Tax preparation costs for business+ individual
Prospect, KY · Member since 2017 · 39 posts · 13 votes
Tax preparation costs for business+ individual
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Linda WeygantPro Member
Investor and CPA · Arvada, CO · Member since 2015 · 2k+ posts · 3k+ votesWell no, it's not "5 forms"
You've got 1040, Schedule A (probably) and Schedule E x 9 plus a few more miscellaneous forms.
The ES may or may not have involved some manual calculation or he could have just accepted what the software calculated.
plus your state forms.
The NSA Survey for Tax/Accounting firms for 2017 shows the following as national averages:
1040 with Schedule A and State Return - $273
Schedule E - $135 x 9 = $1215. Even if we're being generous and allow that you can fit 3 rentals on one Schedule E, that's still $135 X 3 (I don't know anybody who charges by the form, not by the property, so I'm really gonna go with $1215).
So if your guy charges by the form (some do, some don't....), then by this ranking, the average fee would be between $678 and $1488.
Then you have average rate for Management Advisory Services, which is what your "several emails" would fall under. The national average for that is $146/hour, so that's an additional $263.
So your bill of $1000 is pretty much right in the middle of where it should be. The emails might be a tad high, but I have no idea if you were asking him to explain to you, in painstaking detail, exactly how the various different tax bill proposals throughout the fall might or might not affect you, if you were asking him to calculate possible 1031 deferrals, preparing a significant tax plan, or whatever.
Your "plug and play" comment is a bit out of line. While there may be many tax professionals who "plug and play", the vast majority of CPAs who are worth their fee really do think about the numbers you've presented. They are, at a minimum,
1. Comparing them to prior year figures to see if there is an anomaly.
2. Checking for completeness (did you remember to find out the insurance amount on your rentals if they aren't reported on your 1098?)
3. Reviewing repairs/maintenance and several other categories to make sure the deduct vs capitalization exercise has been considered.
4. Review overall passive income/loss to see if there are recommendations to be made based on your income levels
5. Apply interest tracing rules for any applicable HELOCs
6. Make sure you're declaring all your possible rental deductions (mileage, cell phone, internet???)
7. Is there a different business structure that would work better for you based on what you're doing?
8. Are you still on track towards your goals? Have your goals changed? Any differences between your stated goals and your actual results will need to have a note taken for future discussion.
Some of those tasks will have been done on a property by property basis while some are done as a whole. $1000 is a very fair rate if your tax preparer works like this.
15 Replies
- 8yLinda WeygantPro MemberInvestor and CPA · Arvada, CO · Member since 2015 · 2k+ posts · 3k+ votes
Well no, it's not "5 forms"
You've got 1040, Schedule A (probably) and Schedule E x 9 plus a few more miscellaneous forms.
The ES may or may not have involved some manual calculation or he could have just accepted what the software calculated.
plus your state forms.
The NSA Survey for Tax/Accounting firms for 2017 shows the following as national averages:
1040 with Schedule A and State Return - $273
Schedule E - $135 x 9 = $1215. Even if we're being generous and allow that you can fit 3 rentals on one Schedule E, that's still $135 X 3 (I don't know anybody who charges by the form, not by the property, so I'm really gonna go with $1215).
So if your guy charges by the form (some do, some don't....), then by this ranking, the average fee would be between $678 and $1488.
Then you have average rate for Management Advisory Services, which is what your "several emails" would fall under. The national average for that is $146/hour, so that's an additional $263.
So your bill of $1000 is pretty much right in the middle of where it should be. The emails might be a tad high, but I have no idea if you were asking him to explain to you, in painstaking detail, exactly how the various different tax bill proposals throughout the fall might or might not affect you, if you were asking him to calculate possible 1031 deferrals, preparing a significant tax plan, or whatever.
Your "plug and play" comment is a bit out of line. While there may be many tax professionals who "plug and play", the vast majority of CPAs who are worth their fee really do think about the numbers you've presented. They are, at a minimum,
1. Comparing them to prior year figures to see if there is an anomaly.
2. Checking for completeness (did you remember to find out the insurance amount on your rentals if they aren't reported on your 1098?)
3. Reviewing repairs/maintenance and several other categories to make sure the deduct vs capitalization exercise has been considered.
4. Review overall passive income/loss to see if there are recommendations to be made based on your income levels
5. Apply interest tracing rules for any applicable HELOCs
6. Make sure you're declaring all your possible rental deductions (mileage, cell phone, internet???)
7. Is there a different business structure that would work better for you based on what you're doing?
8. Are you still on track towards your goals? Have your goals changed? Any differences between your stated goals and your actual results will need to have a note taken for future discussion.
Some of those tasks will have been done on a property by property basis while some are done as a whole. $1000 is a very fair rate if your tax preparer works like this.
- 8yBasit SiddiqiBusiness MemberAccountant · New York, NY · Member since 2015 · 8k+ posts · 3k+ votes
@Paul Passafiume
$1,000 for all those forms seems fair/decently priced(that is if he is a competent accountant who did as Linda described above).
Do you also have a schedule C in there somewhere? SEP-IRA is normally reserved when you have a business(not including rental activities).If you have a schedule C in there - $1000 is definitely on the cheaper end.
Wasn't pricing discussed before you engaged with your accountant?
Basit Siddiqi CPA4.979 Reviews - Rental Property Investor · Durham, NC · Member since 2016 · 7k+ posts · 7k+ votes8yPaul Passafiume I’m going to err on the conservative side and agree with those above that 1000 is likely fair. This year I had a Ohio return, cleveland city return, NC state return, federal return, and WI return to having a couple different jobs last year. I was charged ~ 600. I didn’t pay anything extra for the email correspondence, but from what I ask him usually is relatively straight forward for a CPA and doesn’t require a lot of additional research. It’s also worth noting I have a friendly relationship with my CPA, so that may be part of it as well, but I’m not entirely sure. The return for this year should be simpler and I don’t think he would charge me more unless I get into a partnership of some sort or alternative investments such as notes or a syndication. Hope this helps.
- Prospect, KY · Member since 2017 · 39 posts · 13 votes8y
I want to be clear I was charged a total of 1526, not 1000.
He itemized the bill. The 1000 was the "discounted" charge for individual and state income taxes plus the KY single member LLC filings.
We have some defensive CPAs here but I didn’t indicate the whole return was plug and play but it’s not like I handed him a wastebasket of receipts and said “do my taxes.”
We never discussed per hour rates nor how/if he’d bill for email questions. He certainly deserves a nice living but I still think he’s high.
The additional 526 was charged for additional email correspondence...I never asked for significant detail but he did provide detail. He listed 7 bullet points and the 526 was for 1.8 hours which seems a bit high in time but probably not too far off if he had to research answers.
I also asked a couple questions about Trumps tax changes throughout the year expecting yes/no answers in email and he would tend to hit more detail in responses than I want.
He works for a big firm in Louisville in very plush (read not cheap) downtown offices so I get it, but only thing we discussed a few years ago was it “should be under a grand” and last year’s return was but I bought 5 more units (one was a 4 plex) in 2017.
Also to be clear I have 9 units but technically only 6 property/addresses in addition to my personal home.
Thanks for the responses!
- Prospect, KY · Member since 2017 · 39 posts · 13 votes8y
Originally posted by @Basit Siddiqi:
@Paul Passafiume
$1,000 for all those forms seems fair/decently priced(that is if he is a competent accountant who did as Linda described above).
Do you also have a schedule C in there somewhere? SEP-IRA is normally reserved when you have a business(not including rental activities).If you have a schedule C in there - $1000 is definitely on the cheaper end.
Wasn't pricing discussed before you engaged with your accountant?
- Prospect, KY · Member since 2017 · 39 posts · 13 votes8y
I can dig up return but he put Form 1040 and 1040 ES as part of itemized return. Isn't 1040 a Schedule C? I am a Ky single member LLC so in addition to federal 1040 and 1040ES I have to file Ky state income tax, Ky state estimated income tax, and a Ky single member LLC tax form (as an aside Louisville is booming but could be booming like Nashville in a more tax friendly state)
- 8yJames WilcoxBusiness MemberReal Estate Agent · Bowling Green KY ~ Lexington, KY · Member since 2015 · 1k+ posts · 601 votes
@Paul Passafiume probably doesn't help but our 2017 tax filings by our CPA was $200 for myself and wife (filing jointly) including our rentals which is 23 units currently in Lexington. Ours is pretty "easy" with a good amount of preparation and we only have our state and federal to file. Nothing with some of the extra business filings like you have.
Everybody's situation with taxes are different but I will say that our CPA will give free advice throughout the year as needed. Every CPA is different but I do like that open door policy for tax questions even if they do deserve to be paid for their advice and time. I am confident in my CPA's abilities and a good one can really save you a lot of money on what you give Uncle Sam.
REI James w/ eXp Realty54 Reviews - Rental Property Investor · Durham, NC · Member since 2016 · 7k+ posts · 7k+ votes8yPaul Passafiume from what you have described so far then I would say you overpaid. Unless you have partnerships or are using other advanced tax strategies, someone with some rentals and and a W2 type day job isn’t really that difficult for most cpas. My account literally showed me where he would add additional properties as I add them on my tax returns. It’s the same place. My PM does all the accounting throughout the year, I just hand them the forms. I upload receipts throughout the year to their online platform. It’s really quite seemless. He did my taxes in about a week and a half. My total tax return was over 160 pages I think. Got a binded copy of that in the mail and they filed my taxes electronically. Paid them after they were filed. All really seemless all done remotely. Idk could just be me but I really don’t like getting billed by the whole email thing. I used an attorney once who did that and he was charging me like 30 bucks for a one line email. Which got absurd because I just stopped communicating to him because my reply would be another 30 bucks. Really just absurd sometimes. I get it time is money, and that’s fine, but sometimes I just think some services should be included in a fixed price (which is what he told me at the beginning). So personally I’d find a cpa who didn’t charge for email correspondence.
- New to Real Estate · Indianapolis, IN · Member since 2017 · 102 posts · 74 votes8y
@Paul Passafiume - If you are fairly price conscious, I'd recommend getting the contact info for @James Wilcox's CPA! $200 is an absolute steal (assuming it was all done correctly...which I have no reason to believe it wasn't).
You'll find a lot of CPAs on here won't try to compete on price. Like myself, most here will try to compete on value.
As far as billing for the emails- that's frustrating. Like you mentioned above- you wish your accountant wasn't as detailed and sometimes provided more than needed. That sounds like a frustrating relationship- having to constantly babysit, monitor, and spell out exactly what you want, and hope he/she doesn't spend too much time on it.
As an investor, you're paying for results and answers- not time.
Many on here will charge a flat rate, not an hourly rate, throughout the year that includes the tax return, monthly/quarterly check-ins, bookkeeping, and ongoing email support.
This puts you on the same team. That way you WELCOME the detailed responses because it means you got more value.
If you're not at the point of needing those extra services and you're looking for just the tax prep- just make sure you spell out ahead of time with your CPA that you want his/her support to come in under $XX or XX Hours. Or as @Caleb Heimsoth suggested- find one that doesn't charge for the correspondence.
Hope this helps!
- Prospect, KY · Member since 2017 · 39 posts · 13 votes8y
Originally posted by @Caleb Heimsoth:
Paul Passafiume from what you have described so far then I would say you overpaid. Unless you have partnerships or are using other advanced tax strategies, someone with some rentals and and a W2 type day job isn’t really that difficult for most cpas.
My account literally showed me where he would add additional properties as I add them on my tax returns. It’s the same place. My PM does all the accounting throughout the year, I just hand them the forms. I upload receipts throughout the year to their online platform. It’s really quite seemless.
He did my taxes in about a week and a half. My total tax return was over 160 pages I think. Got a binded copy of that in the mail and they filed my taxes electronically. Paid them after they were filed. All really seemless all done remotely.
Idk could just be me but I really don’t like getting billed by the whole email thing. I used an attorney once who did that and he was charging me like 30 bucks for a one line email. Which got absurd because I just stopped communicating to him because my reply would be another 30 bucks. Really just absurd sometimes.
I get it time is money, and that’s fine, but sometimes I just think some services should be included in a fixed price (which is what he told me at the beginning). So personally I’d find a cpa who didn’t charge for email correspondence.
So, to be clear, I have 6 rental properties (totals 9 units). I have a W2, plus two independent contractor jobs SEPARATE of my real estate. But the IC jobs are literally spelled out on one form. It sounds like he got irritated with emails or something and billed me another 526, so now I am going to switch CPAs. I fear he'll charge 2 grand next year, that's an enormous cost and a nice chunk of my after tax income!
My real estate company is a single member LLC in KY, so that requires its own filing in addition to a filing KY income and estimated income taxes.
I though 1000 was high but still in the "ballpark." $1526 is simply highway robbery.
Thanks to all for their input.
- Rental Property Investor · Red Bank, NJ · Member since 2017 · 1k+ posts · 1k+ votes8y
2 W-2’s and 2 multi’s $475 from CPA/Esq. He had to correspond in writing with a bank regarding an issue-never asked for a cent.
- 8yGeorge SkidisPro MemberRental Property Investor · Belleville, IL · Member since 2017 · 875 posts · 529 votes
First Question: How do you have two 1040s? One personal and one state? Those are individual or personal income tax returns. Do you mean 1099s for misc or rental income as that was in the same sentence as your W-2?
A normal personal scenario would be a 1040 Federal return and one state return.
How did you set up to file your LLC? Corporation or Partnership?
Did you make a filing declaration within 90 days as specified by federal tax law?
A single member LLC could have been treated as a disregarded entity for Federal tax purposes and included with you personal return.
In addition to real estate I own a tax business in Illinois. We would have charged significantly less. My guess is your tax prep firm is a CPA with a lot of name recognition. You pay the price for that.
The big time drain is setting up the depreciation schedules for the rental properties. Half of the returns we see that was not done properly the first time. We regularly prepare amend returns for schedule E (rental property) filers and find them overlooked refunds.
Don't like the price go shopping. Make sure you have you entire return with federal worksheets and schedules when you go.
- Investor · Seattle, WA · Member since 2011 · 253 posts · 112 votes8y
$1500 is a little less than I pay now for 80 units, an S corp, personal return, and a couple of partnerships. When I had a portfolio your size I was paying $350-450. Ask other RE investors who they use. We're generally a cheap bunch, right?
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