How do you know if you are paying too much for a CPA?

Question

Is there an average price to pay for multi-state tax returns (3 commercial and 3 residential rental properties) in California? I believe I am being overcharged but it seems like a huge risk to search for and switch CPAs if that is the case. How would I reliably know that another CPA will do a good job for less money? Any advice on potentially switching CPAs or what to do if you think you are being overcharged is very much appreciated!

Russell Brazil · Answer

There is no such thing as being over charged. Someone sets their prices, and you choose to hire or not hire someone based on those prices. You can go to H&R block and have extremely low fees, or go to a big CPA firm with specific specialties and pay huge amounts.

But try reaching out to @Natalie Kolodij, she may give you an idea of what the rate for say a real estate specialized cpa is.

Basit Siddiqi · Answer

@Juliette LernerIf you did not hire your accountant, is this an accountant that your parents used that you also decided to go with?Can you clarify what type of services you are getting from your accountant.1) It seems as if they are doing your personal tax return - Is this a federal tax return, california tax return plus 3 other state tax returns?2) You mentioned having an LLC, is this a single member LLC or a multi member LLC? California has a filing requirement for single member LLC's which are unique to other states.3) You mentioned not doing the books for your businesses. Does the company provide you a set of books or does the accountant try to figure out the numbers for you where you would confirm/deny the amounts?4) Are you available to speak to the accountant throughout the year with questions/concerns?

If you are concerned about pricing costs, you may want to speak to a couple accountants and ask for a quote. There are about 20 accountants on this message board who specialize in real estate taxation.

Juliette Lerner · Answer

@Tom S. Yes, thank you that's super helpful! I would like to begin exploring how to do at least some of those P&L summaries myself to save on fees. I'm also wondering how long a typical residential/commercial property tax return is. Perhaps that can tell me if our situation is particularly complex or not? Or if our CPA is spending a lot of hours on each one?

Tom S. · Answer

@Juliette Lerner  Right, P&L summary including rents collected, expenses by category (taxes, insurance, repairs, landscaping etc) are all that's needed for him, and then the mortgage interest YE statement from the bank.

That's once the property is in use.  Upon purchase there will be closing costs, breaking out the purchase price between land and building (because building is depreciated), but those are all one-time items.

Hope that helps,

- Tom

Juliette Lerner · Answer

@Russell Brazil  Right, I am aware that the prices are agreed upon. However, I was not the one who hired our CPA and I am trying to learn as much about the process as possible to make sure that we are in good financial standing, especially since the cost of our tax returns is my main concern at the moment. Thank you for referring me to Ms. Kolodij, I will definitely message her!

Juliette Lerner · Answer

@Tom S. Thank you, that's super helpful! So, the P&L summary and mortgage statement from the bank for each property  is all you need to give to your CPA for the tax returns? I am trying to learn as much about the process as I can, and all of this information is much appreciated.

Tom S. · Answer

@Juliette Lerner  I live in CA but invest in VT, where I'm originally from.  My guy here charges $500 for the base return (W2's - federal and state of CA)) and $150 per property after that, which includes the VT returns.

I also print out everything in advance on spreadsheet, so a quick P&L summary of each property and then the associated mortgage interest statement from the bank.

Juliette Lerner · Answer

It's 3 duplexes in California and 3 commercial in different states. We don't do our own accounting. We're trying to figure out if we are paying to much for tax returns for those properties (we also have an LLC).

Sam Shueh · Answer

Based on forms and clients and tell. Yours sounds like commercial business.  Are you providing all numbers on tallies, receipts collected and he validate and refine just enter the numbers?

How do you know if you are paying too much for a CPA?

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