Questions to Ask When Hiring a CPA

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Over the last few weeks, I have been asked more and more frequently about certified public accountants (CPAs) and what questions to ask when hiring a CPA.

I have worked with many tax professionals over the last year ranging from a guy who resulted in me owing the IRS $3,000 for money he claimed fraudulently and had paid to his personal bank account…to the fantastic Brandyn Cox of BMC Accounting who I use now!

In the middle, I have used a few decent CPAs and tax professionals and learned what I like (and dislike) to see when hiring a CPA.

questions to ask when hiring a CPA

When Should You Hire A Tax Professional?

There are two ways to answer this question, in lifecycle, and time of year.

Lifecycle

You should begin looking for a tax professional as soon as you have more to claim than your normal W2 salary.

Most young service members are completely safe going with the free services on base, but the moment you add real estate income, dividend income, stock profits, short-term capital gains, and/or business revenue into the mix you need to find a professional.

Also, if you just hate the process of filing taxes, or put it off until the last possible moment, go ahead and hire somebody to do it for you.

Time of Year

This is important and often overlooked by people.

January through April/May is the busiest time of year for tax professionals.

This is absolutely the wrong time to begin hiring somebody to prepare your taxes.

My personal tax professional was so slammed at the beginning of this year that he stopped taking on new clients.

Not only that, but no tax preparer who is actually worth a shit is going to have the spare time to let you interview them during tax season.

For these reasons you need to begin hunting for a tax professional during the summer or fall of the year before you need them. This will ensure you can find the best tax professional for your situation with plenty of time to get familiar with each other prior to tax season.

This will also ensure they have factored your return into their workload, and you won’t get turned away.

My friend Doug recently wrote an article about when to hire a CPA as well, and it is definitely worth checking out!

Technical Answers from Brandyn Cox on Hiring a CPA or Tax Professional

The first thing you should be looking for is their level of experience as a tax professional.

Because I’m less than qualified to know what certifications, and specific information a tax professional should know when performing taxes for military real estate investors, I decided to ask Brandyn, my tax professional!

I was more than happy with his answers, and have expounded upon why they are important so that you can ensure your tax preparer knows enough to be lethal with your taxes!

What Certifications Do You Have?

As with any profession, you want to ensure the person you hire has the proper credentials. You wouldn’t want Billy the mechanic who learned via YouTube working on your Ferrari…you would (hopefully) hire a Ferrari-certified mechanic.

You’re Looking for One of Three Professionals to Hire

According to Brandyn, there are three certifications that you should be looking for. Any of these three sets of credentials will mean your tax preparer is adequately qualified to file your taxes as a real estate investor.

Enrolled Agent – like Brandyn Cox

An Enrolled Agent (EA) is a tax practitioner who is licensed at the federal level by the Internal Revenue Service.

Becoming an Enrolled Agent means you are credentialed at the highest level by the IRS because you are federally licensed, unlike some of the other qualifications.

Enrolled Agents also focus more narrowly on business or private entity tax preparation, which should mean they are generally qualified for what you’re looking to achieve.

Certified Public Accountant

CPAs are the most discussed tax professionals in the real estate world. In fact, I still catch myself (accidentally) referring to Brandyn as a CPA, even though his certification is higher up the tax-preparer food chain.

CPAs have a more expansive repertoire than Enrolled Agents. At first glance, this sounds like a good thing, but I suppose it depends on how deep you need to go down the business/real estate realm with your taxes.

CPAs are licensed by their state boards of accountancy and are still more than sufficiently qualified to file your taxes. As a side note, the CPA exam is extremely difficult, so anybody with these credentials should be quite knowledgeable.

The United States Tax Court Practitioner

A United States Tax Court Practitioner (USTCP) is another specialized tax professional.

You are much less likely to be interviewing anybody with this distinction, as they generally end up working in the tax court system.

Nonetheless, this credential would merit them worthy of filing your taxes.

Have Them Look at Your Prior Year Return

The first thing you should do when hiring a CPA, EA, or USTCP is bring them a copy of your prior years’ tax return.

This tax professional should be able to show you what was done correctly, incorrectly, and what can be improved upon going forward. What you’re really looking for here is their ability to articulate these points to you in a way that you understand it simply.

Some tax professionals get into Doctor-speak world where they speak so “intelligently” that you may have no idea what they’re saying.

You don’t want this.

You want a tax professional who can break things down “Barney style” for you.

Test Them by Asking Real Estate Questions

If you know enough to be dangerous, you should be able to throw some stump-the-chump tax questions at them.

For example, if I were hiring a CPA I might ask them if they think I should perform cost segregation on a property. This would be especially beneficial if I knew the property was entirely too small to warrant performing cost segregation on.

What you’re looking for with these are two things: do they know enough to answer your question on the fly, and can they articulate why, or why not, in a way that makes sense to you.

Section 121 Exclusion

If you’re in the military and thinking of hiring a CPA, EA, USTCP, or another tax professional, you should absolutely ask them a question about the Section 121 Exclusion.

For those of you who don’t know, if you live in a home for a cumulative total of 24 months out of the last five years, you won’t have to pay capital gains tax on the first $250k (or $500k for certain taxpayers who file a joint return) in profit.

Well, Section 121 allows active-duty service members to extend this 5-year period out to 15-years! Not every tax preparer knows this, so you should ask them something like “I heard service members can use the capital gains exclusion for more than 5 years after moving out of the home, do you know if this is true?”

If they aren’t familiar with this, they probably aren’t the best tax preparer for you—the military real estate investor.

Have Them Explain The 8582

Honestly, I’m just going to leave this explanation to Brandyn, because I don’t fully understand the 8582, and wouldn’t want to lead you astray.

He stated that it shows whether or not you can use real estate write offs, and if you can carry over losses from previous years.

Sounds good to me, and I’m sure if your tax professional is good, they’ll be able to answer this question simply pertaining to your specific situation.

Intangibles to Look for When Hiring a CPA or Tax Professional

Alright, here are my answers about what I look for when hiring a CPA, EA, or USTCP.

As I said before, I’ve had some good experiences, and some bad experiences. My current tax preparer is the best I’ve seen, and he showed me a whole new level of service on the tax front!

Confidence

I think this goes without saying in any profession. That being said, accountants can sometimes be very quiet, behind-the-scenes types of people.

There is nothing inherently wrong with this, but you definitely want them to be able to hold their own in a conversation.

Aggression

No, not like violence.

You want an aggressive tax professional!

For example, when I first talked with Brandyn he immediately saved me a ton of money by introducing me to MileIQ, an app that tracks your mileage while driving.

This application saved me more money on taxes in 2020 than it cost to file the returns for all of my LLC’s!

I had tax preparers in the past who could answer questions I threw their direction, but weren’t aggressive enough to make unsolicited suggestions to improve my taxes.

I don’t know about you, but I’ll never turn down unsolicited advice about how to save more money on taxes!

Tax-Strategist

This ties into the aggressiveness, but when hiring a tax professional you want to ensure they can think like a master strategist.

My current tax professional will sit down and do a tax-planning session with you in order to help you plan for the next few years, and help you save money on taxes.

There is a huge difference between a tax professional who can file your taxes, and one who can prepare your tax return while simultaneously helping you plan for the next few years in order to reduce the amount of taxes you pay.

Educator

Do you see the trend here?

You’re hiring a tax professional, and as such I think it is only natural to expect them to be able to educate you about taxes as they pertain to your specific situation.

Don’t settle for somebody who files your taxes when you can have somebody that helps you improve your tax rate every year!

Hiring a CPA, EA, or USTCP Should Save You Money!

The biggest question you should be asking yourself when interviewing a tax professional is “can this person save me more money than their services cost?”

The answer with any tax preparer worth a shit should be a resounding “YES!”

If it isn’t, keep interviewing people until you can answer that question confidently.

Also, if you want an introduction to Brandyn Cox over at BMC Accounting let me know—or just go to his website—but please let him know you heard about him from me, as it will give me brownie points with him 😊

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David Pere

David Pere

David is an active duty Marine, who devotes his free time to helping service members, veterans, and their families learn how to build wealth through real estate investing, entrepreneurship, and personal finance!

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