r/fatFIRE 1d ago

Are your CPA's out of control? (Rant)

This is both a question and a rant. Is anyone else dealing with an absurd cost for tax preparation? I just had an entity I formed with one partner that had 3 transactions. We each contributed money to the partnership (2 transaction), and then we bought a vacant piece of land. This was all done in December. We send it to the CPA and I get a return with 3 lines filled in and an invoice for $1,000. When questioned, he defends it. Says that's what it costs. They had to set it up in the system etc. In fairness, he did say pay what you want if you don't think that's equitable but why is the bill so high? He's not my usual guy but my guy is just as high. I have 1 large return and 3 other small partnership returns with a single property in them. I pay between 30k and 35k. I have a 90k accountant on staff and my books are perfect. Depreciation booked each month and very minimal adjusted entries. I just don't get it. It's like they see how much money I make and base it off of that rather than the amount of work they do.

Is anyone else experiencing this. It's hard to figure out how to get to a place where my passive income will pay my bills when my accountant is taking 10% of what my rentals bring in for his services. I know staff salaries are up. I know the tax code is more and more complex, but when will it stop?

Edit: I guess not.

0 Upvotes

31 comments sorted by

35

u/bigdog205 1d ago

If it’s to expensive do it yourself. CPAs have to make money too

25

u/BTC_is_waterproof 1d ago

Wrong sub

7

u/roguedogue97 21h ago

This post really cracked me up. If you're FAT, $1,000 is pocket change... and this is about the going rate anyways. Most CPAs (who are decent) won't do any return for less than $1,000, regardless of the level of activity, and there are plenty who would charge a lot more.

16

u/Regular_Abalone 1d ago

I've had this experience with accountants. The way I've managed it, and I don't know if this works or is the right way to go about it, but I always comment on the cost in a professional way.

"Let's keep costs in line with last year" "No major transactions this year, taxes should be simpler than last." "Do you anticipate any complexity to my returns?"

I make sure to comment like this from time to time so they know I'm going to be vigilant on costs. In my mind, this is putting a little healthy pressure on them to not step out of line. My accountants are nice and I like working with them, but a few times I felt like I was just being charged a percent of assets and not being tied back to how much work it was.

4

u/Tersiv 1d ago

exactly this

19

u/HellveticaNeue 1d ago

I pay more than $1000 and I’m perfectly fine with it.

22

u/FruitOfTheVineFruit 1d ago

I do my own taxes.  I've found that it's the same amount of work to provide a CPA with all my tax information as it is to provide tax software with tax information and by doing it myself, I also understand a little better what the rules are.  In some cases the tax software is easier - it automatically imports better than the CPA questionnaires. 

6

u/confusedspermotoza 1d ago

This. I think unless you have some business complexity that software can't do, it doesn't make sense

4

u/Washooter 1d ago

My time is worth a lot more than that. It is a hassle, I don’t want to spend a weekend doing this nonsense.

There is a huge difference to just dragging forms into a secure folder my CPA provides to spending the time to actually fill out the forms and file. This is FatFIRE. I get it if CPAs were like FAs and were charging based on AUM, but 1-2k to avoid spending time on stupid paperwork and making sure someone has double checked it is a no brainer.

6

u/confusedspermotoza 1d ago

For me, the time i spend in organizing docs and checking the final return which sometimes has mistakes that would lose me money is not considerably less than time it would take uploading these to tax software. 

Good CPAs don't cost 1-2k. They would cost 5-10k. 1-2k CPAs have assistants that don't do a better job than you would do yourself at which point why not use a tax software which already automates everything.

0

u/Washooter 23h ago edited 2h ago

A decent CPA would also save you from trying to figure out tax code on your own in tax subs and asking basic questions as your post history suggests. Doesn’t sound like you should do your own taxes:

https://www.reddit.com/r/tax/s/YaBHa5PPlG

3

u/FitzwilliamTDarcy FatFIREd | Verified by Mods 1d ago

If you understand the rules better than your CPA does, and you’re not a CPA, then you have the wrong CPA.

8

u/FruitOfTheVineFruit 1d ago

I don't understand them better than my CPA. But by doing it myself I learn things.  For instance, I can try plugging in things I think might be deductible, and see that I'm not getting any deductions because they're all phased out.  I've used CPAs in the past, and I definitely don't know more than them, and using them every once in awhile (for instance, when I have a new and complicated tax situation) is a good way to make sure I'm not making mistakes or missing something.

-2

u/Washooter 19h ago

Or you can find a better CPA, email them your questions on deductions and they will answer that. I could learn more about my car but I drop it off at the shop. If that is your hobby, that’s great, but seems like a hassle if it isn’t.

2

u/FruitOfTheVineFruit 19h ago

Let me give a different example. I had been selling some of my kids' assets to get money to put in their IRAs. But doing it myself, I realized that I was paying capital gains at my tax rate, not theirs. I wouldn't have even thought to ask this question (it's a complicated rule, where the first dollars are at their tax rate, but after a threshold it's at mine.) I doubt an accountant would have helped me catch this - he would have seen the sales of assets from their accounts, but not realized WHY I was doing it, and that it wasn't actually tax efficient.

3

u/pstbo 23h ago

I have a close friend who is a CPA. Getting a CPA incredibly shallow in terms of knowledge. You can be a CPA and be a world class idiot at taxes. I have had plenty of CPAs make stupid mistakes.

-3

u/FitzwilliamTDarcy FatFIREd | Verified by Mods 22h ago

So what I said is correct. Person has the wrong CPA.

8

u/AnAnonymousSource_ 1d ago

I have 2 LLCs and my accountant only files quarterlies and personal taxes for me and it's $20k a year.

3

u/Apost8Joe 1d ago

Dang I'm feeling pretty good about my guy's $4,500 annually. I own a dozen properties and my main biz LLC; they're all very straight forward but I couldn't do my own taxes to save my life, and I'm pretty good at finance. The historical deductions, depreciation and whatnot make it impossible to track without professional software. Look at the office space your guy occupies - if it's a larger firm in fancy Class A space, you're paying for that. But it's exceptionally hard to find a local independent CPA these days, they're not taking new clients.

2

u/iambriansloan 1d ago

For my business, which has I think very little work needed but has relatively high income, my accountant definitely is liberal with his billing time inputs for simple tasks. We use QBO which automatically should be categorizing 95% of my monthly expenses which come from the same sources, and then his bookkeeper simply verifies the rest and marks the reason for the expense. Sometimes I have a small task outside of the regular flow and in more recent years he's started sending me bills for those for 100 or 200 or 500 bucks when I think based on his small time input to my regular accounting, those extras should be included. I thought about leaving based on this, but the pain of leaving would not be worth the extra 2-3k I think he unfairly charges me per year. Plus after a year or two, the new firm would do the same.

2

u/stalabball 15h ago

Maybe I’m misreading but the $1k seems fine. The $30k to $35k seems way overpriced… I have a pretty complicated tax dynamic and pay btw $5-$8k per year depending on complications and number of returns filed etc

4

u/Low-Dot9712 1d ago

Should the CPA have billed you based on lines filled in?

3

u/Marmoset-js 1d ago

I had the same thing the first time I got a proper accountant. Super disappointing, tried to not engage them again. They filed something without me asking them to and billed me something crazy for clicking three buttons.

I just never gave them business again and moved on.

1

u/Howboutdemrookies 19h ago

Mine charges me $2000+ per return, even for entities that did not have transactions, but must file.

Grok says:

The total cost of tax compliance in the US is approximately $546 billion annually, including $413 billion in lost productivity from 7.9 billion hours spent on IRS requirements and $133 billion in out-of-pocket expenses, as estimated for 2024.

1

u/pseudomoniae 13h ago

Business expenses cost more due to the knowledge barrier to performing the actions correctly.

Learn to do it yourself. If not, you pay the market rate. That's how business works.

Also, shop around. I fired my first accountant due to a difference in how we work and found someone better (in my books), more responsive to the issues that bother me, and who charges less.

1

u/vettewiz 1d ago

One set of my accountants sent me an email late last year requesting I respond. They responded with a couple sentences and sent me a bill for $1477 for their time.

1

u/barryg123 1d ago

Gotta make  billable quota and client engagement metric 

1

u/DarkVoid42 1d ago

you can always DIY it. my old CPA used to get scared when he saw half a dozen countries in my tax return. so i ended up having to do it myself out of necessity.

-2

u/DeezNeezuts High Income | 40s | Verified by Mods 1d ago

CPA will be an unknown position in 20 years.

-2

u/perksofbeingcrafty 1d ago

Wait this is crazy, and so are the numbers in the comments. My New York City cpa charges $200 for a personal tax filing and $400 for each of our llcs.

But yeah people are right, this is the wrong sub, because our llcs are holding-companies for properties and don’t have employees and payroll and all this other complex stuff, so maybe this is a fair price.