People often call their accountants when it’s time to file their tax returns, but then the phone goes radio silent for the rest of the year. I get it. I used to do the same thing. I’d send my accountant my documents and he would crank out my tax returns for me. Sounds simple enough, right?
That was before I realized the power of speaking with my accountant regularly and strategizing together. When I shifted my thinking and started to brainstorm with my accountant about tax-saving opportunities, it made a huge difference. All of a sudden, I began to invest more strategically, considering potential tax implications beforehand.
So, when is the best time to hire an accountant? And how do you get the most out of conversations with yours once you hire one?
When to Hire an Accountant
The best time to hire an accountant will be different for everyone. Personally, I decided to hire one when my life started to get more complicated from a tax perspective. What I mean is that I started to have deductions that were cumulatively higher than the standard deduction. For example, I got married, had children, and bought my first property.
Looking back, I should’ve hired one sooner.
In fact, just the other day I was running through the numbers with my youngest son. We looked back over my real estate portfolio and found that although I usually had a surplus of cash flow, I’d almost always rolled it right back into my portfolio to sustain a property I owned or to purchase a new one.
What really propelled me into wealth were the numerous tax-saving strategies I employed throughout my investing career — many of which I realized, or learned about, through conversations with my accountant. So, yes, I suggest hiring an accountant before you feel like you need one, if only to gain ideas and strategies to utilize in the future.
How to Find the Right Accountant
Although many investors prefer hiring an accountant who has personally invested in real estate, I think it’s more important that he or she has experience working with real estate investors. If your accountant is learning more from working with you than you are from working with him or her, you have the wrong accountant.
This is where referrals come into play. What better way to find an accountant than to ask around at your local REIA meeting, or even here on BiggerPockets?
My accountant, whom I’ve worked with for 20-some-odd years now, was referred to me by a family member who owned a bunch of real estate properties.
Personally, I prefer someone who has years of experience. That said, I would look for someone who is career focused and energetic enough to stay up-to-date on the tax code. Keep in mind, a new version of the federal tax code is published each year, and it’s not a light read.
Talking Strategy with Your Accountant
Let’s say you have a great accountant who’s very knowledgeable and has experience working with investors. Are you asking him or her the right questions?
Meeting with your accountant can be similar to going in for a doctor’s appointment: You have to ask proactive questions to get the most out of it. Maybe your accountant has great advice, but you’re just not asking for it.
Here are few simple questions to get the conversation flowing:
- What strategies have you seen other investors use to save on taxes?
- What can I do to save more money this year, next year, and beyond?
- Were there any red flags in my return?
- Are there any other deductions that I could be taking that I’m not set up to take now?
- Are my deductions being taken on the right schedule?
Of course, while it’s important to ask questions and learn about new strategies, try not to waste your accountant’s time. For example, if you’re keeping up your side of the bargain by being respectful and preparing documents appropriately, your accountant will probably be willing to talk with you about detailed strategies.
There may even be some strategies you can implement ahead of time to offset gains or losses. So, if you’re thinking about buying or selling a property, winding down a business, or making a large financial decision, it may pay to talk to your accountant first.
How did you find your accountant while considering your real estate portfolio? Better yet, how do you best utilize his or her advice? Tell me in the comments below!