Self-preparation may be sufficient when the structure is simple and the records are organized. Common indicators include one property or a small number of properties, activity limited to one state, no entities or a single entity, and no transactions that affect ownership or timing, such as a 1031 exchange or a real estate professional election.
In these cases, rental income and expenses are generally reported on Schedule E. The IRS outlines this reporting structure in its Schedule E guidance.
Many investors will prepare their returns without a CPA. Whether that approach is workable depends on familiarity with the forms and on maintaining records that support the filing.
There is no straight line. What counts as “simple” varies based on property count, entity count, and whether loss limitations or multi-state filing apply.
Differences in structure can lead to very different tax outcomes, even among similar investors, as discussed in our blog Why Two Real Estate Investors Can Owe Very Different Taxes.
Complexity often increases as properties, entities, or states are added. Other common drivers include depreciation across many assets, loss limitations or suspended losses, and transactions that affect basis or timing. Examples include 1031 exchanges, cost segregation studies, and real estate professional status.
Decisions you make early on affect later tax filings. How depreciation is set up, how basis is allocated between land and improvements, how entities are reported, and how losses are classified can affect later years. Inconsistent treatment often requires corrective action. Some of these areas also receive closer IRS scrutiny, including common rental deductions, which are discussed in Rental Deductions the IRS Most Frequently Reviews.
For that reason, many investors seek tax advice from accountants who specialize in real estate tax reporting as their structure or transaction volume increases.
The IRS addresses these areas in several places, including passive activity and loss limitations (Form 8582 and Publication 925), excess business loss limitations (Form 461), and like-kind exchanges (Form 8824).
[Source: https://www.irs.gov/pub/irs-pdf/i8582cr.pdf]
[Source: https://www.irs.gov/pub/irs-pdf/p925.pdf]
[Source: https://www.irs.gov/forms-pubs/about-form-461]
[Source: https://www.irs.gov/forms-pubs/about-form-8824]
These are common signals that a return has moved beyond Schedule E reporting.
When a CPA is involved, the work itself changes. Accountants who specialize in real estate tax reporting review prior returns for consistency, set up depreciation and basis correctly going forward, and align loss treatment with how the activity is reported year to year. They coordinate bookkeeping and tax reporting so income, expenses, and asset activity match the return.
Handled this way, returns are less likely to require amendments or later record reconstruction. The point is not a specific property or entity count, but rather what the accountant does when real estate activity exceeds a simple tax filing process.
Accolade Accounting serves real estate investors in the Atlanta area, handling tax preparation, bookkeeping, and related services for rental owners and otherinvestors. The scope of our work varies by client.
When it comes to reliable accounting services in Atlanta, GA, look no further than Accolade Accounting. With a highly experienced accountant team, we have assisted numerous businesses in developing and implementing effective accounting systems. If you need expert guidance, don’t hesitate to contact our certified public accountants, call 470-646-2663
Disclaimer: This article is for informational purposes only and is not intended as tax advice. Tax situations vary, and IRS rules can change. Always consult with a qualified tax professional regarding your specific circumstances.
