CPA charging me $3,000 to prepare simple tax return?!!!

26 Replies

Hello BP community, 

My wife and I work w-2 jobs and own 3 rental properties... nothing crazy. Is it normal for my CPA to be charging me $3,000 to prepare our tax return? This is my first time using a CPA and I don't know what is considered normal. But I feel like something is definitely off here. I have other investor friends who pay $400-$600 to their CPA and they own multiple properties. Thoughts?

Best, 

David

Originally posted by @David Kuhlke :

Hello BP community, 

My wife and I work w-2 jobs and own 3 rental properties... nothing crazy. Is it normal for my CPA to be charging me $3,000 to prepare our tax return? This is my first time using a CPA and I don't know what is considered normal. But I feel like something is definitely off here. I have other investor friends who pay $400-$600 to their CPA and they own multiple properties. Thoughts?

Best, 

David

It depends on the level of tax & retirement planning. Have you asked your friend what he is getting for the $400 to $600? Why aren't you using their CPA?

Originally posted by @Mike Hern :
Originally posted by @David Kuhlke:

Hello BP community, 

My wife and I work w-2 jobs and own 3 rental properties... nothing crazy. Is it normal for my CPA to be charging me $3,000 to prepare our tax return? This is my first time using a CPA and I don't know what is considered normal. But I feel like something is definitely off here. I have other investor friends who pay $400-$600 to their CPA and they own multiple properties. Thoughts?

Best, 

David

It depends on the level of tax & retirement planning. Have you asked your friend what he is getting for the $400 to $600? Why aren't you using their CPA?

 They are not providing any tax and retirement planning. We haven't even received one phone call from them. Again, our tax situation seems very simple. Two W-2 income, 3 single family rental properties, and some stock sales. $3,000 for tax preparation seems outrageous to me. 

Originally posted by @David Kuhlke :
Originally posted by @Mike Hern:
Originally posted by @David Kuhlke:

Hello BP community, 

My wife and I work w-2 jobs and own 3 rental properties... nothing crazy. Is it normal for my CPA to be charging me $3,000 to prepare our tax return? This is my first time using a CPA and I don't know what is considered normal. But I feel like something is definitely off here. I have other investor friends who pay $400-$600 to their CPA and they own multiple properties. Thoughts?

Best, 

David

It depends on the level of tax & retirement planning. Have you asked your friend what he is getting for the $400 to $600? Why aren't you using their CPA?

 They are not providing any tax and retirement planning. We haven't even received one phone call from them. Again, our tax situation seems very simple. Two W-2 income, 3 single family rental properties, and some stock sales. $3,000 for tax preparation seems outrageous to me. 

 You seem to have answered your own question.  Search for another CPA/accountant.

How are you providing your records to the CPA?  If you're well organized, have summarized results, and are ready to go, it's a cheap date. Deliver a box full of receipts and that CPA is simply going to price you out.  Saves the time of telling you no and why.

You might look into securing some investment tax software and doing it yourself; there are several programs that are very good.  And/or get referrals and shop for the right expert who will charge you a fee that best represents the work in compiling your return.

Walk from this guy...

Originally posted by @David Kuhlke :

Hello BP community, 

My wife and I work w-2 jobs and own 3 rental properties... nothing crazy. Is it normal for my CPA to be charging me $3,000 to prepare our tax return? This is my first time using a CPA and I don't know what is considered normal. But I feel like something is definitely off here. I have other investor friends who pay $400-$600 to their CPA and they own multiple properties. Thoughts?

Best, 

David

 Do you have your stuff organized with good records?

Originally posted by @David Kuhlke :
Originally posted by @Mike Hern:
Originally posted by @David Kuhlke:

Hello BP community, 

My wife and I work w-2 jobs and own 3 rental properties... nothing crazy. Is it normal for my CPA to be charging me $3,000 to prepare our tax return? This is my first time using a CPA and I don't know what is considered normal. But I feel like something is definitely off here. I have other investor friends who pay $400-$600 to their CPA and they own multiple properties. Thoughts?

Best, 

David

It depends on the level of tax & retirement planning. Have you asked your friend what he is getting for the $400 to $600? Why aren't you using their CPA?

 They are not providing any tax and retirement planning. We haven't even received one phone call from them. Again, our tax situation seems very simple. Two W-2 income, 3 single family rental properties, and some stock sales. $3,000 for tax preparation seems outrageous to me. 

My approach is to use CPAs & Tax Lawyers for high level tax planning and estate planning. That is well worth the price.

However, I have learned enough over the years (I've taken the time & interest) to do a preliminary tax return on some pretty complicated tax preparation. I sometimes catch things the CPA doesn't because I understand the implications of certain choices. The CPA can't second guess your goals and plans. You have to tell them, and then it's likely to change over time anyway. That should be what you're paying for. 

There is no "one return fits all" of course. 

Seems to me a guy with some interest and a high end tax package from Staples or OfficeMax can get you what you want and teach you how to optimize your investments for tax purposes. It also allows you to do scenarios like "If I bought this property and used it for XX purpose how does it impact my taxes and my cashflow, vs if I used it for YY how does it affect things. But, if you don't want to take the time to learn, you hire someone else, prepare your paperwork in an orderly fashion, prepare spreadsheets that support your tallys, make copies of all pertinent documents and spreadsheets and present them to a CPA that understands Real Estate Investing and preferably is himself an investor. NOT all CPAs understand Real Estate Investing. There are several CPAs on BP that do fit this criteria. My advice would be to interview them for the job.

I use QuickBooks for my LLC. So I just send my guy the export. He does my LLC and my personal taxes for 1,500. A little higher than other quotes I've gotten but he answers an other questions i have during the year. And a big plus is he is the CPA for a lot of investors so he knows the ins and outs. Most CPAs charge by the hour so if you send him all of your docs in a need and orderly fashion it should cost less. As @Seidy Lasker said get the rates for doing your returns upfront when you go to the new CPA. When you interview CPAs ask a few other questions as well.  Who is actually doing the taxes, the CPA or an assistant?  What experience does the CPA have with other investors?  Will the CPA answer basic questions throughout the year for free or will you get billed by the hour for that as well.

You file seperately or jointly? If seperately, thats 4 tax returns.

In your situation Id expect to pay in the $1500 range for someone who knows what their doing. $400-$600....I can almost guarantee those returns are a mess.

@David Kuhlke

Most CPA's use three different pricing models when charging their clients

1) Fixed Cost based on complexity and your tax profile - This cost should come up to no surprise to you as the CPA would have told you the charge before starting.
2) Hourly - This is a little bit more complex as he will tell you his hourly rate. It is his goal for him to tell you how long it would approximately take based on information that you provided to him before starting.
3) Monthly subscription model - a monthly fee that is charged to you to help file your return and answer questions.

Firms with high prestige and many employees will normally have a higher charge to file returns.
Think of firms like the big 4
Smaller shops will likely charge a lower cost

Overall, I think your charge is high but it depends...do you have any entities holding the properties?(this would require additional entity returns) are your rentals scattered in different states?(This would require many state return filing obligations)

You may want to shop around for another CPA next year.
best of luck

Originally posted by @Basit Siddiqi :

@David Kuhlke

Most CPA's use three different pricing models when charging their clients

1) Fixed Cost based on complexity and your tax profile - This cost should come up to no surprise to you as the CPA would have told you the charge before starting.
2) Hourly - This is a little bit more complex as he will tell you his hourly rate. It is his goal for him to tell you how long it would approximately take based on information that you provided to him before starting.
3) Monthly subscription model - a monthly fee that is charged to you to help file your return and answer questions.

Firms with high prestige and many employees will normally have a higher charge to file returns.
Think of firms like the big 4
Smaller shops will likely charge a lower cost

Overall, I think your charge is high but it depends...do you have any entities holding the properties?(this would require additional entity returns) are your rentals scattered in different states?(This would require many state return filing obligations)

You may want to shop around for another CPA next year.
best of luck

 Hi Basit, 

Thanks for the detailed response. We were given the fixed cost up front which was $650 but the hourly rate was not disclosed. There were a few back and forth emails with our CPA to clarify some questions, but then we got hit with the bill later on. We asked the CPA firm what happened, and they said they had to take time to bucket our property expenses, which is odd because they were already bucketed per our property manager year-end statement. We were also surprised because our CPA gave us no heads-up notice that it would take “X” amount of hours for them to do this versus telling us “Hey, I need to see these expenses in such and such format.” We were virtually given no choice or notice. The CPA firm understood our position and we reached an agreement to drop the price on the bill, but we are very much looking forward to finding another CPA. The challenge that I’m running into is finding a great all-around tax software for managing the rental properties. I’ve heard of Quickbooks and Stessa. Do you have any recommendations? 

Best, 

David 

Originally posted by @Russell Brazil :

You file seperately or jointly? If seperately, thats 4 tax returns.

In your situation Id expect to pay in the $1500 range for someone who knows what their doing. $400-$600....I can almost guarantee those returns are a mess.

 We filed jointly. We own properties out of state, but all of those properties are in the same state. What tax software do you use to manage your rental property expenses and depreciation? 

Originally posted by @Jim Kalish :

I use QuickBooks for my LLC. So I just send my guy the export. He does my LLC and my personal taxes for 1,500. A little higher than other quotes I've gotten but he answers an other questions i have during the year. And a big plus is he is the CPA for a lot of investors so he knows the ins and outs. Most CPAs charge by the hour so if you send him all of your docs in a need and orderly fashion it should cost less. As @Seidy Lasker said get the rates for doing your returns upfront when you go to the new CPA. When you interview CPAs ask a few other questions as well.  Who is actually doing the taxes, the CPA or an assistant?  What experience does the CPA have with other investors?  Will the CPA answer basic questions throughout the year for free or will you get billed by the hour for that as well.

 Hi Jim, does QuickBooks calculate depreciation on rental properties as well as the capital expenditures? 

Originally posted by @Patricia Steiner :

How are you providing your records to the CPA?  If you're well organized, have summarized results, and are ready to go, it's a cheap date. Deliver a box full of receipts and that CPA is simply going to price you out.  Saves the time of telling you no and why.

You might look into securing some investment tax software and doing it yourself; there are several programs that are very good.  And/or get referrals and shop for the right expert who will charge you a fee that best represents the work in compiling your return.

Walk from this guy...

Hi Patricia, what tax software would you recommend? I’m looking for something that can accurately calculate depreciation of both the property and cap ex. 

I pay about $600 for filing my W2 tax plus over a dozen properties, CROSS BORDER in Canada and US. Quite complicated. Your CPA is ripping you off.

@David Kuhlke My accounting firm bills a set rate according to the number of forms you bring in. So I have two W-2s, several K-1s and some other various printouts from my rental properties.

I have always used the head honcho at this firm and we get my taxes done in 1 hour. Sometimes the filing might take a little longer. He has always disagreed with this billing structure and has continued to bill me accordingly to what he feels my taxes should be billed at which is around $800. According to the firm’s structure it would be closer to $1500 for 1 hour of work.

Shop around.

We pay just over 2000 for our LLC. Ours was 180 pages long (59 units in 21 properties) and another 400ish for our personal.

My CPA charges $250 per hour and in Los Angeles I think that price is below market. The cost for a CPA to do your tax returns depends on how many different tax returns he does for you e.g. one for your personal taxes and are you doing all your real estate through a DBA, one corporation, or two LLC's etc.. The most important thing that affect the cost is what method you send your records. If you are sending everything in a shoe box them $3,000 is cheap. If you are sending everything in a method where he has to personally type in each debit, deposit, vendor receipt and rent payment then $3,000 is super cheap.

The correct way to send your records to a CPA is to take each bank statement and you create either a database or spreadsheet that matches the debits and credits perfectly. You put each bank statement in one folder. Then you print a report for each folder that proves that the debits and credits are exactly the same as the bank statement. Then, your records are accurate.

Then, at the end of the year you print one paper report for the entire year and then when you get your records back from your CPA you know whether or not your CPA made a mistake.

This is the most critical part. You need to be able to export your records for the entire year so you can give your CPA all your records in an Excel format. This way, your CPA does not have to manually type in each record and he only has to make a few minor changes to your Excel sheet and he can dump your records into his database.

If you don't know how to do what I explained then expect to have many errors in your records that nobody can ever find and expect to pay more than $3,000 for a good CPA.

I develop all my own software with MS Access 2003 and I am a very strong believer that the reason my businesses have been successful is because my bookkeeping, payroll processing, customer data lists, account receivables and many other facets of my business is so streamlined where I had as many  as 60 employees, did up to $7 million in plumbing and construction business, own real estate in several states and I never had more than 1 secretary who worked more than 20 to 30 hours per week and our records are accurate-to-the-penny. Not an exaggeration and not a joke. Today, I reduced to 20 employees, 1 part time secretary and we still own the same amount of real estate. When you run your business and you know where you stand minute-by-minute then you know exactly where you are going and where you can go. Being organized is critical and you save tons of money when you use a good system your accountant can work with and you avoid problems with all the worker comp, general liability and IRS audits.

@David Kuhlke seems high. I have W2, wife is self employed, did 5 flips in one year, have 4 separate 4 plexes, and a few K1’s, as well as stock income. My highest bill ever was $2400 as they charge per form. I think this was high but yours seems crazy high based on 3 properties, unless they are large apartments.

@David Kuhlke

Seems way to high to me. Is it only for the 1st year maybe then it would drop down? My cpa charges about $700, and I have 12 rentals, my wife has her own business she runs out of the house, and I have several out of state businesses (silent invester) as well as multiple 401k, etc.