What is a reasonable cost for a CPA?

Question

My wife hates our CPA. We don't get much advice, he's disorganized, and the last straw was him sending out a group email to 200+ clients exposing everyone's contacts! That's like a 1998 internet mistake. I would never do that to my tenants! But he's apparently inexpensive.

Our taxes ARE a bit more complex than average, 2 schedule C's in addition to an LLC holding our 3 properties, filing as an S, no recent schedule A since the standard deduction was raised. But I used to do it myself using Turbotax prior to the LLC.  I feel like we're paying simply for data entry.

So what's reasonable? Being in the NY Metro we know it's more than some areas, but we got a price from a referred CPA in Minneapolis, and they were way more expensive!

Johann Jells · Answer

Haha, we call that the "FU" bid, the ridiculous price at which you'll happily do a job you don't want. Thanks for the thoughtful reply. I'll see if I can find that name.

Nathan Gesner · Answer

You get what you pay for. I used a friend as my CPA for years and she charged around $600 to file taxes, but that was her friend rate. We really increased the complexity in the past three years (33 doors, five LLCs) and it was more than she wanted to handle. I was interested in a tax strategist anyway, so we made the switch. My tax strategist cost me $8,000 for 2021 strategies and tax preparation. Sounds expensive, but she's also going to save me 3x that amount and I'll probably get a refund for the first time in 12 years.

Financially, it made sense, but I think we're over-paying and she was a little sloppy with communication and organization. I plan to search for a new tax strategist as soon as this tax filing is complete.

I did some research online and the general consensus is that an accountant will run $3,000 - $5,000 a year for a small business, then another $500 - $1,000 for tax preparation. Those numbers seem reasonable to me because a good accountant can pay for themselves in savings.

John Woodrich · Answer

I would estimate between $1500-$2,500 (annual fee) depending on how organized you are and what all you actually have going on.  This could be a little more if you are expecting them to handle payroll for you also.  This would probably include individual tax prep, S-Corp tax prep, possible tax planning in the fall and general questions that come up during the year.  Nobody can really give an estimate until they see your returns and from there we often make a leap of faith hoping that your accounting is in order.

There isn't an apples to apples comparison here as some CPAs only prepare a return and dissapear until the next year while others are around to answer questions, complete tax planning for your S-Corp, and offer more of an all inclusive service.  You also have to make sure you are using a CPA, I have probably seen a hundred returns prepared by a "CPA" who wasn't a CPA.  In tax ANYONE can get registered with the IRS to prepare returns for compensation and their is no licensing criteria.

Our industry is severely understaffed so you may be talking to a company who gave you a high rate as a "We aren't interested but for this price, we will make room".  Kinda like the contractor who gave you the crazy bid, probably didn't want the job.  I don't know any CPAs who are actively searching for clients and every firm I know would love to hire another experienced CPA.  They are modifying the CPA exam again as the younger generation is not as interested in the commitment it takes to become a CPA and the industry is likely losing more CPAs each year than it is gaining.

Interested who the Mpls company was that you talked to, could you message me?  Curious if I know them or if it is my old firm.

Bjorn Ahlblad · Answer

I have had the same accountant for 30 years.........before that it was his father. He is in Ca where we used to live. He has handled 1031's, my business taxes, our rentals in Ca and Wa. Fees were higher when he was doing the company stuff, sometimes 20k. Just rentals and taxes were 5k and more recently 2k, again rentals etc.. I know he has saved us a bundle over the years. He taught me the basics of RE investing many years ago. He has always been available for consultation and strategy I have had him review financials before buying a property. It is a relationship I'd hate to be without.

Johann Jells · Answer

This is the part I don't get. Holding rentals isn't really that complex, nor is there a lot of wiggle room, you have expenses, depreciation and income. I don't see how an accountant can possibly save us $5k a year. Except for the LLC filing instead of the Schedule E I filed using TT, our taxes don't look much different using a CPA.

What is a reasonable cost for a CPA?

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