When dealing with a tax professional, you are putting a lot of trust in them. You will probably turn over tax documents, sensitive info, and social security numbers to a person you just met, so before you start putting the intimate details of your life into the hands of a stranger, here are some helpful tips to think about:
Are they licensed in Hawaii? - If you see someone advertising themselves as a CPA, check to see if their certification claim is valid by checking the Professional & Vocational Licensing page hosted by the Department of Commerce and Consumer Affairs (https://mypvl.dcca.hawaii.gov/public-license-search/) Click the "Business/Individual" tab and type in their name. If there are multiple results, choose the one with a license beginning with "CPA". First, make sure the "Status" is "Current, Valid, & In Good Standing". Also, under "Special Privilege", look for "Permit to Practice". State laws (HRS 466-7: https://cca.hawaii.gov/pvl/files/2013/08/HRS-466-Public-Accountancy.pdf) says, "A license and permit are required to actively engage in the practice of public accountancy." From my experience, about a third of people who advertise themselves as a CPA either don't have a license or a permit to practice, so check credentials carefully, and avoid anyone who doesn't hold both a license and permit to practice.
Where are they located? - Tax rules and regulations are different in every state. Some states don't even have an individual income tax filing requirement. And the rules are complicated in every single state that imposes an income tax on individuals, so it's next to impossible to have a thorough understanding of the tax codes across state lines. If someone who practices in a state other than Hawaii tries to claim expertise in Hawaii taxes, be very skeptical. Half of the challenge in filing any Hawaii tax form is gaining an understanding of our state's unique rules and regulations. But the other half is actually understanding the processing of returns within the Department of Tax. Where do the forms get sent? What are the expected timelines? Who are the people to call at the Department if you have a question or problem? This is the kind of experience that an out-of-state tax practitioner is unlikely to have. HARPTA is a Hawaii-specific withholding. Be very wary of out-of-state practitioners who claim to understand our state's unique tax rules and procedures.
What is the range of their practice? - Imagine you suffered from a bad knee and you needed a doctor to help you. You have two doctors to choose from: Doctor A is a dedicated orthopedic surgeon who works only on knees, and has performed hundreds of successful surgeries on knees. Doctor B does operate on knees sometimes, but she also does surgeries on feet, ankles, elbows and shoulders. Who would you choose as your surgeon? The reason for this analogy is that if you research the firms that advertise their HARPTA services, there's only one that focuses specifically on HARPTA and FIRPTA (the federal equivalent of HARPTA), and that's us. We don't accept any new income tax clients because our firm is dedicated specifically to this one very specific niche, and it's something we know better than any other tax firm. If you're looking for help with HARPTA, look at the tax services the firm offers. If they offer income tax services, they're likely to be extremely busy in March (corporate/partnership tax filing deadlines), April (individual tax filing deadlines, and October (extension filer due dates). If they offer payroll services, they'll be super busy every quarter filing employment taxes. We don't have those other tax filings to distract us.
What is their expertise in real estate tax, specifically? - There are so many areas of tax: not-for-profit organizations, manufacturing entities, trusts and estates, professional service firms, etc. that it's impossible to understand it all. I knew a very long time ago that specialization was the key to doing great work, so I decided to specialize in real estate tax. The first job I took after years of audit experience was the Controller position at the Honolulu Board of Realtors. I wrote and taught a six hour class to Realtors called "Residential Real Estate Tax Rules, 1031 Exchanges, and Foreign Investors" which I started to do in 2004 and continued teaching part-time until this 2021 In 2009 I opened a tax practice specializing in Realtors and their clients, and we've been filing HARPTA forms since then. When HARPTA increased from 5% up to 7.25% a few years ago, that part of our business started to grow and I made the decision that I was going to help my income tax clients find a new tax preparer to help them, and I was going to devote all of the focus to this specific niche. Be wary of tax professionals who try to do it all, because you're likely to find someone who has knowledge that may be broad, but is shallow. Jack of all trades, master of none.
Does the tax professional have the trust of their community? - Over the last 12 years, I've been asked to give over 70 presentations to real estate brokerages and Realtor regional groups. I've spoken to thousands of agents at Better Homes and Gardens, Locations, Coldwell Banker, Keller Williams, Berkshire Hathaway, Century 21, eXp Realty, Redfin, and a number of other organizations. It was a long, slow process of building trust and demonstrating competence that allowed me to do this. If you work with a Hawaii tax professional to help you with HARPTA, ask them to provide professional references - experienced Hawaii real estate agents who can vouch for their professionalism, knowledge and willingness to help.
We welcome any and all questions about HARPTA and FIRPTA, so if you are a Hawaii non-resident or military servicemember selling your home in Hawaii, please give us a call.