CPAs may seem unneeded if you haven’t yet run into trouble with taxes or budgeting. But what happens when your rental business grows, and you now have much more to think about and keep track of? Or, what if a tax law changes and you had no idea? An accountant can make your life easier by keeping an eye on all your financials and communicating the best ways for your business to be more profitable. Below are the top four benefits of hiring a CPA for your rental business.
#1: Tax Law Compliance
Staying tax compliant is a large part of keeping your rental business up and running. If you aren’t careful, you could fall victim to penalties and fines. Even the best of us can miss a thing or two when it comes to tax law: tax requirements and regulations are lengthy and complex. Having a professional take a second look at your finances makes all the difference, since there are numerous different kinds of expenses you incur as a landlord, like property maintenance, mortgage interest, property management fees, and more. You need to know how to properly deduct these expenses and figure out whether any of them depreciate, and by how much. A CPA will help you do all these things and more.
CPAs can also file your tax returns for you. Taxes are simply the worst, and taking the time to do them can be a real burden. Not to mention, the deadline always seems to sneak up on you. Hire a CPA and let that worry fall by the wayside. Accountants will file your tax returns on time and correctly. Not to mention, if you find yourself caught up in an audit, they can represent you.
Also, tax planning can really help you save money over time by making the most of tax deductions and creating strategies to minimize your tax liability. The people who know how to do this the best are CPAs, and the amount that they charge for their services should be more than covered by the money they save you.
#2: Budget Creation
We all know that budgeting is the best way to keep track of your expenses and be sure you have enough cash flow to cover all your monthly expenses. But what’s the best way to create a budget? Where do you start? When you hire a CPA, they will help you manage your finances by keeping detailed records, working with budgeting tools and giving you expert advice to create a realistic and attainable budget.
The way that CPAs create such helpful budgets is through analyzing financial statements like your income statement and balance sheet, giving you insight into things like your net income and assets and liabilities. Since they have so much knowledge on the financials of your business, they can also help you plan for long-term success. Retirement planning, investments, and tax planning are all things you can discuss with your CPA.
#3: Detailed Bookkeeping
Building on the point above, CPAs have fantastic tools to keep detailed records of all your transactions. Your accountant can recommend the best software that they have used and liked to help you streamline the process of accounting for landlords. You no longer have to manually track things like rent payments, maintenance expenses, or property taxes, since most accounting or property management software can do it for you.
Also, an accountant can double-check all these records by reconciling them with your credit card or bank statements. When a CPA reconciles your records and statements, they’re making sure that all transactions are correct and accounted for. You can sleep easier at night knowing that someone is looking out for your financial well-being.
#4: Long-Term Planning
Tax laws change often, making long-term planning somewhat difficult for the average person. When you hire a CPA for your rental business, their whole job is to stay on top of any changes and use that knowledge to shift and tweak your financial strategy to reduce your tax liability. Also, if they already know your long-term financial goals, they can continuously work towards those goals by cluing you into various savings methods like IRAs or 401(k)s. If you don’t have a long-term goal yet, don’t worry. You can also use an accountant to sit down with you and figure out things like future investment planning and other long-term goals.
Additionally, if you are planning on having a succession plan, hiring a professional would be a big help. CPAs know how to set up your business for long-term, continued success even after you aren’t running your company. Talk to them about things like developing a buy-sell agreement, creating a trust, or transferring ownership of your company.
Any money you spend on hiring a CPA is more than worth it when you consider all the money they can save you in the long run. It’s always helpful to have another pair of eyes on you and your business’s future.