Questions to ask a CPA?

38 Replies

Since we are approaching tax season, and I am new to investing, I figure it would be a good idea to look/interview for a CPA?

Do you have any qualifying questions I should ask?

I figure one pre-qualifiying question would be if they have real estate investments themselves. Aside from that I am at a loss, any help much appreciated.

I remember seeing another thread, where someone said not to be too concerned with the CPA portion of those creditentials. Do BP'ers agree?

Thanks,
Keith

Not all CPA's are the same. I had one CPA that was an older, knowledgeable, nice guy. However he was not real aggressive. I wanted someone like Diane Kennedy.

I found another, more aggressive CPA but he was in another state. Getting feedback from him was difficult.

Last year I found a young, local guy. He asks me good questions and sends me updates about the laws periodically. I like him so far.

Keith,

I have compiled a list of questions that you can select which are most pertinent to your situation:

What was the most recent CE course you took and when?
What subject is/are your academic degree(s) in?
What is your specialty (tax accounting, tax representation, etc.)
How long have you been practicing?
How many clients do you have?
What percentage of your practice today is in real estate?
Have you represented clients in front of the IRA, and what is your success rate?
Will you share a reference(s) from your current client who runs a business similar to mine?
Will you share a reference who can speak to your representation before the IRA?
How can you or your professional network help me with entity structuring, retirement/estate planning, business analysis, etc.?
Help you define the appropriate business structures, both from a legal protection and from a financial/tax perspective
Help you create a tax strategy for your business that will allow you to legally keep as much money as you possibly can
Help you make smart decisions with respect to your individual real estate investments
Prepare your annual tax returns
Recommend other team members (attorney, insurance agent, real estate agent, etc) who can help make your business a success
What are your credentials?
What services do you offer?
What areas of tax and accounting do you specialize in?
What is your background and do you personally own real estate?
How would I be able to communicate with you? Can I get questions answered by email?
Given my circumstances, what business structure(s) do you recommend? Why?
Can you register the business structures for us?
How can you help in the various phases of real estate investing (acquisition through sale)?
Do you specialize in tax strategy? Specifically geared towards real estate?
How aggressive will you be in helping us keep as much money as possible?
What tax strategies/issues should I be aware of upfront?
How often would you suggest we meet to review our progress/plan?
Do you do tax preparation?
What software do you use (and expect me to use) to do our accounting?
Can you help me find other team members (attorney, insurance agents, real estate agents, etc)?
What is your schedule of fees?
Do you have references?

Some of the questions are duplicated in here for the reason of asking them a different way for a different response.

Also here is a link to another similar discussion we had on this topic (it is some very good reading): http://www.biggerpockets.com/forums/51/topics/63679

Originally posted by Steven Hamilton II:
How aggressive will you be in helping us keep as much money as possible?

This is a KEY question to ask. I would follow this question up with asking about how they would determine what portion of a distribution from a s-corp would be salary and what would be dividends. This cuts through the platitudes and gives a very specific question that they can use to come up with an answer that is relevant for most real estate investors. You can even give them sample income amounts to see if the answer would vary based on your income for the year.

I spent 4 hours meeting with my accountant this morning discussing things very similar to what Steven has in his post above. This is a GREAT post!

Bryan,

Even more important than the S corp question is "what is reasonable based upon X income for X job?" I have some clients who own S-corps, and they do literally no work for the business. They just college a check and have a manager, do you think they should take a salary?

-Steven the Tax Guy

Being on this subject matter, are there any problems having a CPA that is remote (out of city/state)? I'm deciding whether I should start considering accountants not local to me since I haven't been able to find one that I've been happy with.

Originally posted by Steven Hamilton II:
They just college a check and have a manager, do you think they should take a salary?

Beats the heck out of me. This EXACT question actually came up today when I was speaking with my accountant. If all my s-corp does is invest money in the best spot why should I be required to take a salary for this activity?

@Bryan Hancock , you're correct, you're not required to if you are not actively participating in that activity. However, it may be something to consider. They only reason I say this is if you have the income and you are close to maxing out your Social Security tax liability at 106k than it may be in your interest to take a small salary just to maximize your credits. Pardon my typo as well. I'm usually fairly good about them.

@Account Closed , Approximately 15% of my clients are out of state. Focus on finding someone you can consult with regularly. I frequently use Skype to chat with my clients. With today's technology it has become very easy to send information and contact clients.

-Steven the Tax Guy

Your guide to IRS laws, rules and regulations.

Great thread.

I would definitely get an idea of the CPA's client base. As a client, would you be their largest, smallest, or somewhere in the middle? If you're not sure where to begin, ask what the firm's gross billings are for the year, how many professional staff they have, what their clients average gross revenue is, and what they anticipate (range wise) it would cost for the service(s) you are requesting.

Your goal is to grow your business, do they know how to help you do that?

It's important to know how well versed the firm is relative to your investment. Are you a single investor with a single property and need some light bookkeeping assistance? Or do you have multiple K-1's with cross collateralized debt, layers of flow-through ownership, inter-company loans, inside and outside basis, side management companies, employee leasing companies, 401(k) plans, estate tax plans, etc etc.

Also there's more to consider than just the tax preparation. Do you need financial statements? Do they need to be reviewed or audited? Or will a full disclosure compilation suffice? How about other services such as business valuations, debt negotiation and credit restructuring?

You should walk away from the meeting with ideas for your business plan or accounting strategy that you didn't have before.

If your CPA/EA isn't comfortable stepping into a quazi CFO role during the course of the conversation, could they really be a trusted business adviser? Would you want this person speaking to your lenders or partners on your behalf?

Your relationship should be symbiotic; they should provide more value than simply filling a compliance need.

Originally posted by @Scott B. :
Great thread.
I would definitely get an idea of the CPA's client base. As a client, would you be their largest, smallest, or somewhere in the middle? If you're not sure where to begin, ask what the firm's gross billings are for the year, how many professional staff they have, what their clients average gross revenue is, and what they anticipate (range wise) it would cost for the service(s) you are requesting.

Your goal is to grow your business, do they know how to help you do that?

It's important to know how well versed the firm is relative to your investment. Are you a single investor with a single property and need some light bookkeeping assistance? Or do you have multiple K-1's with cross collateralized debt, layers of flow-through ownership, inter-company loans, inside and outside basis, side management companies, employee leasing companies, 401(k) plans, estate tax plans, etc etc.

Also there's more to consider than just the tax preparation. Do you need financial statements? Do they need to be reviewed or audited? Or will a full disclosure compilation suffice? How about other services such as business valuations, debt negotiation and credit restructuring?

You should walk away from the meeting with ideas for your business plan or accounting strategy that you didn't have before.

If your CPA/EA isn't comfortable stepping into a quazi CFO role during the course of the conversation, could they really be a trusted business adviser? Would you want this person speaking to your lenders or partners on your behalf?

Your relationship should be symbiotic; they should provide more value than simply filling a compliance need.

@Scott Baker ,

There is an item in your post that are against Circular 230 regulations to disclose: Client's average gross revenue. Without a 7216 filled out from every client you could not release such information or even a compilation of such information. Granted you could give a rough idea. I don't particularly care to disclose my gross billing. That is more than someone needs to know. A few good referrals typically suffice.

@Steven Hamilton II ,

Not what I meant. Disclosing client specific information was not part of my recommendation.

Asking probing questions to gain an understanding of where you (as a client) might fit into the practice was the flavor of the post.

You should definitely be concerned with their credentials as a CPA (unless they are a lawyer).

Anyone can prepare taxes. No license is needed. The no minimum is that they be a CPA.

They need to know depreciation rules, tangible property rules, make sure all the right deductions are taken (most things are deductible even a portion of your cell phone if used for business).

They should know basis rules especially if you are investing through a Corp or partnership. Ask that your K-1 come with a basis schedule.

Just wanted to chime in on this one...

For any credentials a person claims to have, you just want to make sure that they are true (if they say they are a CPA, check your state Board of Accountancy; if they're an EA, check the IRS database). Enrolled Agents are tax experts by definition, and not all CPAs handle tax preparation. And, of course, neither is inherently an expert in real estate investing. Tax preparation standards may vary by state, but I know in CA, you do need to have a license to prepare taxes (otherwise you are doing so illegally).

Great thread, I needed this to day as am meeting with my tax accountant to play year 2017 taxes.  Thank you.  Also if I can share for those that are looking for more info, I did listen to this BP Podcast (Amanda Han) while reading this blog and more tips on questions to ask your CPA: 

https://www.youtube.com/watch?v=84qKOz5pj10

Originally posted by @Anna M. :

Great thread, I needed this to day as am meeting with my tax accountant to play year 2017 taxes.  Thank you.  Also if I can share for those that are looking for more info, I did listen to this BP Podcast (Amanda Han) while reading this blog and more tips on questions to ask your CPA: 

https://www.youtube.com/watch?v=84qKOz5pj10

 Glad to help. If you want confirmation or have questions after your meeting feel free to reach out.

I have a question about the CPA, I just bought my first investment property (Single Family House) out of state and I haven't set up any legal entity yet since I want to acquire more properties under my name as I heard it's easier to get financed. Would you recommend getting a CPA now locally where I live (or where my property is) or wait?

@Mora Clark I too think personal preference is best. But my next thought is this: Why do you want a CPA with just one property? I am going on 7 properties and always just do my own taxes with (relative) ease. Just curious why you feel the need for a CPA. And yes, it is far easier to find financing if the property is in your name. You can (as far as I know), transfer it to a LLC after you have closed on it however. At that point, the bank just wants to get their money every month on time and doesn't care if it moves from your name to an LLC or which you are the principal (again, as far as I know). Best of luck!

@Ryan Kuja That's why I am very hesitant to reach out for a CPA yet just because I only have one property right now, not many assets like others but just want to make sure I don't miss out on any tax benefits. I have listened and read quite a bit about tax related deductions on my own as well and it doesn't seem too difficult but you know i'm a newbie, just want to make sure Uncle Sam doesn't rip me off dramatically :D

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