Are you ready for some real estate investor tax tips?
The start of the New Year is often known for resolutions, cold weather, and taxes. As a real estate investor, tax time is often the source of dread and confusion. In a perfect world, you will have kept impeccable records over the last twelve months and can file without any issues. If you are like most investors however, this is not the case. Even if you are somewhat organized, there is always something that has been forgotten about or omitted. Here is where a good CPA (certified public accountant) comes into play. Technology has made it as easy as possible for anyone to do their own taxes. This doesn’t mean you should. A good accountant can not only save you time and money, but also give you piece of mind. There are plenty of accountants out there, but you want to find the best one for you and your business. Here are some tips to help you know if you are working with the right CPA for you.
- They Are Truly Invested In Your Situation. Now until the end of April is the busiest time for any accountant. Even though they are busy, you still want to be treated individually. The best accountants take some time to find out about your specific situation. No two taxpayers are the same. There may be some similarities between two people, but everyone is at least a little different. Instead of just mailing out a questioner, they should take some time to know your situation. These few questions can help develop a relationship and give them the insight needed for your return. It may not seem like much, but if your accountant asks specific questions about you and your business, you should know they are a qualified candidate.
- They Are Available Year Round. There is more to a good accountant then what they do at tax time. A good accountant should be available to you when you need them. You can’t expect them to drop everything if you have a question, but it is not unreasonable to get a response in a few hours. A good accountant will help if you have a question on a new purchase in July just as much if you have a deduction question. It is important to work with someone that is an accountant and not someone who just prepares taxes. There are many people who are great at preparing taxes but don’t focus on accounting on a year round basis. This can be a problem if you have a business question outside of tax season. The best accountants are those that you can reach regardless of what month it is and will help whatever the situation. Looking for someone who can cut you a deal for tax preparation may come back to bite you if you have a question later on in the year.
- They Are A Full Service Accountant. There is much more to a good accountant than just tax preparation. This is certainly a huge part of the business but far from the only niche they should cover. A good CPA will offer tax planning advice and services year round. They should be willing to offer strategies and advice for any situation you get involved in. The advice you get over the course of the year is often much more valuable than anything you hear at tax time. In most cases, your tax situation is pretty cut and dry. There may be, at most, a tweak here and there than has any impact. The advice you get on a purchase or how to structure it is more important. You should also receive pointers on how to manage your records, organize your documents, and structure your holdings.
- They Have Experience With Real Estate Investors. Turbo tax and other software have made it so almost anyone can file their own taxes. Someone with a simple W2 can spend $50 on the software and receive their return in a few weeks. A real estate investor return is not as easy. Anyone that flips multiple houses throughout the year needs the help of an experienced accountant. It is important to ask if your accountant has experience dealing with real estate investors. Dealing with three investment properties and five flips is much different than any other type of tax return. Most accountants cover a broad range of areas but if you can find one that focuses solely on real estate, you know you have a keeper.
- They Live By The Motto: Price Equals Service. Everyone is familiar with the saying “you get what you pay for.” If there was one area in the business world where you should spend a few dollars, it should be with your accountant. The more properties and transactions you have, the more expensive your return will be. This should be considered the cost of doing business. You can find a part time accountant for a fraction of the price, but what are you really getting? If you do get audited, you are responsible for your tax return, not your accountant. You should want the security in knowing that you have maximized all of your deductions and done things the right way. You may pay a little more for this, but you can’t put a price on piece of mind. With a good accountant you get what you pay for.
With tax time quickly approaching, it is time to think about your accountant. If you have an established relationship, you should consider yourself lucky. But if you are just starting your search, keep these five tips in mind.