Need a Real Estate focused CPA, unfortunate situation
So I have a tax situation that is unfortunately going to require me to have to terminate the services of a CPA and start over for tax year 2020. I am a MI resident, currently work overseas in Bahrain and take full advantage of the foreign earned income exclusion(FEIE) utilizing form 2555.
I also invest passively in syndication deals that issue me a K-1. So my tax situation isn't super simple, but also not too complicated that a competent CPA who handles foreign earned income(from a US employer) and K-1s would struggle. I had a CPA that specializes in expats working overseas and he also handles K-1 forms(supposedly). He prepared/filed my taxes for 2019, he made a few small errors I discovered that were promptly corrected. No problem. I only had 2 K-1 forms for 2019 and both showed paper losses, he did not file state returns for either K-1 for 2019. He didn't apply any of the losses off my W-2 income(I'm not an active RE professional), which I didn't have an issue with as the FEIE is such a huge benefit I didn't make a fuss, I can carry the passive paper losses forward.
Fast forward to tax year 2020 and I have 6 K-1 forms all showing a paper loss as well as still working overseas as a defense contractor. I submit all of my information to the same CPA. He sends me a draft copy of the returns as well as state returns for the LLC K-1s to preserve my loss carry forwards. It was a nightmare trying to make sense of it was so sloppy. He made the following errors just through a quick 30 minute scan, at least what I thought were:
1. Drafted state returns for K-1s in states where the sponsor is based for their general business as opposed to where the LLC syndication property is located. So he had drafted state returns for CA and NJ when the properties are located in GA and KY respectively. I owned up to messing this up as I didn't inform him that the K-1 didn't specify where the property is, only the mailing address for the GP sponsor in CA and NJ. He also left out other state returns to preserve losses in OR, GA and KY where I am invested. It doesn't make any sense that I would have to file in the state where the sponsor is doing their main business when the property LLC I am invested in is filed, registered and located in another state. If I am wrong about this, please tell me. He claims I have to file in those states as if the K-1 they issued was as if I am a general partner in a sponsor's main business vs a limited partner in a syndication in another state. If it was only this error I would not have terminated his services.
2. 1099 interest income from banks was mis-reported, a simple Ally Bank 1099-INT had individual CD interest income earned and then at the end of the pdf it had a composite for all interest income for all CDs/accounts. He only reported the interest income from 1 CD. A small easily correctable error, but troubling he didn't scroll down on the 1099-INT. Taken together with other errors I was not getting concerned.
3. Left out my 529 deduction to take a state tax deduction. He gave me a questionnaire prior to engaging his services that captures all of this.
4. Miscalculated my form 2555 FEIE deduction for working overseas(The FEIE allows one to exclude from their income upto $107,600 for the 2020 tax year if they work and derive their income from working overseas). To qualify for this exclusion, 1 must either meet the bona fide residence test or meet the physical presence test. The physical presence test is much easier to satisfy, the requirement of which is one has to be overseas for 330 out of 365 days in any rolling 12-month period. If one uses a 12-month period to qualify that crosses calendar years, you have to allocate the portion in the corresponding tax years. He did not do this, he counted days from I used to qualify in 2021 for the 2020 tax year. This raises a huge red flag for audit risk.
5. He took passive losses from 3 out of my 6 syndications and deducted it from my W-2 income(he deducted approx $19k from my W-2 income), and ignored the losses from my other 3 syndications. If I am not mistaken, isn't there a limitation of $25,000 to deduct passive losses from W-2 income but only if my MAGI is below $100,000 and completely phased out at $150,000? My MAGI(which unfortunately has to add back in the huge $100k+ foreign earned income exclusion) exceeds both of these thresholds so I don't believe I can have it deducted from my W-2 income. I am not an active RE professional either, so no benefit there.
Taking all of these issues together, I didn't have any confidence in my return, it is completely unusable and I think I need to start over with another CPA who can handle it. Even if he corrected them, I question his competency now. So I have terminated his services and am on the hunt for a CPA that can handle real estate passive LP syndication K-1s as well as utilizing the FEIE form 2555. Any recommendations would be MUCH appreciated. Thank you.