Rental Property Tax Return Preparation
By Jason Watson, CPA
Posted Saturday, September 28, 2024
We get asked often, “What do you need to prepare my rental property tax returns?” Or, “what should I be recording or keeping track of throughout the year?” We created a template called the Simplified Rental Operations (SRO) Worksheet. While spreadsheets and templates are only meaningful to the spreadsheet designer, you might find value and some helpful hints.
Here is the link to our SRO-
Here is also a checklist of all the things we need beyond revenue and expenses for the preparation of your individual tax returns (Form 1040) including your Schedule E rental property activities-
This assumes you are reporting your rental properties on your individual tax returns. If you are leveraging a multi-member LLC taxed as a partnership where your activities are reported on Form 8825, here is our business entity tax return checklist-
Even if you don’t use WCG CPAs & Advisors, you might find these tools helpful.
WCG Fee Structure
We pride ourselves on being transparent and having a simple fee structure. Most business services and tax returns will fit into the fees described below. Sure, there’s always the outlier or the unusual situation, but the following information gives you an idea of our philosophy. We only have time on this earth to sell, and we cannot inventory it. Our fees are an attempt to coincide with expected time spent and the value received.
Individual Tax Prep
Our starting fee is $800 for standalone jointly-filed individual tax returns (Form 1040). Most are $800 to $1,000. However, we also have FasTrac 1040 at $525 and a fee range of $250 to $400 for children and students depending on your tax footprint.
Small Biz, LLCs, Rentals Tax Prep
Small businesses are commonly reported on your individual tax return on Schedule C. Rental activities are reported on Schedule E. Typical fee range is $800 to $1,000 for those with 1-2 rentals or one side business.
Some things to keep in mind-
- At times we have a rental setup fee ($150 to $500) when we need to bring in prior depreciation and build out asset listings. We try to avoid nickels and dimes, but at the same time maintaining this history especially with 1031 like-kind exchanges is important.
- Cost segregation studies require additional asset entries with our typical set up fee being $300 to $500 depending on complexity.
- Additional state tax returns range from $150 to $250. For example, you live in Colorado and have a rental property in California. You will need to file a California non-resident tax return even if the rental loses money. You have an income-generating asset in their state, and they have the right to inspect your books and records to ensure your loss is truly a loss.
Partnerships, Real Estate Hold Co
Our starting fee is $1,500 for partnership (Form 1065) and corporate tax returns (Form 1120 and 1120S) depending on the quality of your accounting records (most are $1,500 to $1,800).
However, for rental property holding companies filing a partnership tax return, our fees are reduced to $1,000 to $1,200.
Business Formation
We can create a business or a real estate holding company for $625 plus the state filing fees. Includes Articles and employer identification number (EIN). Please visit our most current fee structure.
Tax Patrol Services
We also have Tax Patrol! This is a wonderful tax service for those who don’t need all the business advisory bells and whistles above, but from time to time want some love from an experienced tax consultant and business advisor. Have a quick tax question? Need to know the depreciation rules as you buy that new car? Wondering what your April tax bill is going to be in August? Tax Patrol is like ski patrol… you might not use it, but you sleep better knowing you have it.
| A la Carte* | Keystone | Copper | Breck | |
| Individual Tax Return Prep (Form 1040, joint filing) | $800 starting | |||
| Business Entity Tax Return Prep (Form 1065, 1120, 1120S) | $1,500 starting | |||
| Tax Planning, Tax Projection Worksheets [more] | $350 to $500 | Streamlined | Pro-Active* | Pro-Active* |
| Estimated Tax Payments Calcs | Included | |||
| Tax Resolution, Audit Defense [more] | NA | Add-On | Add-On | Add-On |
| Complimentary Quick Chats (CQC) | $250 to $500 | Routine | Routine | Routine |
| Annual Fee* | $1,500 | $2,400 | $3,360 | |
| Paid Monthly | $125 | $200 | $280 | |
| (prorated based on onboarding date) | ||||
*The Asterisk
Yeah, we all dislike the little asterisk. The gotcha! The fine print! Well, here is one of those situations. Pro-active and Pro-active Biz Tax Planning are different. Pro-active tax planning is limited (for individuals and households) and does not include business-entity tax planning and payments (California’s Franchise Tax, New Jersey’s BAIT, Portland’s overall madness, NYC, etc.), pass-through entity tax (PTET) calculations and payments, among other things. Not every business entity needs separate tax planning! Texas, No. California, Yes. Please see our Tax Planning Services page and Master Service Agreement for more information.
Our Telluride Business Advisory plan includes the pro-active business tax planning plus interfacing with lenders, attorneys and financial planners.
Afraid of bait and switch? Yeah, we think that stinks too. Our annual fee for Vail, as an example, is $4,500. What can make this fee go up? The most prominent reason is additional state tax returns (taxing jurisdictions). However, we will detail that in your proposal. Please see our individual and business entity tax return preparation pages for more information.
Quarterly financial statements analysis is an add-on service, however it is included automatically if you use our accounting services.
Investor Patrol Services
We also have Investor Patrol which is like Tax Patrol, but with a Monopoly flair. This is a valuable service to our rental property owners and real estate investors. Tax return preparation aside, investor patrol provides access and comfort including pro-active tax planning and routine consultation on rental property tax deductions, material participation, short-term rental loophole, real estate professional status, repairs versus improvements, and other common real estate questions.
| A la Carte* | Houses | Hotels | Monopoly | |
| Individual Tax Return Prep (Form 1040, joint filing) | $800 to $1,000 | |||
| Real Estate Investor Activity (tax footprint) | Starting | Building | Extensive | |
| Number of Rental Properties | $100 to $150 | 1-3 | 4-6 | A Gaggle |
| Number of State Tax Returns | $150 to $250 | 1-2 | 3-4 | Lots |
| Tax Planning, Tax Projection Worksheets | $350 to $800 | Pro-Active | Pro-Active | Advanced |
| Estimated Tax Payments Calcs | Included | |||
| IRS Audit Defense | NA | |||
| Complimentary Quick Chats (CQC) | $250 to $500 | Routine | Routine | Routine |
| Real Estate HoldCo Tax Return (Form 1065) | $1,000 to $1,200 | $750 add-on | $1,000 add-on | Quote |
| Annual Fee | $2,040 | $2,520 | Custom | |
| Paid Monthly | $170 | $210 | Custom | |
| (prorated based on onboarding date) | ||||
Investor Patrol Fine Print
With our Investor Patrol Services, everyone is a snowflake. Each real estate deal is unique, right? Each real estate investor is also unique. The above Investor Patrol Service plans are our attempt to give you an idea of the value proposition. Here are some pre-launch things we need to sort through-
Rental Setup
We might have a rental setup fee depending on the complexity (such as 1031 like kind exchange history) and number of depreciating assets (some rental property owners list everything under the sun, even a $25 shovel).
State Tax Returns
Our fees include state tax returns as detailed. Even if your real estate activities result in a tax loss, we must file a tax return since the taxing jurisdiction (fancy lingo for government) has the right to audit your books and records.
Partnership Holding Company
These fees assume a 1040 tax return filing. At times, reporting your rental activities on a partnership tax return (Form 1065) might be a good idea to lower audit rate risk and mechanically show at-risk basis in the assets. Should a partnership exist such as a multi-member LLC owning rental properties that would be an add-on fee as shown above. (see our fee page for partnerships).
Cost Segregation
If you have a cost segregation study completed on a rental property, there is a one-time fee of $250 to $500 depending on complexity. There is time spent booking the new 5, 7 and 15-year assets plus reviewing bonus and possibly Section 179 eligibility. It takes a bit of time and finesse.
Short-Term Rental
Short-term rental activities including the STR loophole are mostly included in these fees above. We say “mostly included” because it depends on the quality of your accounting records and overall tax readiness. If you are one hot mess or if we need to do a lot of cleanup then we might have an additional fee. We truly want to avoid a bunch of add-on fees and other nonsense.
Other Out of Scope Stuff
Our approach to starting off this relationship with you is to comprehensively understand your needs and objectives, and then design a malleable system as needed. Additionally, the following activities are considered out of scope and might incur a separate fee-
- handling IRS or state notices for matters that WCG was not originally engaged to perform,
- verification letters for mortgage loans,
- postage and delivery beyond simple letters,
- financial planning or investment advice,
- QuickBooks, QuickStart or other accounting software setup or training,
- annual corporate governance such as filings, resolutions and meetings,
- reviewing legal documents such as Operating Agreements, Shareholder Agreements, contracts, etc.,
- extensive coordination with attorneys and financial advisors, and
If we believe the requested service is outside of scope and not included in the Investor Patrol Services, we will have that awkward conversation with you ahead of time so an agreement can be reached. We will never do work and then bill you without an estimate of time from us and approval from you. In other words… ask away! It is up to us to pump the brakes with a “umm… yeah… can we chat about what’s involved for a bit first?”
Talk to a Real Estate CPA About Your Rental Property
Please use the form below to tell us a little about yourself, and what you have going on with your investments and wealth-building objectives. WCG CPAs & Advisors are real estate CPAs, tax strategists and rental property consultants, and we look forward to talking to you!