Tax Accountant or HR Block?

30 Replies

Hi guys -

Looking for some quick advice -  Would you use HR Block/TurboTax over a RE Tax Preparer if you were a small "start-up" in 2018?  Why or why not?  

Thanks,

John

I would pay a dog wearing a tutu to prepare your taxes before going to H&R Block. 

I amend more H&R Block returns than any thing else. 

I literally just wrapped up an amendment from Block where they missed out on over $8k for the client in 2016, and over the life of the rental the incorrect reporting would have cost the client just shy of $90k in depreciation. 

Now weather you should self prepare or find a tax professional- you'll receive a lot of input. I'm obviously biased. 

A lot of people can/do. A lot of people also leave money on the table. And you lose out on having the feedback and advising from a  professional as you grow your business. 

I use CPA. He represents you when getting audited.


I have reviewed a total of 2 self-prepared landlord returns that did not need to be amended. 2 out of more than a hundred reviewed. Most of them were landlords with a single property.

Now... people bring me their return to review because they suspect there might be a problem. That skews the results over what we'd find in the general population if we reviewed ALL the self-prepared landlord returns. 

But......2.

It's difficult to do anything well if you only do it once a year. It's possible to get it right, but there can be a significant difference between right and optimized.

Best of Luck with your real estate investments! 

I have a Facebook friend who works for H&R Block during tax season.

During the rest of the year, he works at a mall kiosk selling calendars for the Christmas season and works other retail jobs during the summer and fall.  Really nice guy..... but, you know.

So last year, he posted pictures of an award he got at H&R Block for tax season.  "Top Converter", it said.

"What's that?" I asked...

It's an award for adding on the most products in my office this season, he said.  So I sold people audit protection and additional services and I was top in my office for those sales.

...

...

I dunno.  I guess I'd want my tax preparer to win an award for Most Number of Returns Done Accurately or Best Customer Service or something else.

Like I said, nice guy.  But....

@John M.

It's basically a two-step process:

Step 1. HRB

Step 2. One of us to fix it.  :)

I'm only half-joking though. Like any major chain, they employ tons of people and provide minimal training. Their new people are paid very little and are motivated even less - just a seasonal job for them, like retail for Christmas. 

They also have some dedicated veterans with outstanding skills and experience. If you're lucky to find one of those, and that person will stick with you from year to year - it could be as good as any. But you have a much higher chance to run into one of those that are not up to task, which is the majority.

Even the better ones are not experts in REI, so that is good to keep in mind, too.

Originally posted by @Linda Weygant :

I have a Facebook friend who works for H&R Block during tax season.

During the rest of the year, he works at a mall kiosk selling calendars for the Christmas season and works other retail jobs during the summer and fall.  Really nice guy..... but, you know.

So last year, he posted pictures of an award he got at H&R Block for tax season.  "Top Converter", it said.

"What's that?" I asked...

It's an award for adding on the most products in my office this season, he said.  So I sold people audit protection and additional services and I was top in my office for those sales.

...

...

I dunno.  I guess I'd want my tax preparer to win an award for Most Number of Returns Done Accurately or Best Customer Service or something else.

Like I said, nice guy.  But....

Amplify that award by a few million dollars and you get the 1940 classic Where are the Customers' Yachts by Fred Schwed.

"Humorous and entertaining, this book exposes the folly and hypocrisy of Wall Street. The title refers to a story about a visitor to New York who admired the yachts of the bankers and brokers. Naively, he asked where all the customers' yachts were? Of course, none of the customers could afford yachts, even though they dutifully followed the advice of their bankers and brokers. Full of wise contrarian advice and offering a true look at the world of investing, in which brokers get rich while their customers go broke, this book continues to open the eyes of investors to the reality of Wall Street."

BPers, of course, will avoid these sales pitch pitfalls because financial literacy is empowerment.

In my case, I used to have managed accounts that charged a 2.5% annual fee (I kept track because I was able to deduct those fees on my tax return back then). When robo advisers came along (which charge nothing or next to nothing), I switched my money over to them. My investment strategy is known as asset allocation (a little bit of this, a little bit of that, rebalanced regularly because this and that have different market returns in any given year). The computer gives me the same end result of investment performance as managed accounts, but at a much lower cost.

How does self filing using turbo tax compare to a cpa?

In years past, I have filed with turbo tax, but that was just our W2 income and our personal home. Now we have our first investment property. We bought and rehabbed, it is not yet rented. So, we have a net loss. Plus, I've never understood depreciation on our home and cars.

I expect to hear a cpa can find ways to improve on turbo tax. Am I correct?

Originally posted by @Angela Smith :

How does self filing using turbo tax compare to a cpa?

In years past, I have filed with turbo tax, but that was just our W2 income and our personal home. Now we have our first investment property. We bought and rehabbed, it is not yet rented. So, we have a net loss. Plus, I've never understood depreciation on our home and cars.

I expect to hear a cpa can find ways to improve on turbo tax. Am I correct?

Well for starters since the rental isn't in service yet- you don't have a loss this year. You don't get to deduct any thing until it's placed in service. 

Using a tax pro will give you someone with the knowledge and expertise of all the gaps in your understating of those tax issues. 

Turbo tax just asks you questions- if you don't really know what it's asking you won't get correct results, let alone strategic advice. 

And whether or not you can claim a loss from a rental property (assuming it’s held out for rent) requires even more analysis. Best to go with a CPA you trust. I don’t just mean someone who prepares returns. I mean someone with the letters CPA after their name. Good luck.

@Angela Smith you could cost yourself a lot of time, money, and headaches by trying to self-prepare. And if you get audited you could have problems including penalties and interest if you made mistakes that caused you to underreport income or report losses that aren’t deductible.

You confirmed what I was thinking. When I've used turbo tax for basic income in the past, I had minimal risk for errors. But, I think our situation now has enough complexity that I need help. A CPA it is. I have someone in mind. Will call next week and schedule an appointment.

I use my accountant during the year, and at tax time. He helps review building financials, 1031x investments as well as just general advice. He has been doing my taxes etc for 30 years-since his dad retired. Every investor benefits from accounting advice-more than just at tax time.

Originally posted by @Javi Chipi :

@Natalie Kolodij is the property held out for rent? Her facts did not indicate.

Yes, they did: "We bought and rehabbed, it is not yet rented."
 

@John M. Use an accountant. I own a handful of properties. My tax return last hear was a 140 pages long. Do you want to deal with that? Do

You think H and R block can handle that?

@Michael Plaks “it is not rented yet” hopefully means it is held out for rent and time/money was spent to advertise it as such but I don’t want to make assumptions. Thanks

Originally posted by @Javi Chipi :

@Natalie Kolodij is the property held out for rent? Her facts did not indicate.

"Now we have our first investment property. We bought and rehabbed, it is not yet rented."

It actually did indicate it.

Lol. I will settle the argument. We have not yet advertised it for rent. I will hire a CPA. I'm not prepared to do it myself.

@Angela Smith right what I was getting at was if it was advertised for rent. https://budgeting.thenest.com/can-deduct-rental-expenses-property-vacant-25648.html found an article online about this. Best of luck.

Turbo Tax / HR Block are great if your income and overall financial situation is simple. When you start adding investment accounts, rental properties, side hustle income, etc. its a good idea to turn things over to a CPA...preferably a CPA who has real estate investor clients and is also a real estate investor themselves.

For true realization, try this:
1.) prepare your taxes on one of the mentioned softwares and pay the fee so you are able to save & print the documents, but don’t file just yet.
2.) take your self-prepared tax filing into the CPA for review (along with the last 2 years’ tax filings). A seasoned CPA will be able to look things over in 20 minutes or less and tell you what was missed or could be amended to save you money. In most cases the CPA’s tax prep fee will be less than the savings they can bring you, not to mention setting you up in better position for the following year’s taxes (deferring loses, etc).

Good luck!

@Natalie Kolodij I was referring to advertising the property as being held for rent. No problem as I may not have been clear enough. Take care.

Originally posted by @Javi Chipi :

@Michael Plaks “it is not rented yet” hopefully means it is held out for rent and time/money was spent to advertise it as such but I don’t want to make assumptions. Thanks

Sticking a sign in the yard or posting an ad on craigslist or facebook does NOT indicate that your property is in service.  Yes, I know.  I read that article too.  BARRRR should stand for the first part of BARRRFFFFF! because it was very full of misinformation.

Advertising and holding out for rent is meaningless.  You must actually have a property that is advertised for rent and IS ACTUALLY READY FOR RENT.  If you've got the kitchen or bathrooms torn out (thus making the property not habitable), then no ad on the planet is going to automatically mean that your property is In Service.

 Basically, if somebody knocks on the front door and (assuming they qualify), you could rent it to them today and they could move in tomorrow, your house is not In Service.

I could smack the guy that wrote that article.  It is misleading and inaccurate.

Create Lasting Wealth Through Real Estate

Join the millions of people achieving financial freedom through the power of real estate investing

Start here