The last couple years I've had someone else do my taxes. This year I received a letter from my CPA that the cost is going WAY up. So my question is how difficult would it be to do my own income taxes? It's basically my husband and I's income from our jobs, then the LLC we started this year, in which we own a small 5-plex.
Without the 5-plex, I would say to go for it on your own. The rental makes the tax return a bit more complex. Not impossible, but more complex. As complexity increases with tax returns, so do the fees. Hopefully you will be able to find a CPA that is more than paying for his/her fees by keeping you compliant, providing good advice, and saving you time.
We’ve had a business relationship with our CPA for over 30 years, @Rachel Payton , and he’s become a trusted advisor. Not only do we get tax advice, but he understands our risk tolerance, personal finances, and he's helped set up and manage our retirement plans and family trust. He’s not a lawyer but obviously understands tax and investment law and has been around the block enough to provide us with financial legal advice.
My CPA is also a great resource when I need a reference for a lawyer, insurance agent, or other business professional. He has also helped me set strategy for my businesses and is a great sounding board. I can't imagine being in business without him.
Oh, he also does our taxes which includes helping us decide how to maximize our retirement plan contributions. With marginal tax rates at 30%, 40%, or more, your greatest return on investment can be in reducing your taxes so this is not the place to cheap-out. Considering everything else we receive, and the peace of mind, our CPA is money well spent.
If filling out tax forms is all you're using your CPA for, you are either misusing him, or you need to build a relationship with someone else.
@ Rachel Payton,
Hire a CPA or tax accountant that specializes in working with real estate investors. They will save you time and money and are worth more than their fees.
I find mistakes on 100% of the self-prepared tax returns involving rental property that I review. I have not yet reviewed one that did not have at least one error. Sometimes they are minor. Then there's the guy who got an additional $10,000 back from the IRS after we amended.
Now - people are usually bringing me their returns to review because they aren't feeling too confident about them. Or they've received some IRS correspondence indicating there is a problem. I suspect a random sampling of self-prepared returns would turn up some that were correctly prepared.
Are you getting value from your current guy? Only you can say. You can get value somewhere, though. Plumbers are expensive, too, but I'm not crawling under my sink anymore.
Best of Luck With Your 5-plex!