Accounting for landlords is not easy. Most landlords do not have previous accounting experience, and having to learn what to do and not to do can be difficult and time consuming. Not to mention, you may not have the tools or knowledge needed to make sense of your finances in the first place. Hiring an accountant for your rental business is extremely helpful, and below are a few reasons why.
Analysis
To run a successful business in any field, you need to be able to keep track of your income, expenses, and any other financial metrics. This can be difficult for someone who doesn’t have any previous experience in budgeting or finance. Thankfully, when you hire a CPA for your rental business, they take care of all the complicated parts for you.
Accountants have access to helpful tools and information that make it easier for you to see all your financials at a glance. Creating an organized bookkeeping system helps you see incoming rent payments, how much you’re spending on maintenance, and any property taxes you need to pay. Using this data, they can help you create a manageable and realistic budget to identify any areas where you can reduce spending.
Long-Term Planning
When you have a profitable rental business, you should not only be thinking about how your company is running now, but also how you plan to grow it in the future. This task is quite daunting, and there are a lot of factors you must consider. Because your accountant has in-depth knowledge on the current health of your business, they can help you plan for its future health as well by studying tax law and identifying ways that you can reduce your tax liability. Structuring your business in a way that is tax-efficient is a great way to ensure you’re not spending more money than you have to.
Also, a CPA can take your goals into account and craft a comprehensive retirement plan. They have deep knowledge regarding savings vehicles like 401k(s) and IRAs to help you reach your retirement goals. Other types of investment planning like succession plans can also be created by your accountant. You could pass your business down to a friend or family member, or an accountant can help you implement certain strategies like a buy-sell agreement or creating a trust.
Compliance
Last but certainly not least, an accountant can help you remain in the IRS’s good graces. Without meaning to, you could stray outside of what’s expected for your business from a tax standpoint and accrue penalties and fines for doing so. If you hire a CPA to keep an eye on your financials, you’re much less likely to accidentally violate a tax law. A CPA can also make sure you’re maximizing your tax deductions, allowing you to save as much money as possible and remain profitable.
That being said, not everything is deductible. Some expenses need to be depreciated over time and need to have a depreciation schedule. This is one of those responsibilities best handled by a professional. Hiring an accountant to help you with this task and others like it is a foolproof way to remain compliant
Most obviously but also most conveniently, an accountant can file your taxes for you. Many landlords have that pit in their stomach when tax season rolls around, knowing they’ll have to comb through their finances and deal with the complicated red tape involved in the process. When you hire a professional to file for you, you know that your taxes will be filed correctly and on time. A thriving real estate business like yours will always benefit when you can delegate responsibilities to experienced experts, and not having to file your own taxes can free up room for your other tasks.
Conclusion
Although the up-front cost involved in hiring a CPA may motivate you to handle your finances yourself, it’s important to look at the overall savings you’ll benefit from if you do hire a professional. They will make sure you don’t get yourself stuck in expensive lawsuits or have to deal with hefty fines, and they can help you save as much as possible by budgeting and making the most of your deductible expenses. In the long run, hiring an accountant to help you sort out your business’ financials is a great way to save money and have the peace of mind that you’re remaining tax law compliant.