Over the years, and the myriad conversations with real estate investors of every level, the subject of tax prep and quality of tax preparation almost always comes up. Many of them who later became clients have remarked to me that once they hired a highly qualified, real estate oriented CPA, the difference was eye opening. Sometimes the difference was staggering. For example, many investors learned they’d literally left money on the table in previous years’ returns. In one extreme case, many moons ago, a CPA to which I’d referred a new client, amended previous returns which resulted in over $25,000 coming their way. Don’t do what I did upon hearing such stories as a young man. At first, I expected too much. I was wrong.

It’s about understanding the Internal Revenue Code — Just not ALL of it.

The problem isn’t that the pros these investors hired were incompetent. In fact, the vast majority were highly trained with impressive experience. The real hitch was that they’d employed a pro who wasn’t an expert in the IRC sections related to real estate investment. It’s really that basic. On one occasion I was ambushed by the accountant my new client ‘tried’ to replace. Turned out it was a conference call, as my clients were part of the conference.

Reader’s Digest version? When I got to the third question he couldn’t begin to answer, the phone call was abruptly concluded. It was incredibly awkward to say the least. My clients were unhappy that their ‘friend’ had put them in that position. It did, however, demonstrate conclusively that a change was indeed in order.

I’ll use the analogy popular with many. When our kids come down with a severe sore throat, we don’t take ‘em to our golf buddy, the proctologist. For obvious reasons we get the medical help a sore throat suggests. Most don’t real identify with how ginormous the Internal Revenue Code actually is. I’ve been forced to learn and study just the real estate sections of the code since 1977, and I still call Chuck Perkins about stuff all the time. Though knowing real estate investment-related tax law is a huge part of my business, I’ve never fooled myself into thinking I’m at the level of an experienced and well trained CPA. Every now and again I’m happy to report, I’ll say something to a CPA about a particular combination of strategies I’ve put together synergistically, and hear the reply, “Hhmm, that’s interesting. Gimme a case study if you would, please.” That doesn’t happen too often, and in fact it normally works the other way around. But when it does, it makes my day.

BawldGuy TakeAway: When real estate investors execute consistently inferior tax strategies, the predictably inferior results are often not the only consequence. Much of the time, possibly most of the the time, executing deficient tax strategies will end up deleting options from the taxpayer’s menu. It sounds a bit innocuous, but the real world results of subpar tax strategies can literally ruin an otherwise solid Plan.

Sure, my decades of experience have helped me spot and help investors avoid some very costly mistakes. Many of those mistakes were mere weeks or even days from becoming fact. There have been such instances that’ve provided me with a sense of immense satisfaction. It’s exciting to be able, in real time, to stop someone from accidentally incurring a five or even six figure tax bill. But even in those instances, I call the CPA for THEIR final verdict. The IRC is simply too big for anyone to think they’ve mastered it. Lord knows I’m not that guy.

Think you  might benefit from some Strategic Synergism employed in your Purposeful Plan for retirement? Gimme a call at 619 889-7100, and together we’ll map your way to a magnificently abundant retirement. If you’d prefer, jot me a note, or a long letter if you’d like, by clicking the Contact BawldGuy button up top. Have a good one.