How Do You Find a Tax Professional for Your Rental Property?

Consider an enrolled agent or a certified public accountant (CPA) who prepares rental returns every year. Both can prepare your return and represent you before the IRS in any matter, including audits, collections, and appeals. A tax attorney is the better call when you may face fraud penalties or criminal exposure. Before you hire anyone, confirm the credential in the IRS preparer directory or with the state licensing board, and ask how they handle depreciation, passive losses, short-term rentals, and property sales.

Which tax professional fits a landlord?

Anyone paid to prepare a federal return must have a Preparer Tax Identification Number (PTIN) from the IRS. Beyond that, the IRS recognizes several levels of credential, and they differ most in what happens if your return is examined.

A credential tells you who may represent you, not how many rental returns the person prepares, so ask the questions below whatever the credential.

How do you verify a tax professional's credentials?

1. Search the IRS directory. The IRS Directory of Federal Tax Return Preparers with Credentials and Select Qualifications, at irs.treasury.gov/rpo/rpo.jsf, lists preparers with an active PTIN who are EAs, CPAs, attorneys, enrolled retirement plan agents, enrolled actuaries, or Annual Filing Season Program participants. It is updated weekly, but changes can take up to four weeks to appear. Some qualified preparers opt out, so a missing name is not proof of anything; verify by other means below.
2. Check a CPA license. CPAverify, run by the National Association of State Boards of Accountancy, shows license status, issue dates, and disciplinary actions. As of 2021, 54 of the 55 state and territorial boards took part. You can also search your state board of accountancy directly.
3. Check an enrolled agent. Submit the IRS Office of Enrollment contact form and choose the option to request information about an enrolled agent. The office aims to answer within 72 hours.
4. Check an attorney with the lawyer search on your state bar's website.
5. Check the preparer's history. IRS Topic 254 suggests asking the local Better Business Bureau about complaints.

Rental questions to ask before you hire

Good answers are specific and name the form or rule involved.

• Depreciation. "Will you build and carry forward a depreciation schedule for each property, with the land separated from the building and the building's cost deducted over 27.5 years?" Also ask how they would handle depreciation missed in earlier years. Publication 527 says you must reduce your basis (generally your purchase cost adjusted for items such as improvements and depreciation) by the full depreciation you could have deducted, even in years you did not claim it, so missed years still raise your taxable gain at sale.
• Passive losses. "How will you apply the passive activity rules to my rental losses?" Under Publication 925, if you actively take part in managing the rental, up to $25,000 of rental losses can offset other income. That allowance shrinks by 50 cents for each dollar of modified adjusted gross income (income calculated for this limit, with deductions such as rental losses and IRA contributions added back) over $100,000 and is gone at $150,000. If you are married filing separately and lived apart from your spouse all year, the maximum allowance is $12,500, shrinking by 50 cents per dollar over $50,000 and reaching zero at $75,000 of modified adjusted gross income. If you file separately and lived together at any time during the year, you get no special allowance. See what happens when rental expenses exceed income.
• Short-term rentals. "Have you prepared returns for short-term rentals?" When the average guest stay is 7 days or less, Publication 925 does not treat the activity as a rental activity, which changes how losses are handled. Hosts who provide hotel-like services, such as regular cleaning during a stay, may report on Schedule C and owe self-employment tax under Publication 527.
• Sales and exchanges. "Can you estimate the tax if I sell this property, and have you handled a like-kind exchange?" Depreciation lowers your basis, which raises the taxable gain when you sell, and an exchange has its own reporting rules.
• Ownership changes. If you are thinking about moving a rental into an LLC, ask about the tax result before you sign a deed. See the tax consequences of transferring property to an LLC.
• Other states. If a rental sits in a state where you do not live, ask whether they file that state's return.

Fees and warning signs

IRS Topic 254 lists what to avoid and what to expect:

• Avoid a fee based on a percentage of your refund, and any preparer who offers to deposit part of your refund into their own account or promises a larger refund than others can get.
• The preparer must sign the return and enter their PTIN. Avoid anyone who refuses. You may sign and submit a paper return yourself if the paid preparer has also signed it and included their PTIN.
• Never sign a blank return. Review the finished return before you sign, because you are responsible for what it says.
• Expect questions. A careful preparer asks to see your records and receipts and asks about your income and deductions.
• Ask about year-round availability. You want someone who will still answer if the IRS sends a notice about the return months or years later.

Ask for the fee structure in writing before work starts: a flat fee per return, a fee per property, or an hourly rate for notices and audits.

What to give your tax professional

Bring last year's return, the depreciation schedule for each property, closing statements, improvement invoices, and your income and expense totals sorted by Schedule E line. See what rental records to keep for the full list.

If you want the professional to deal with the IRS for you, sign Form 2848. It authorizes a person who is eligible to practice before the IRS, such as an EA, CPA, or attorney, to represent you and to receive your confidential tax information. If an earlier year may have unreported rent, say so at the first meeting; see the difference between a correctable error and tax evasion. For the deductions a preparer should be claiming on your return, see rental expenses you can deduct as a landlord.