WEBVTT NOTE This file was generated by Descript 00:00:08.209 --> 00:00:11.840 Speaker: Welcome to Real Estate is Taxing, where we talk about all things real estate 00:00:11.870 --> 00:00:16.869 tax and break down complex concepts into understandable, entertaining tax topics. 00:00:17.440 --> 00:00:21.259 My name is Natalie Kalady, I'm your host, and I am so excited 00:00:21.259 --> 00:00:22.670 that you've decided to join me. 00:00:23.370 --> 00:00:27.390 Microphone (Shure MV7): How would you feel if you were told that the price 00:00:27.390 --> 00:00:29.370 to complete your taxes this year? 00:00:29.820 --> 00:00:32.940 Was going to be just shy of $30,000. 00:00:33.629 --> 00:00:38.070 What if that also didn't include an additional $8,500 00:00:38.070 --> 00:00:40.470 fee for the upfront tax plan. 00:00:41.310 --> 00:00:46.290 This was the Facebook thread I stumbled across today and it aligned 00:00:46.320 --> 00:00:48.360 perfectly with today's topic. 00:00:49.530 --> 00:00:54.000 I want to chat with you guys about a very common question that comes 00:00:54.000 --> 00:00:59.610 up and that is how much should I be paying to have my taxes done? 00:01:00.360 --> 00:01:06.240 Now, when it comes to this question, there is no one size fits all answer. 00:01:06.630 --> 00:01:10.470 And that's why the responses, when this is asked in a public forum. 00:01:10.920 --> 00:01:12.870 Are rightfully all over the place. 00:01:13.800 --> 00:01:16.410 Some of you guys heard that introduction. 00:01:16.770 --> 00:01:19.680 And do you thought 30,000 to have my taxes done? 00:01:19.680 --> 00:01:20.610 Holy shit. 00:01:20.760 --> 00:01:24.210 What did that person possibly have on their tax return? 00:01:24.540 --> 00:01:28.289 They must've had some crazy corporation, maybe some international items. 00:01:28.289 --> 00:01:29.729 This must be a huge company. 00:01:30.360 --> 00:01:33.240 There are other people who heard that number and thought. 00:01:33.750 --> 00:01:37.740 Well, yeah, I would happily pay that if it saved me more than it costs me. 00:01:38.369 --> 00:01:41.009 And every opinion in between. 00:01:41.580 --> 00:01:45.780 And this is always what comes up when this is asked in a Facebook group. 00:01:46.480 --> 00:01:51.520 When it comes to tax return pricing, there are an infinite 00:01:51.520 --> 00:01:53.680 number of things that go into this. 00:01:54.280 --> 00:01:59.770 But we are going to focus on three core things that are tying into the 00:01:59.770 --> 00:02:03.130 current pricing market for tax services. 00:02:03.830 --> 00:02:07.640 We are going to talk about the difference between a tax return 00:02:07.640 --> 00:02:10.190 preparation and tax planning. 00:02:10.550 --> 00:02:12.230 These are apples and oranges. 00:02:12.260 --> 00:02:14.030 And a lot of people intermix the two. 00:02:14.730 --> 00:02:16.170 We also have. 00:02:16.800 --> 00:02:18.959 A huge shortage. 00:02:19.769 --> 00:02:24.510 Of professionals in the industry right now, and it is only getting worse. 00:02:25.079 --> 00:02:27.390 And based on the laws of supply and demand. 00:02:27.779 --> 00:02:29.850 Pricing is going to be impacted. 00:02:30.600 --> 00:02:36.480 And lastly, all of the individual circumstances that go into what 00:02:36.480 --> 00:02:38.310 your tax return is going to cost. 00:02:39.089 --> 00:02:43.079 Now we don't have enough time on this episode to cover each 00:02:43.079 --> 00:02:46.200 and every little thing that can change your tax returns pricing. 00:02:47.040 --> 00:02:50.550 But we are going to hit on some of the big picture things. 00:02:51.089 --> 00:02:55.860 That people often don't consider or common misconceptions when it comes 00:02:55.860 --> 00:02:58.230 to what impacts pricing and why. 00:02:58.680 --> 00:03:00.540 So let's get into things. 00:03:01.110 --> 00:03:02.970 Microphone (Shure MV7)-3: Now at the beginning of the episode, I 00:03:02.970 --> 00:03:08.640 mentioned someone who was quoted around $35,000 by a tax firm. 00:03:09.100 --> 00:03:13.360 And this was for their tax returns and also some tax planning, but we 00:03:13.360 --> 00:03:15.070 don't really know the details of that. 00:03:15.610 --> 00:03:18.760 All we really had from the post was that this person had four 00:03:18.760 --> 00:03:20.650 rentals and two small businesses. 00:03:21.340 --> 00:03:25.660 That could mean almost anything and we're missing a whole lot of other information. 00:03:26.360 --> 00:03:28.340 Microphone (Shure MV7)-5: So let's fill in some of those blanks. 00:03:29.750 --> 00:03:31.130 Tax preparation. 00:03:31.790 --> 00:03:36.590 It's typically going to be a lower cost service that occurs once a year. 00:03:37.100 --> 00:03:39.020 This is a transactional event. 00:03:39.500 --> 00:03:42.830 This is you gathering all of your financial documents for 00:03:42.830 --> 00:03:46.490 the year and sending them, or bringing them into a professional. 00:03:47.000 --> 00:03:51.860 Who is going to enter them in to the tax forms, applying the tax code 00:03:52.160 --> 00:03:54.140 and what they know to be accurate. 00:03:54.740 --> 00:03:57.080 And submitting it to the IRS on your behalf. 00:03:57.920 --> 00:03:59.540 It is very transactional. 00:03:59.990 --> 00:04:05.180 It is a snapshot of your situation from the past year. 00:04:05.720 --> 00:04:09.170 There are only a few things that can be done after the fact 00:04:09.200 --> 00:04:10.970 to change your tax position. 00:04:11.570 --> 00:04:14.540 A large part of this is already done. 00:04:14.590 --> 00:04:16.000 What's happened, has happened. 00:04:16.540 --> 00:04:20.620 And attacks prepare is just reporting the end result. 00:04:21.430 --> 00:04:26.410 So this isn't a service that is necessarily going to save you any money. 00:04:26.980 --> 00:04:30.700 That is going to apply additional strategies that 00:04:30.700 --> 00:04:32.920 might relate to your situation. 00:04:33.580 --> 00:04:38.500 This isn't a service that is necessarily going to put a ton of time. 00:04:39.100 --> 00:04:44.140 Into the big picture of what you have going on and what could change going 00:04:44.140 --> 00:04:46.540 forward and provide advice, et cetera. 00:04:47.440 --> 00:04:48.400 Tax planning. 00:04:48.820 --> 00:04:51.850 Tends to be on the very opposite end. 00:04:52.330 --> 00:04:53.410 Of the spectrum. 00:04:54.370 --> 00:04:56.230 Tax planning and strategy. 00:04:56.620 --> 00:05:02.350 Tends to be a more expensive service and it is being proactive instead of reactive. 00:05:03.160 --> 00:05:06.640 Instead of this being a one-time transactional event. 00:05:07.120 --> 00:05:08.830 Where you work with a professional. 00:05:09.070 --> 00:05:10.600 Where you hand your documents off. 00:05:11.050 --> 00:05:14.170 This is an ongoing relationship with a professional. 00:05:14.800 --> 00:05:17.410 This is working with someone throughout the year. 00:05:17.860 --> 00:05:21.100 This is being able to ask those tax questions of an 00:05:21.100 --> 00:05:22.690 expert throughout the year. 00:05:23.230 --> 00:05:28.360 This is being able to have suggestions made to you when you are thinking about 00:05:28.360 --> 00:05:33.340 selling a business or buying a property or any of these big decisions that can 00:05:33.340 --> 00:05:39.970 have a tax impact and receiving in depth feedback on the differences of outcome. 00:05:40.990 --> 00:05:44.470 Tax planning and strategy is designed to look forward. 00:05:44.890 --> 00:05:47.110 To save you money on taxes. 00:05:47.530 --> 00:05:50.290 But that might not be the only thing that's important to you. 00:05:50.990 --> 00:05:52.220 It might be important. 00:05:52.550 --> 00:05:57.200 For you to qualify for a specific loan in the next year, because you're trying 00:05:57.200 --> 00:05:59.990 to buy a business or buy a property. 00:06:00.590 --> 00:06:04.160 It might be important to you to plan your income levels. 00:06:04.490 --> 00:06:08.120 To be able to qualify for certain credits or subsidies. 00:06:08.420 --> 00:06:09.890 Or things of that nature. 00:06:10.700 --> 00:06:14.570 All of these forward looking items are what tax planning 00:06:14.570 --> 00:06:16.550 and strategy will address. 00:06:17.330 --> 00:06:20.120 So let's think back to that beginning of the episode. 00:06:20.360 --> 00:06:22.160 $35,000. 00:06:23.150 --> 00:06:24.320 We don't know. 00:06:25.010 --> 00:06:29.930 What her exact details were, but $8,500 of that. 00:06:30.290 --> 00:06:32.330 Was for an initial tax plan. 00:06:33.320 --> 00:06:37.460 If someone has multiple properties and multiple businesses. 00:06:38.090 --> 00:06:42.260 I can think of at least 25 different things that could potentially 00:06:42.260 --> 00:06:44.480 be applied just off the cuff. 00:06:44.960 --> 00:06:47.390 To put them in a better position tax wise. 00:06:48.590 --> 00:06:51.980 If those items that can be applied to one of their multiple 00:06:51.980 --> 00:06:53.510 businesses or properties. 00:06:54.020 --> 00:06:55.190 Saved them. 00:06:55.580 --> 00:06:58.490 A total of $20,000 in tax next year. 00:06:59.090 --> 00:07:03.020 Would it be worth $8,500 to have received that advice? 00:07:03.590 --> 00:07:05.120 Most people would say yes. 00:07:05.600 --> 00:07:09.770 And that's the difference where if they had gone to a very transactional tax 00:07:09.770 --> 00:07:15.020 firm, Those things wouldn't have ever been investigated in most situations. 00:07:15.720 --> 00:07:17.520 Onto the next current impact. 00:07:17.820 --> 00:07:19.470 Of tax return pricing. 00:07:20.170 --> 00:07:24.160 Everyone is getting the hell out of this industry and COVID, didn't help it. 00:07:24.860 --> 00:07:28.100 I graduated college almost 10 years ago. 00:07:28.550 --> 00:07:31.010 To the day it was August of 2014. 00:07:31.610 --> 00:07:36.800 And at the time I graduated, I was told that something like 70%. 00:07:37.400 --> 00:07:41.510 Of currently practicing CPAs were set to retire in the next 10 years. 00:07:42.530 --> 00:07:43.430 We are there. 00:07:43.850 --> 00:07:44.630 Well, we are at that. 00:07:44.630 --> 00:07:45.350 10-year mark. 00:07:45.800 --> 00:07:47.510 And during COVID. 00:07:47.930 --> 00:07:49.730 We had all of these new requirements. 00:07:49.730 --> 00:07:50.570 We had cares act. 00:07:50.570 --> 00:07:52.880 We had all of these laws that were coming out. 00:07:53.180 --> 00:07:57.020 With tax implications and credits and all of these things we had to learn. 00:07:57.500 --> 00:08:00.200 As they were happening pretty much like mid taxis. 00:08:00.200 --> 00:08:03.320 And you were learning new things to apply to the PAX 00:08:03.320 --> 00:08:04.580 returns sitting in front of you. 00:08:05.480 --> 00:08:09.200 And there were some people who might've stayed in and worked in the 00:08:09.200 --> 00:08:11.180 industry for another five or 10 years. 00:08:11.690 --> 00:08:14.000 And they were just close enough to retirement that they 00:08:14.000 --> 00:08:15.950 said, nevermind not worth it. 00:08:15.950 --> 00:08:16.730 And they bounced. 00:08:17.300 --> 00:08:17.420 Okay. 00:08:17.720 --> 00:08:23.270 We are having people exit the tax industry at a much quicker rate. 00:08:23.690 --> 00:08:25.820 Then we have people coming into it. 00:08:26.570 --> 00:08:31.580 There was a recent study that said that 75%. 00:08:32.240 --> 00:08:36.710 Of the CPA workforce reached retirement age in 2020. 00:08:37.610 --> 00:08:41.210 Between 2020 and 2022. 00:08:41.780 --> 00:08:46.940 Over 300,000 accountants and auditors left third jobs. 00:08:47.770 --> 00:08:53.500 That 300,000 accountant figure came from a wall street journal article that 00:08:53.500 --> 00:08:58.150 recapped that as being a 17% decline of. 00:08:58.570 --> 00:09:01.690 Accountants in the workforce during that two year span. 00:09:02.390 --> 00:09:05.450 There's a number of reasons that came into play here. 00:09:05.940 --> 00:09:09.720 the accounting industry doesn't line up with a lot of tech industry jobs. 00:09:10.050 --> 00:09:13.560 For salaries versus amount of education required. 00:09:14.260 --> 00:09:19.270 In addition to that tax law has gotten increasingly complex. 00:09:19.810 --> 00:09:24.610 And technology has added more requirements that we need to maintain. 00:09:25.150 --> 00:09:26.980 To keep data secure. 00:09:27.430 --> 00:09:29.710 And when firms are having a data breach. 00:09:30.460 --> 00:09:33.610 Most of the time, it forces them to close as a result. 00:09:34.150 --> 00:09:40.030 The financial outcome of affirm having data breached is tremendous. 00:09:40.030 --> 00:09:41.860 And most firms can't survive that. 00:09:42.280 --> 00:09:45.250 So the cost to maintain a secure environment and to 00:09:45.250 --> 00:09:47.320 operate in compliant manners. 00:09:47.860 --> 00:09:50.110 Is getting more and more expensive. 00:09:50.650 --> 00:09:53.980 And the tax code is getting more and more complicated. 00:09:54.460 --> 00:09:56.410 And it's just becoming harder. 00:09:57.250 --> 00:09:59.410 To operate in the industry. 00:10:00.110 --> 00:10:03.860 These factors in conjunction with the fact that we have not 00:10:03.860 --> 00:10:05.900 made tax season sound sexy. 00:10:06.380 --> 00:10:07.130 At all. 00:10:07.700 --> 00:10:11.000 Is also keeping people out of the industry. 00:10:11.540 --> 00:10:15.980 So between those similar years, which part of this is due to COVID. 00:10:16.610 --> 00:10:23.990 But between 2019 and 2020, there was less than 73,000 people who 00:10:23.990 --> 00:10:28.010 received a bachelor's of accounting or a master's of accounting. 00:10:28.700 --> 00:10:31.190 And that was the lowest figure in a decade. 00:10:32.060 --> 00:10:35.240 So again, I'm sure part of that relates to COVID. 00:10:35.750 --> 00:10:39.470 But some of those other factors come into play as well. 00:10:40.170 --> 00:10:44.400 In alignment with the reduction of people getting degrees in accounting. 00:10:44.910 --> 00:10:49.140 During those same years, there was a 17% decrease. 00:10:49.560 --> 00:10:51.810 In CPA exam candidates. 00:10:52.380 --> 00:10:57.450 So fewer and fewer people are coming into this industry. 00:10:58.150 --> 00:10:58.630 And. 00:10:59.200 --> 00:11:04.360 75% of practicing people are ready to get out of this industry. 00:11:05.140 --> 00:11:06.730 So what this means. 00:11:07.300 --> 00:11:11.230 Is that pricing is going to reflect someone's demand. 00:11:12.250 --> 00:11:16.930 So right now in accounting, it has been incredibly hard to hire 00:11:16.930 --> 00:11:18.850 adequate professionals in tax. 00:11:19.720 --> 00:11:22.330 That's because anyone who's really good at this. 00:11:23.020 --> 00:11:24.580 Has basically either. 00:11:25.390 --> 00:11:28.300 Started their own practice or. 00:11:28.810 --> 00:11:33.940 They are demanding such a substantial rate because they know there is scarcity. 00:11:34.720 --> 00:11:37.780 And so these costs are going to apply to you guys. 00:11:38.410 --> 00:11:41.020 Let's pull it back to the start of the episode again. 00:11:41.680 --> 00:11:46.090 $35,000 for an annual cost for tax work. 00:11:46.960 --> 00:11:50.980 Does that person need services that cost $35,000. 00:11:51.670 --> 00:11:54.490 Is there a chance that their circumstances are. 00:11:54.970 --> 00:11:57.730 Simple enough that they could go somewhere and have it done 00:11:57.730 --> 00:12:01.690 for $3,500 or maybe even $350. 00:12:02.290 --> 00:12:03.250 Microphone (Shure MV7)-10: Absolutely. 00:12:03.940 --> 00:12:06.250 But here's what it comes down to. 00:12:06.950 --> 00:12:11.000 If there are becoming fewer and fewer tax professionals. 00:12:11.690 --> 00:12:15.560 Those who are in that average band. 00:12:16.310 --> 00:12:18.860 Is going to get skewed down as well. 00:12:19.100 --> 00:12:21.710 So the amount of practicing tax professionals who are 00:12:21.710 --> 00:12:23.030 just pretty good at this. 00:12:23.570 --> 00:12:25.850 The total number is going to become smaller. 00:12:26.780 --> 00:12:31.160 If you want someone who is by definition above average or 00:12:31.190 --> 00:12:33.530 absolutely kick ass at this. 00:12:34.490 --> 00:12:37.250 The number that fit into that category. 00:12:37.610 --> 00:12:39.920 Is also going to be much smaller. 00:12:40.460 --> 00:12:43.880 So could that person with the $35,000 quote. 00:12:44.570 --> 00:12:49.550 Could they have a simple enough situation to go somewhere else and pay much less. 00:12:50.060 --> 00:12:50.960 Absolutely. 00:12:51.770 --> 00:12:55.670 But regardless of how complicated someone's situation is. 00:12:56.210 --> 00:13:00.380 If the person they want to work with is someone who is capable of 00:13:00.380 --> 00:13:02.300 doing much more complicated work. 00:13:02.990 --> 00:13:06.350 That level of work is the value of their time. 00:13:07.460 --> 00:13:14.450 There is no reason for them to substitute your easier work in for work. 00:13:14.450 --> 00:13:19.010 They could charge three times as much for when they have a demand 00:13:19.010 --> 00:13:24.440 for them and their skillset for that higher quality more complicated work. 00:13:24.980 --> 00:13:27.980 So this doesn't mean you can't work with that person. 00:13:28.400 --> 00:13:30.740 Who has that incredible skillset? 00:13:31.400 --> 00:13:32.480 It just means. 00:13:32.750 --> 00:13:37.730 That you are paying for their level of expertise, regardless of if you 00:13:37.730 --> 00:13:40.070 need every bit of it at this point. 00:13:40.670 --> 00:13:43.400 And that is what is currently happening. 00:13:43.820 --> 00:13:47.420 With the supply and demand issue in accounting. 00:13:47.690 --> 00:13:49.880 So if you want someone very good. 00:13:50.180 --> 00:13:52.190 And do you want someone with that skill? 00:13:52.550 --> 00:13:54.290 Expect to pay more for it. 00:13:54.680 --> 00:13:58.490 And that's what it comes down to this isn't going to get much better. 00:13:59.870 --> 00:14:03.440 The last thing that comes into play with pricing. 00:14:04.130 --> 00:14:06.380 Is someone's literal circumstances. 00:14:07.160 --> 00:14:12.860 This is why a post of people discussing what they pay for their CPA or 00:14:12.860 --> 00:14:15.050 their EA or their tax professional. 00:14:15.680 --> 00:14:17.600 Isn't really of much value. 00:14:18.440 --> 00:14:22.100 Because while there may be some similarities between 00:14:22.100 --> 00:14:23.840 people's tax circumstances. 00:14:24.440 --> 00:14:25.850 Without knowing. 00:14:26.540 --> 00:14:29.330 An infinite number of additional facts. 00:14:29.810 --> 00:14:31.280 We have no idea. 00:14:31.280 --> 00:14:33.500 If what they're paying is a good deal or not. 00:14:34.430 --> 00:14:36.680 Every now and then I come across a post. 00:14:37.220 --> 00:14:40.460 Where people are talking about what they pay for their taxes, 00:14:40.490 --> 00:14:42.260 what they have included, et cetera. 00:14:42.710 --> 00:14:44.960 And there's always someone who's so cocky. 00:14:45.380 --> 00:14:50.840 To say, oh, I only pay my accountant a dollar 50 to do my taxes and 00:14:50.840 --> 00:14:52.730 I have 46 rental properties. 00:14:53.430 --> 00:14:57.000 And the only thing I can think is, oh God, what? 00:14:57.030 --> 00:14:59.100 I wouldn't pay to see that tax return. 00:14:59.580 --> 00:15:03.030 Because there's no way in hell that if you are going to someone who is 00:15:03.030 --> 00:15:07.710 charging a fraction, Of what the majority of other people are charging. 00:15:08.220 --> 00:15:13.410 That they are also miraculously better than all of those other people. 00:15:13.920 --> 00:15:17.880 Maybe it exists, but most of the time you are getting what you pay for. 00:15:18.580 --> 00:15:22.300 Microphone (Shure MV7)-11: When it comes to certain explanations 00:15:22.300 --> 00:15:24.220 related to tax returns. 00:15:25.240 --> 00:15:28.780 What the taxpayer hears and what the accountant hears. 00:15:29.260 --> 00:15:31.030 Are completely different things. 00:15:31.330 --> 00:15:35.260 So I'm going to provide you guys with some translations. 00:15:36.010 --> 00:15:38.650 First up is my business. 00:15:38.680 --> 00:15:40.030 Isn't very big. 00:15:40.240 --> 00:15:42.400 It shouldn't be too complicated. 00:15:43.120 --> 00:15:46.750 The taxpayer is under the assumption that, because this 00:15:46.750 --> 00:15:48.790 isn't a high revenue business. 00:15:49.180 --> 00:15:53.500 And they don't have a bunch of complexity around having multiple 00:15:53.500 --> 00:15:57.250 locations and employees and millions of dollars of revenue, et cetera. 00:15:57.760 --> 00:15:59.950 That this should make for an easy. 00:16:00.310 --> 00:16:03.010 Quick and cheap tax return filing. 00:16:04.000 --> 00:16:05.860 The tax professional hears. 00:16:06.490 --> 00:16:11.770 I'm going to hand you a pile of disorganized numbers and half of 00:16:11.770 --> 00:16:13.540 them, I will not have receipts for. 00:16:14.500 --> 00:16:18.820 Because a business is small or quote, not complicated. 00:16:19.420 --> 00:16:22.990 Doesn't mean it is going to be any easier to prepare. 00:16:23.470 --> 00:16:28.330 And oftentimes it's actually worse to prepare because it's not yet 00:16:28.330 --> 00:16:29.920 being treated like a business. 00:16:30.340 --> 00:16:34.480 And there aren't reliable reports there isn't money being put into 00:16:34.480 --> 00:16:36.400 maintaining the information needed. 00:16:36.880 --> 00:16:41.440 To complete an accurate let alone strategic tax return. 00:16:41.950 --> 00:16:43.570 Whether you are running. 00:16:44.050 --> 00:16:47.530 A business that does $10,000 a year. 00:16:47.890 --> 00:16:49.990 Or $10 million a year. 00:16:50.530 --> 00:16:52.060 The amount of work. 00:16:52.630 --> 00:16:53.650 Is the same. 00:16:54.490 --> 00:16:58.300 Having there be more or less zeros attached to each number 00:16:58.300 --> 00:17:00.100 that goes each place on the form. 00:17:00.550 --> 00:17:04.570 Does not change the amount of work that goes into doing the tax return. 00:17:05.240 --> 00:17:06.200 That was an extreme. 00:17:06.890 --> 00:17:10.190 But at the end of the day, just because your business only made 00:17:10.190 --> 00:17:13.100 a couple thousand dollars instead of a couple of hundred thousand. 00:17:13.610 --> 00:17:18.290 It doesn't mean it should necessarily cost less to do the taxes for it's 00:17:18.290 --> 00:17:22.850 likely going to be more work than a well-organized structured business. 00:17:23.550 --> 00:17:26.490 Microphone (Shure MV7)-12: The next phrase that requires translation. 00:17:27.120 --> 00:17:28.530 Is going to be. 00:17:29.010 --> 00:17:33.780 My wife and I just have some LLCs for our rental properties. 00:17:34.650 --> 00:17:35.910 To the taxpayer. 00:17:36.000 --> 00:17:37.440 This says we're married. 00:17:37.470 --> 00:17:39.510 We set up some LLCs together. 00:17:39.600 --> 00:17:41.010 Shouldn't be anything special. 00:17:41.010 --> 00:17:42.060 It's just us. 00:17:42.480 --> 00:17:45.540 And all it has is a rental property in each one. 00:17:46.080 --> 00:17:47.730 This shouldn't be complicated. 00:17:47.730 --> 00:17:49.680 This shouldn't cost much to do. 00:17:50.380 --> 00:17:52.510 What a tax professional hears. 00:17:53.110 --> 00:17:55.300 Is that there is a good chance. 00:17:56.020 --> 00:18:00.520 Both spouse and taxpayer are the owners of that LLC. 00:18:01.150 --> 00:18:05.980 And in the majority of situations that creates a partnership tax return. 00:18:06.400 --> 00:18:10.720 With a entirely separate 10 65 tax filing. 00:18:11.350 --> 00:18:15.610 In addition to that since the taxpayer likely didn't know, that was the case. 00:18:16.150 --> 00:18:20.680 There was not books and records maintained appropriately for a partnership. 00:18:21.430 --> 00:18:26.020 And in addition to that, partnerships have much more information 00:18:26.020 --> 00:18:27.580 that go into the reporting. 00:18:28.330 --> 00:18:33.070 So while the taxpayer says, everyone says to set up LLCs, This 00:18:33.070 --> 00:18:34.150 shouldn't have been a big deal. 00:18:34.150 --> 00:18:37.270 We didn't move any money around nothing crazy happened. 00:18:37.270 --> 00:18:39.700 We just structured things for legal protection. 00:18:40.780 --> 00:18:42.610 The tax professional looks at this. 00:18:43.410 --> 00:18:48.810 And their first concern is that these are multi-member LLC creating partnerships. 00:18:49.440 --> 00:18:53.130 And often at the advice of the general internet. 00:18:53.970 --> 00:18:57.630 People feel that every single rental should be in its own LLC. 00:18:58.050 --> 00:19:02.460 And now what we have is 10 different partnership tax return filings. 00:19:03.160 --> 00:19:08.110 Do you think that taxpayer was expecting to pay, to have 11 tax 00:19:08.110 --> 00:19:12.940 returns filed that year 10 of which need to have essentially books created 00:19:12.940 --> 00:19:14.590 for them as part of the process? 00:19:15.190 --> 00:19:16.240 Absolutely not. 00:19:16.780 --> 00:19:19.180 But that is the situation that was created. 00:19:20.050 --> 00:19:26.050 So the phrasing of just have some LLCs or only set up a couple 00:19:26.050 --> 00:19:28.810 LLCs or any variation there of. 00:19:29.470 --> 00:19:36.220 Can have a dramatic impact on the cost of your tax services for the year. 00:19:36.920 --> 00:19:40.340 Microphone (Shure MV7)-13: Another phrase that requires translation between 00:19:40.340 --> 00:19:44.990 the general populace and those of us who are on the dark side of things. 00:19:45.690 --> 00:19:48.750 Microphone (Shure MV7)-16: My taxes are pretty much the same as last year. 00:19:49.200 --> 00:19:52.920 I just invested in a few syndications and REITs. 00:19:53.280 --> 00:19:56.940 So that I could help diversify my investments a little bit. 00:19:57.640 --> 00:19:59.770 What the tax professional hears. 00:20:00.430 --> 00:20:07.300 Is I now have 30 new state tax filings that I was not expecting to have, 00:20:07.750 --> 00:20:09.850 and I'm not expecting to pay for. 00:20:10.570 --> 00:20:14.770 What many people do not consider when investing in a syndication, 00:20:14.770 --> 00:20:18.250 especially a well-diversified one across multiple states. 00:20:18.940 --> 00:20:24.970 Is that if you happen to earn above the minimum filing requirement for a state 00:20:25.330 --> 00:20:30.440 in which this partnership holds real estate now you have to file a state 00:20:30.440 --> 00:20:33.050 tax return for that state as well. 00:20:33.680 --> 00:20:35.450 I have seen a K one. 00:20:35.990 --> 00:20:40.550 Where the taxpayer earned maybe a few hundred dollars from 00:20:40.550 --> 00:20:41.930 that investment for the year. 00:20:42.380 --> 00:20:46.640 And it resulted in nine different state tax returns being filed. 00:20:47.330 --> 00:20:51.290 Most firms charge a few hundred dollars per additional state. 00:20:51.920 --> 00:20:52.580 So. 00:20:53.240 --> 00:20:54.350 Be mindful. 00:20:54.830 --> 00:20:58.220 That what you might consider a simple investment. 00:20:58.820 --> 00:21:03.350 Could result in multiple additional filing requirements. 00:21:04.890 --> 00:21:08.640 Microphone (Shure MV7)-17: So all of this information, just to say. 00:21:09.150 --> 00:21:12.540 That what you should pay to have your taxes done. 00:21:13.260 --> 00:21:15.360 Can be literally any amount. 00:21:16.110 --> 00:21:19.590 If you are paying substantially less than the average. 00:21:20.220 --> 00:21:22.200 I would consider that a red flag. 00:21:23.010 --> 00:21:26.670 If you are paying substantially more than the average. 00:21:27.240 --> 00:21:33.120 But it is working with someone who has the knowledge and credentials to give 00:21:33.120 --> 00:21:39.510 you a level of expertise and quality and planning that you feel comfortable with. 00:21:40.080 --> 00:21:42.390 Then I would consider that a green flag. 00:21:42.900 --> 00:21:45.360 Even if it's much more than your friends pay. 00:21:46.200 --> 00:21:50.670 There are national surveys that you can look at for this. 00:21:51.360 --> 00:21:54.150 Right in front of me is the Nat P. 00:21:54.360 --> 00:21:57.870 2023 average tax fee survey. 00:21:58.020 --> 00:21:59.520 And you can look at this online. 00:22:00.090 --> 00:22:05.130 For 2023, the average base price for a 10 40 tax return. 00:22:05.550 --> 00:22:08.250 With $250, 2 48. 00:22:08.790 --> 00:22:12.480 That didn't include if it had extra schedules on it. 00:22:12.540 --> 00:22:15.600 So if we had a schedule a and someone itemized, or a schedule 00:22:15.600 --> 00:22:17.340 C for a business, et cetera, 00:22:17.770 --> 00:22:20.200 Microphone (Shure MV7)-18: This study also shows a breakdown 00:22:20.530 --> 00:22:24.010 of what type of designation people held, who were surveyed. 00:22:24.460 --> 00:22:27.760 And also the years in the business, and this is interesting. 00:22:28.180 --> 00:22:34.810 So 32% of those who were surveyed were AFS P, which is annual filing season program. 00:22:35.080 --> 00:22:38.020 It's a voluntary program for those who are non-licensed. 00:22:38.500 --> 00:22:42.490 To take continuing education year to year to meet a requirement. 00:22:43.190 --> 00:22:50.010 Of the remaining categories of everyone else here, we had 9% of other 10% 00:22:50.010 --> 00:22:52.050 of people had no designation at all. 00:22:52.080 --> 00:22:57.450 Meaning these are people who have no type of credential have taken no classes. 00:22:57.690 --> 00:22:58.860 Maybe, maybe not. 00:22:59.340 --> 00:23:03.330 So keep in mind that these people who are not licensed are 00:23:03.330 --> 00:23:05.399 included in that average fee. 00:23:05.970 --> 00:23:07.889 Of that $248. 00:23:08.460 --> 00:23:14.909 The survey had 17% of participants who are CPAs, 43% who were EAs. 00:23:15.450 --> 00:23:22.080 So even in a survey combined with those who have federal licenses or CPA licenses, 00:23:22.680 --> 00:23:25.139 And those who have no designation at all. 00:23:25.649 --> 00:23:29.580 248 was the average across all of them combined. 00:23:30.280 --> 00:23:32.139 Looking at the years in business. 00:23:32.889 --> 00:23:36.310 This is interesting because it holds true to everything else 00:23:36.310 --> 00:23:38.020 that was being said earlier. 00:23:38.530 --> 00:23:41.590 About those leaving the industry versus coming in. 00:23:42.290 --> 00:23:46.879 Those who are surveyed, who have been doing this for less than one year, 0%. 00:23:47.580 --> 00:23:51.270 People who have been in the tax business for one to five years. 00:23:51.629 --> 00:23:53.070 5%. 00:23:53.820 --> 00:23:55.230 Six to 10 years. 00:23:55.800 --> 00:23:57.149 6%. 00:23:58.550 --> 00:24:00.350 At the other end of the scale. 00:24:01.310 --> 00:24:04.220 Of those who have done this 16 to 20 years. 00:24:04.580 --> 00:24:06.290 That is 12%. 00:24:06.830 --> 00:24:12.919 So that one category is as much as the people who have been doing this. 00:24:13.310 --> 00:24:16.399 In one to five years and six to 10 years combined. 00:24:17.360 --> 00:24:20.449 The highest category by far. 00:24:21.150 --> 00:24:24.419 21 plus years in the tax business. 00:24:25.110 --> 00:24:28.259 67% of people surveyed. 00:24:29.280 --> 00:24:34.709 Again, 67% have been doing this over 20 years. 00:24:34.709 --> 00:24:36.300 They've worked a full career already. 00:24:36.300 --> 00:24:37.620 They're at retirement age. 00:24:38.399 --> 00:24:43.439 5% have only been in this industry for under five years. 00:24:44.129 --> 00:24:49.590 The scales are going to keep shifting to a smaller and smaller availability. 00:24:50.100 --> 00:24:52.020 Of skilled tax professionals. 00:24:52.840 --> 00:24:54.129 A closing thought. 00:24:54.459 --> 00:24:56.979 That ties everything we've talked about together. 00:24:57.879 --> 00:25:01.540 Not all, but many of those professionals who have been in this 00:25:01.540 --> 00:25:07.330 industry for 20 plus years, Have pricing models that are going to be. 00:25:07.540 --> 00:25:09.370 A little bit on the lower end. 00:25:09.729 --> 00:25:13.000 Because they've worked with a lot of these clients for 20 years. 00:25:13.389 --> 00:25:18.669 So if they started off charging someone $30 to do a tax return 20 00:25:18.669 --> 00:25:23.739 years ago, They're not going to jump that fee up to $30,000 now. 00:25:24.699 --> 00:25:27.129 So many people who are leaving the industry. 00:25:27.550 --> 00:25:31.959 Had a lower pricing model, then those who are coming into the industry. 00:25:31.959 --> 00:25:33.759 UH inflation. 00:25:34.149 --> 00:25:35.469 Everything costs more. 00:25:36.169 --> 00:25:39.620 In addition to that, what we are also seeing. 00:25:40.310 --> 00:25:46.999 Is that every firm I know right now, Is having a hard time keeping up with demand. 00:25:47.840 --> 00:25:52.999 That's because as these older prepares retire, And as they have 00:25:52.999 --> 00:25:56.870 these large client bases, which normally you would sell your firm, 00:25:57.169 --> 00:26:01.489 you would transition someone who you trained up to be partner, et cetera. 00:26:02.190 --> 00:26:07.379 The difference between a firm that is still operating in a manner to which 00:26:07.379 --> 00:26:09.960 they had been operating 30 years ago. 00:26:10.500 --> 00:26:12.540 Versus a new from today. 00:26:12.540 --> 00:26:14.639 I can be very different. 00:26:15.150 --> 00:26:20.550 So it's not as desirable for someone who is five to 10 years into the industry. 00:26:20.879 --> 00:26:22.110 To buy a firm. 00:26:22.439 --> 00:26:24.989 Where the clients are used to working on paper. 00:26:25.019 --> 00:26:28.229 They're used to coming in and working in person with someone. 00:26:28.499 --> 00:26:31.799 And they're used to paying a minimal fee because they've been 00:26:31.799 --> 00:26:33.449 with this person for decades. 00:26:34.319 --> 00:26:36.839 For someone who is new in the industry. 00:26:37.229 --> 00:26:40.080 Where a lot of things are paperless. 00:26:40.080 --> 00:26:42.360 Now there's a lot more technology. 00:26:42.360 --> 00:26:43.979 There's a lot more automation. 00:26:44.279 --> 00:26:45.839 It's a fully different. 00:26:46.620 --> 00:26:47.580 Dynamic. 00:26:48.299 --> 00:26:49.739 So the transition. 00:26:50.279 --> 00:26:53.129 Of those people retiring out of the industry. 00:26:53.639 --> 00:26:57.839 Also means that in addition to those of you who are currently just looking 00:26:57.870 --> 00:27:02.580 for a tax professional, There are thousands of people every year. 00:27:03.149 --> 00:27:05.729 Where they're professional they've had for decades. 00:27:06.540 --> 00:27:07.560 Is retired. 00:27:07.620 --> 00:27:10.199 And now they're also looking for someone new. 00:27:11.179 --> 00:27:16.219 So I hope this episode helped you come to the realization that what 00:27:16.219 --> 00:27:17.870 you should pay for your taxes. 00:27:18.469 --> 00:27:23.239 Is a completely arbitrary question and it doesn't directly relate to any amount. 00:27:23.810 --> 00:27:27.290 There is no correct amount to be paying for your taxes. 00:27:27.679 --> 00:27:32.149 There is a concerningly low amount, and there's a ridiculously high amount. 00:27:32.209 --> 00:27:34.219 If it's really not something you need. 00:27:34.729 --> 00:27:38.120 But keep in mind, you are paying someone for their experience. 00:27:38.569 --> 00:27:41.749 Not for the service you specifically need. 00:27:42.379 --> 00:27:47.929 So as always, I hope that you took away some value from this episode. 00:27:48.379 --> 00:27:50.929 If you have any thoughts on this, any comments? 00:27:51.290 --> 00:27:55.100 Feel free to find me on social media and share those thoughts. 00:27:55.459 --> 00:27:57.350 Come find me on Facebook. 00:27:57.379 --> 00:28:01.370 Join the Facebook groups linked below, or find me on Instagram. 00:28:01.370 --> 00:28:04.519 I'm R E tax strategist on most platforms. 00:28:04.969 --> 00:28:08.629 And as always, I will talk to you guys next week. 00:28:09.180 --> 00:28:11.419 Mhm.