CPA Question

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KBREAMK
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CPA Question

Post by KBREAMK »

I am thinking of finding a more affordable CPA. My current CPA charges approximately $750 for my 1040 and a $300 for each quarterly estimate calculation requested. I live in Keller, TX so no state tax.

I am a 1/3 owner of a partnership so am accountable for paying 1/3 of the company taxes each year. I also get a 1099 for other income. I pay my taxes quarterly and usually have my CPA estimate these payments based on the current profit situation of my company.

I am also considering doing my own taxes using something like Turbo Tax and then estimating my quarterly payments myself.

Any advice is appreciated.
sport
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Re: CPA Question

Post by sport »

Try doing the taxes yourself along with the CPA this year. You will learn how difficult or easy it is for you and you can compare your results to the professional. If you like what you learn, you will know what to do in the future. Similarly, if you do not like the process and/or the results of your efforts, you will also know what to do.

Of course, you can always search for another CPA. I would do this by asking owners of small businesses for recommendations.
Billionaire
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Re: CPA Question

Post by Billionaire »

I can save you $1200.00 right off the bat. Stop using the CPA for calculating your quarterly estimates. Use your tax liability from the previous year a a measure of how much to pay for the current year.
Ramey58
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Re: CPA Question

Post by Ramey58 »

Did your CPA give you a copy of the forms? If so, just study them and do it yourself. The math isn't difficult.
MarkNYC
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Re: CPA Question

Post by MarkNYC »

Billionaire wrote: Mon Jan 20, 2020 2:04 pm I can save you $1200.00 right off the bat. Stop using the CPA for calculating your quarterly estimates. Use your tax liability from the previous year a a measure of how much to pay for the current year.
What you suggest will work in most situations, but there are many situations where it will not work.

One example would be where the prior year's total income and tax were unusually high and the current year income is expected to be much lower. Knowingly and significantly overpaying current year tax by using prior year amounts would not make much sense.

The other common situation involves partnerships, such as large law firms, where much of the year's taxable income may be realized in the 4th quarter, with very little realized in the 1st quarter, in which case substantially uneven quarterly estimates are appropriate but require calculations. Most people do not want to pay estimated tax on income they have not yet received.

For some it may be worth it to pay for quarterly estimated tax calculations, For others it's not, and the decision may be different if total income is expected to be around $100K vs $600K(or more).
Topic Author
KBREAMK
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Re: CPA Question

Post by KBREAMK »

MarkNYC wrote: Mon Jan 20, 2020 2:51 pm
Billionaire wrote: Mon Jan 20, 2020 2:04 pm I can save you $1200.00 right off the bat. Stop using the CPA for calculating your quarterly estimates. Use your tax liability from the previous year a a measure of how much to pay for the current year.
The other common situation involves partnerships, such as large law firms, where much of the year's taxable income may be realized in the 4th quarter, with very little realized in the 1st quarter, in which case substantially uneven quarterly estimates are appropriate but require calculations. Most people do not want to pay estimated tax on income they have not yet received.

For some it may be worth it to pay for quarterly estimated tax calculations, For others it's not, and the decision may be different if total income is expected to be around $100K vs $600K(or more).
This is my situation... I don't usually make the same quarterly payment.
Billionaire
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Re: CPA Question

Post by Billionaire »

MarkNYC wrote: Mon Jan 20, 2020 2:51 pm
Billionaire wrote: Mon Jan 20, 2020 2:04 pm I can save you $1200.00 right off the bat. Stop using the CPA for calculating your quarterly estimates. Use your tax liability from the previous year a a measure of how much to pay for the current year.
What you suggest will work in most situations, but there are many situations where it will not work.

One example would be where the prior year's total income and tax were unusually high and the current year income is expected to be much lower. Knowingly and significantly overpaying current year tax by using prior year amounts would not make much sense.

The other common situation involves partnerships, such as large law firms, where much of the year's taxable income may be realized in the 4th quarter, with very little realized in the 1st quarter, in which case substantially uneven quarterly estimates are appropriate but require calculations. Most people do not want to pay estimated tax on income they have not yet received.

For some it may be worth it to pay for quarterly estimated tax calculations, For others it's not, and the decision may be different if total income is expected to be around $100K vs $600K(or more).
Yeah, I forgot to mention, use a little bit of common sense.
Billionaire
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Re: CPA Question

Post by Billionaire »

KBREAMK wrote: Mon Jan 20, 2020 3:01 pm
MarkNYC wrote: Mon Jan 20, 2020 2:51 pm
Billionaire wrote: Mon Jan 20, 2020 2:04 pm I can save you $1200.00 right off the bat. Stop using the CPA for calculating your quarterly estimates. Use your tax liability from the previous year a a measure of how much to pay for the current year.
The other common situation involves partnerships, such as large law firms, where much of the year's taxable income may be realized in the 4th quarter, with very little realized in the 1st quarter, in which case substantially uneven quarterly estimates are appropriate but require calculations. Most people do not want to pay estimated tax on income they have not yet received.

For some it may be worth it to pay for quarterly estimated tax calculations, For others it's not, and the decision may be different if total income is expected to be around $100K vs $600K(or more).
This is my situation... I don't usually make the same quarterly payment.
Turbo Tax is super easy to use. I also use it to estimate my taxes for the current year, by using the previous years software. i just make sure to create a NEW return and name it differently from the version that I filed with the IRS.
SlowMovingInvestor
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Re: CPA Question

Post by SlowMovingInvestor »

KBREAMK wrote: Mon Jan 20, 2020 3:01 pm
This is my situation... I don't usually make the same quarterly payment.
Honestly - given today's low interest rates for underpayment, you'd need to underpay by a lot and early in the year for it to cost you more than $1200/year.
Big Dog
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Re: CPA Question

Post by Big Dog »

Billionaire wrote: Mon Jan 20, 2020 2:04 pm I can save you $1200.00 right off the bat. Stop using the CPA for calculating your quarterly estimates. Use your tax liability from the previous year a a measure of how much to pay for the current year.
I was thinking the same thing $300 for quarterlies is a ripoff.
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AerialWombat
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Re: CPA Question

Post by AerialWombat »

SlowMovingInvestor wrote: Mon Jan 20, 2020 7:17 pm
KBREAMK wrote: Mon Jan 20, 2020 3:01 pm
This is my situation... I don't usually make the same quarterly payment.
Honestly - given today's low interest rates for underpayment, you'd need to underpay by a lot and early in the year for it to cost you more than $1200/year.
5% compounded daily is still worth avoiding.
Cuzz35
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Re: CPA Question

Post by Cuzz35 »

$750 for a return doesn't sound like a bad deal. That's about 2 hours of time at my bill rate. Does your CPA charge by the hour or a flat fee? Any sense of how much time it takes him and whether he is just prepping or giving you advice along the way?
michaeljc70
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Re: CPA Question

Post by michaeljc70 »

SlowMovingInvestor wrote: Mon Jan 20, 2020 7:17 pm
KBREAMK wrote: Mon Jan 20, 2020 3:01 pm
This is my situation... I don't usually make the same quarterly payment.
Honestly - given today's low interest rates for underpayment, you'd need to underpay by a lot and early in the year for it to cost you more than $1200/year.
I was thinking the opposite. Given what you earn on "safe" investments overpay if in doubt.

I think someone could easily ballpark the estimate based on past payments/income.
TheDDC
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Re: CPA Question

Post by TheDDC »

Time to go shopping for a new CPA. That’s a terrible price. Mine charges $220 or so, and the quarterly estimate paperwork (however little of it there it is) is thrown into the price.

Alternatively I agree about learning the process yourself. It’s something I myself should do but at so cheap a cost for my guy I have admittedly gotten lazy.

Good luck!

-TheDDC
Rules to wealth building: 90-100% VTSAX piled high and deep, 0-10% VIGAX tilt, 0% given away to banks, minimize amount given to medical-industrial complex
SlowMovingInvestor
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Re: CPA Question

Post by SlowMovingInvestor »

AerialWombat wrote: Mon Jan 20, 2020 7:27 pm
SlowMovingInvestor wrote: Mon Jan 20, 2020 7:17 pm
KBREAMK wrote: Mon Jan 20, 2020 3:01 pm
This is my situation... I don't usually make the same quarterly payment.
Honestly - given today's low interest rates for underpayment, you'd need to underpay by a lot and early in the year for it to cost you more than $1200/year.
5% compounded daily is still worth avoiding.
My point wasn't that one should explicitly underpay, it's that if it's costing you $1200 to do an accurate estimate of how much you need to pay per quarter, you'd very likely be better off just doing a rough estimate yourself and paying that amount.

Even if you underpay or overpay, it'd almost certainly cost you less than $1200/year unless your estimate is way off in Q1 and Q2.
Last edited by SlowMovingInvestor on Mon Jan 20, 2020 8:26 pm, edited 1 time in total.
MarkNYC
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Re: CPA Question

Post by MarkNYC »

Big Dog wrote: Mon Jan 20, 2020 7:21 pm
Billionaire wrote: Mon Jan 20, 2020 2:04 pm I can save you $1200.00 right off the bat. Stop using the CPA for calculating your quarterly estimates. Use your tax liability from the previous year a a measure of how much to pay for the current year.
I was thinking the same thing $300 for quarterlies is a ripoff.
Without knowing the nature, amount, and timing of the taxpayer's income, you really don't have enough information to make a judgment. For some high-income taxpayers, in some parts of the country, $300 per quarter could be a bargain.
SlowMovingInvestor
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Re: CPA Question

Post by SlowMovingInvestor »

MarkNYC wrote: Mon Jan 20, 2020 8:24 pm
Big Dog wrote: Mon Jan 20, 2020 7:21 pm
I was thinking the same thing $300 for quarterlies is a ripoff.
Without knowing the nature, amount, and timing of the taxpayer's income, you really don't have enough information to make a judgment. For some high-income taxpayers, in some parts of the country, $300 per quarter could be a bargain.
Relative to the amount being charged for the actual return ($750), $300/quarter seems quite high.
Billionaire
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Re: CPA Question

Post by Billionaire »

MarkNYC wrote: Mon Jan 20, 2020 8:24 pm
Big Dog wrote: Mon Jan 20, 2020 7:21 pm
Billionaire wrote: Mon Jan 20, 2020 2:04 pm I can save you $1200.00 right off the bat. Stop using the CPA for calculating your quarterly estimates. Use your tax liability from the previous year a a measure of how much to pay for the current year.
I was thinking the same thing $300 for quarterlies is a ripoff.
Without knowing the nature, amount, and timing of the taxpayer's income, you really don't have enough information to make a judgment. For some high-income taxpayers, in some parts of the country, $300 per quarter could be a bargain.
Well the OP was complaining about it. That's all I had to go on. Look, I'm sitting on a billion dollars, what more do you want from me.
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MrBobcat
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Re: CPA Question

Post by MrBobcat »

SlowMovingInvestor wrote: Mon Jan 20, 2020 8:28 pm
MarkNYC wrote: Mon Jan 20, 2020 8:24 pm
Big Dog wrote: Mon Jan 20, 2020 7:21 pm
I was thinking the same thing $300 for quarterlies is a ripoff.
Without knowing the nature, amount, and timing of the taxpayer's income, you really don't have enough information to make a judgment. For some high-income taxpayers, in some parts of the country, $300 per quarter could be a bargain.
Relative to the amount being charged for the actual return ($750), $300/quarter seems quite high.
It depends on how much work is required to come up with good quarterly income estimates. Ideally the OP should find a CPA who can help guide him and his partners to get the books as accurate as possible before bringing them in to do estimates, this should help with the year end tax prep bill as well. That way the CPA can concentrate on the big picture and keep the grunt work to a minimum.
Big Dog
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Re: CPA Question

Post by Big Dog »

MarkNYC wrote: Mon Jan 20, 2020 8:24 pm
Big Dog wrote: Mon Jan 20, 2020 7:21 pm
Billionaire wrote: Mon Jan 20, 2020 2:04 pm I can save you $1200.00 right off the bat. Stop using the CPA for calculating your quarterly estimates. Use your tax liability from the previous year a a measure of how much to pay for the current year.
I was thinking the same thing $300 for quarterlies is a ripoff.
Without knowing the nature, amount, and timing of the taxpayer's income, you really don't have enough information to make a judgment. For some high-income taxpayers, in some parts of the country, $300 per quarter could be a bargain.
Then the annual return would not be only $750.00; it'd be a whole lot more.
MarkNYC
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Re: CPA Question

Post by MarkNYC »

SlowMovingInvestor wrote: Mon Jan 20, 2020 8:28 pm
MarkNYC wrote: Mon Jan 20, 2020 8:24 pm
Big Dog wrote: Mon Jan 20, 2020 7:21 pm
I was thinking the same thing $300 for quarterlies is a ripoff.
Without knowing the nature, amount, and timing of the taxpayer's income, you really don't have enough information to make a judgment. For some high-income taxpayers, in some parts of the country, $300 per quarter could be a bargain.
Relative to the amount being charged for the actual return ($750), $300/quarter seems quite high.
At $200/hour: 1.5 hours per quarterly, and 3 1/2 - 4 hours for the tax return, doesn't seem out of line. Plus doing quarterly calculations can provide a familiarity with the facts that helps reduce the tax preparation time. There can be other unknown factors that affect pricing for different types of work. Again, we just don't have enough information.
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Harry Livermore
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Re: CPA Question

Post by Harry Livermore »

The total amount you are paying is similar to what I pay our CPA for our personal return, which includes my (pass-through) LLC. Our return is pretty complicated, with multiple state returns required, and Schedule E plus depreciation (rental real estate) I may be in a higher COL area than you, but people that I am friendly enough with to discuss such things indicate that I'm either getting a slight bargain or am in line with others*
I would agree with the other posters that you should certainly take over the calculation and payment of the quarterlies. I have always done it myself and rarely get it exactly right. My income is highly variable year to year, and especially so quarter to quarter. I have also had years where cashflow is bad and I simply don't have enough to pay what I estimate. As a result, sometimes in those years, my quarterly payments are lumpy even though income that year is not.
I almost always underestimate, and often owe interest. I just looked over the last 10 years and it's ranged from a low of $0 to a high of $488. Most years it's between $16 and $66. Way less than the $1,200 to "get it right".
Cheers

*The CPA is easily reachable during the year for all manner of quick consults via email or phone, even in person, at no charge. He's also a notary, and I had one complicated multi-employer document that came from California and required the notary to certify something about employment that my local bank officer would not touch. CPA signed and stamped it all, no problem.
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