with his that is nearing completion (95% done, just doing the 1031 portion now) or mine (100% done, ready to submit and all alerts in the software (only had one alert) have been addressed.

Also, should I still pay him $700 if I don't use his return??

At the end of the day I MAY get audited but I reported all of my income so even if I miscalculated the worst case scenario as I understand it is that they would catch an error in my calculations and I'd owe back taxes plus interest/penalties, etc. At least that's the way I understand it.

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Investor · Boston, MA · Member since 2015 · 1k+ posts · 3k+ votes
8y

@Jack B. seems like you don't trust your accountant and at this point the reasons don't  matter. 

File an extension and learn from your previous mistakes about vetting professional. Red Flag #1. No contract agreed upon before work began. 

Go find an accountant that you can work with and file by Oct 18.

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  • Investor · San Francisco, CA · Member since 2016 · 17 posts · 4 votes
    8y

    Hi Jack,

    How does your calculation compare to his? Seems like there is a large difference. As for the tax refund amount, were there any events in 2017 that were difference than 2016 that would cause a difference. Lastly, for the payment of 700 was there a contract in place?

  • Rental Property Investor · Los Angeles, CA · Member since 2016 · 130 posts · 69 votes
    8y

    Hey Jack,

    Sorry that the happened, I wouldn't be very happy. If I could save $8k, I would submit my own taxes. Hopefully yours are done properly!

    If he has not completed your taxes, should he be payed? That is a decision you will have to make from the stories and everything that has happened. 

    I am not a tax expert, but you may want to file your own that your trust. Then you can search for a new accountant for next year!

    Thanks & best of luck!

  • Rental Property Investor · Seattle, WA · Member since 2014 · 1k+ posts · 1k+ votes
    8y
    Originally posted by @Tony Hoong:

    Hi Jack,

    How does your calculation compare to his? Seems like there is a large difference. As for the tax refund amount, were there any events in 2017 that were difference than 2016 that would cause a difference. Lastly, for the payment of 700 was there a contract in place?

     There was no contract in place, he raised his price on me once during text message conversation, different price than he originally quoted me.

    There weren't any events that would cause a significant difference. I've had roughly the same amount come back to me year after year with the same number of rentals in play year after year. I noticed he calculated his depreciation REALLY weird. He gave me some bizarre explanation of depreciation calculations that made ZERO sense and that I had never read or heard anywhere before. Also he has changed his story in email three times as to how the basis for the 1031 is calculated...

    My understanding of depreciation was the structure value (no land) divided by 27.5 years. If you have settlement costs for buying a rental outright you can add some of those to the calculation.

    His calculation is COMPLETELY different than this...

  • Accountant · Philadelphia, PA · Member since 2013 · 303 posts · 210 votes
    8y

    At this point if you are getting a refund why not just extend and then schedule a time to sit down and go over the differences in the return?

  • Rental Property Investor · Seattle, WA · Member since 2014 · 1k+ posts · 1k+ votes
    8y
    Originally posted by @Etienne Martel:

    Hey Jack,

    Sorry that the happened, I wouldn't be very happy. If I could save $8k, I would submit my own taxes. Hopefully yours are done properly!

    If he has not completed your taxes, should he be payed? That is a decision you will have to make from the stories and everything that has happened. 

    I am not a tax expert, but you may want to file your own that your trust. Then you can search for a new accountant for next year!

    Thanks & best of luck!

    Well, let me also say that two years ago I got into a dispute with my companies CPA because they had filled out my W2 incorrectly. They pulled the "We're CPA's" card repeatedly. I had to explain it to them THREE times with links to IRS regulations and a decision matrix THREE times, even circling the relevant sentences and paragraphs before they finally realized I was right. They didn't acknowledge it in email, they just sent me and hundreds of employees updated W2's. Moral of the story, CPA's aren't always right, and this guy is just an EA, much lower barrier to entry than CPA's. I even asked him after the first few times he changed his story or was incorrect if he had done many 1031 exchange and rental property tax returns before...He got a bit defensive after that...

  • Investor · San Francisco, CA · Member since 2016 · 17 posts · 4 votes
    8y

    Sounds like this accountant is inexperienced and bit off more than they could chew. Raising the price in the middle of a tax return and the changing of basis. There is only one formula (with a lot of factors of course) to calculate your basis in the property. 

    No new events out of the normal course of business happened from 2016 and 2017 it sounds like either so you should be in the same refund range. You sound like you have a strong calculation and a grip on your taxes. It would be a better idea to use your own vs this accountant's.

  • All Over, USA · Member since 2017 · 689 posts · 756 votes
    8y
    It’s okay, we all make mistakes, like you did in your title. Doesn’t mean you are in incompetent. Or maybe your hiring/vetting strategy is what is incompetent? So many questions.
  • Investor · Boston, MA · Member since 2015 · 1k+ posts · 3k+ votes
    8y

    @Jack B. seems like you don't trust your accountant and at this point the reasons don't  matter. 

    File an extension and learn from your previous mistakes about vetting professional. Red Flag #1. No contract agreed upon before work began. 

    Go find an accountant that you can work with and file by Oct 18.

  • Ashish AcharyaBusiness Member
    CPA, CFP®, PFS · FL · Member since 2017 · 5k+ posts · 3k+ votes
    8y

    @Jack B.If your difference is 3k vs 10k, 

    I would just extend the return, and file it correctly later.

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  • Basit SiddiqiBusiness Member
    Accountant · New York, NY · Member since 2015 · 8k+ posts · 3k+ votes
    8y

    @Jack B.

    You hired a chartered accountant?
    A chartered accountant is not a designation used in the United States. 
    I would not have hired an accountant outside of the country to do your taxes.

    Furthermore - a 1031 can add some complexity to a return.
    If you decide not to use the current accountant - you should at the very least ask an accountant to review your work product.

    Regardless if a written contract was in place or not - he did the work and you should not stiff him for the time that he spent unless you can point out that he is grossly incorrect with the return that he prepared.

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