I own a 46 lot mobile home park. The property is in a separate LLC from my other properties. No POHs. Lot rent only. All utilities are billed directly to the residents by the utility companies. About as simple of an operation as can be.
I do all of my own bookkeeping using QuickBooks. I’m very good with keeping up with it and recording everything. At the end of the year I simply create an accountant’s copy for the calendar year and email a copy to my accountant to prepare a Schedule C for income taxes. After preparing my Schedule C, my CPA prepares a list of journal entries and forwards them in an email to me. I create all journal entries and forward a second Accountant’s Copy to them for review to make sure I have entered all entries correctly and that we are on the same page.
I would like to know what park owners in my same situation pay their CPA for this service each year? I think I am paying too much and may have to make a change.
Really, it is not that hard. There is no reason to involve a CPA in such a simple task. If you are going to be a businessman you should have a basic grasp on how taxes and bookkeeping works. If you go running to a CPA for such basic stuff it means there is a hole in your knowledge that you need to fill. Or you are intimidated by the cult of the professions.
Take an adult education class in accounting and become more self reliant.
Anyone in business should be able to print out a P&L and fill in the Schedule C in 15 minutes (including a 5 minute break to make coffee). The only line that should offer any trouble is the depreciation line. You get that off total line on you depreciation schedule. If you are super old fashion you can set one up yourself using math you knew when you were 12 or if you are like everyone else, just use Turbo Tax.
And what’s with paying two CPA to make sure everything is perfect perfect. You don’t get extra credit for that. In fact that is a rotten business practice; double paying for something that a competent business owner would not even need to pay for once. There is a lot of discretion in bookkeeping. You can group and call your expense accounts whatever you want. For example there is no law that says you can’t group cleaning and repairs together. If it makes sense to you to do so, do it. You can leave the account lines on the Schedule C blank if you choose not to use them; say for example, put repairs and maintenance in one account called “repairs” and not use the maintenance line at all. All that matters to the IRS is that Income line adds up to your actual income and your expenses add up to your actual expenses, and you have you depreciation items in the proper class. If your numbers are honest and you hang on to your receipts, who cares if you get audited, other then the time wasted.
Much of what you pay an accountant for is navigating this thicket when you get audited. So accountants will try to specify out as much as possible to “prove” to the IRS that there’s nothing funny going on. The most likely “funny” thing is you forgot to capitalize something you should have, or did that calculation wrong (hello TurboTax I’m talking to you), or made some silly error that invites an audit and you can’t explain what the logic behind your numbers was…Or that you are required to be on the accrual system when you are on the cash system, or your books are in another way non-compliant with formalities required by law.
The second most likely thing is that you are inconsistent year-to-year and this provokes an audit (or an inquiry of any sort).
If you’re fine with the risk of being audited and knowing that what you don’t know isn’t going to hurt you, go with TT for someone with your experience. I was in the same situation 7 years ago and that’s what I did. It was a huge mistake.
The IRS has fancy computers and it costs them nothing to use AI or other algorithms to generate notices any time you are inconsistent. Do you have any employees?
Good grief Randy. Someone spiked your Wheaties this morning.
First of all, I honestly want to thank you for taking the time to respond to my question. I read this forum often and I know you frequently respond to questions and have helped many people. I take my hat off to you and appreciate it very much. You and all of the others that take time out of their busy schedules to help others on this site is what makes this a valuable and sometimes entertaining place to visit.
I’m not sure where the disconnect was, but I am not paying two CPAs. I was merely attempting to illustrate my level of involvement in the bookkeeping and accounting process and that at the end of the year I am not just handing my CPA a shoebox full of receipts and telling them to figure it all out.
That being said, I don’t think Turbo Tax is a viable solution for my particular situation.
I have read your recent threads regarding the issues you are dealing with in two of your parks and know that you have had your hands full lately. I wish I could offer suggestions to help solve both of your current problems, but I honestly don’t have anything to add outside of what has already been discussed. My question seems completely trivial compared to what you’re dealing with and I thank you for taking the time to respond.
I’ve been self employed for 26 years now. I believe in paying professionals to represent me when performing work that is out of my core competency. I don’t want to represent myself in a court of law and I don’t want to sit alone across the table from an IRS agent. I had the fortune of selling a rather large business about 14 years ago. The very next year I was audited by the IRS. I was very glad to have had my CPA there. He explained his position relating to the question the IRS had and we were out the door in less than thirty minutes without anything more owed. I have the same CPA today and, knock on wood, have never been audited again.
That being said, I also don’t want to overpay for these services either.
I do have two employees related to this particular property, a married couple that live on-site and maintain the property for me. It’s so minor that I do the payroll and all related payroll taxes myself. My CPA’s only involvement is by way of giving me a journal entry at the end of the year if something was off by a little bit.
My problem is that my CPA is charging me more than I think is fair. I just need to have a conversation with them regarding their fees.
Thank you so much for your input and I wish you luck with your two issues.
I think the second, this was a reference to the turbotax company’s promise to act like a CPA or give you one upon needing one of your own (H&R Block). Those guarantees will end up saying tough luck, you input garbage numbers and you got out garbage numbers. Or you won’t have a problem defending yourself. It’s not that much of a risk for the TurboTax company “advice” to be wrong.
Thank you for the very kind words. Personally, you can count on saying goodbye to your accountant if you go back to doing it yourself, which is fine. It does sound like you know what you’re doing. If you read up on the internet, you can be an expert in anything.
After doing it two years myself, then two years with an accountant I didn’t care for, then split the work to the old accountants office but different person, and then another accountant, then finally settled in on last accountant for two years and my last one I think is $1000 per return is reasonable, but I live in one of the most expensive places in the country SF CA so don’t know what that would be in Des Moines (for example,) or Minneapolis or Detroit.
And, by the way, the huge mistake was failing to understand the importance and primacy of the balance sheet. Everything must reconcile back to reality.
I had the good fortune of attending the same. I learned a great deal from Frank. The bonus was listening to your questions, a multiple park owner, and Frank’s responses to them. Very insightful.
I own other types of commercial real estate but had a good feeling about parks. I had a better feeling about them afterwards and purchased one shortly after.
I strongly recommend to you all, John T. Reed’s Agressive Tax Advoidence for Real Estate Investors for a sophisticated analysis of the tax law, audits and accountants. Although the subject matter inherently dismal, Reed’s book is very readable and I found parts hard to put down.
Yes, I have employees; 6 in 3 states. And yes, I will agree with anyone that payroll accounting is a HUGE FRIGGING headache when starting out for DIYers. I use the payroll patch in QBs and those patient and fine Filipino ladies at the end of the QB help line walked me through it and helped me set up everything so I can now pay my employees, pay my taxes, file the proper reports to all the different taxing authorities and stay out of trouble with just a few mouse clicks every other week.
I too am not unfamiliar with the delights of being audited. Years ago I had a small software company in St. Petersburg, Russia. We sold software to beauty salons all over the world. But I also have always had an office in my home in California. Life was good until I got a letter from the CA Board of Equalization who thought they should be getting sales taxes off of some of my sales. Yikes! Well, not really yikes; the process was not all that bad, did not cost me much for my sins and life was soon good again.
I have a question for you–why are you reporting on a Schedule C and not on a Schedule E? Reporting on a Schedule C has the potential to incur the 15.3% self employment tax. If you are not providing substantial services to the tenants I think a Schedule E is the correct form.
Yes, you are right, Schedule E is for rental income. But if you have a business, for example, managing other people’s parks you have to use the Schedule C and pay self employment tax.
