How to choose a cost segregation firm

Four areas separate a study you can rely on from one you will have to defend on your own: the engineers, the method, the audit support and the deliverable. Below are the questions worth asking any firm in each area, followed by how we answer them.

Engineer qualifications

Questions to ask

• Who prepares the estimate before I engage, and how deep does that review go?
• Who performs the study, and what experience do they have with my property type?
• How are engineers trained for commercial work, and who is accountable for the final report?
• What credentials does the engineering team hold?

How we answer

Commercial estimates are prepared by Engineering and held to a deeper investigation than other firms. The engineering training program is very selective for commercial projects, the engineering team has completed 900+ commercial property studies, and every study is signed off by the Head of Engineering. Engineering has completed studies for every commercial property type, from hotels to lumber mills, with deep experience in RV parks, mobile home parks, offices, manufacturing plants, hotels, motels, large multifamily, retail centers, self-storage, gas stations and medical offices.

Methodology

Questions to ask

• Which methodology does the study use, and how does it compare with the approaches described in the IRS Cost Segregation Audit Technique Guide?
• Are costs taken from my actual records where they exist, such as the closing statement, plans and pay applications?
• Is the property toured, and how are components priced where records do not exist?
• Can every number in the report be traced back to a document, a photograph or a measured quantity?
• For a production facility, can the firm separate qualified production property under §168(n) from the rest of the building?

How we answer

We deliver engineered studies only. Each one is built from your own documents, a tour of the property with Virtual or Onsite Tour options, and component-level classification that ties every allocation to its support. Documents arrive through a secure upload, and NDAs are available for sensitive projects. For manufacturers and other production facilities, we are one of the only firms in the USA that can do a Production Property Study under §168(n). Why engineered studies are the only type to use.

Audit support

Questions to ask

• Is audit defense included, or billed separately when it is needed?
• How long does it last, and does it follow the property or only the tax year?
• Does it cover the appeals level, or only the first information request?
• Who answers questions about the workpapers, the photos and the method?
• What happens if the error turns out to be the firm's?

How we answer

Lifetime audit defense is included with every study, for the taxpayer and the property while under their ownership. It covers responding to IRS information requests about the study at the agent and appeals level, answering for workpapers, photos and methodology questions, and correcting the report if the IRS finds an error on our side. A money-back guarantee also applies; the details are in our Terms of Service.

Deliverables

Questions to ask

• What exactly will I receive, and can I see a sample before I buy?
• Will the report stand on its own, with the method, the component detail and the photographs?
• Will the firm work directly with my CPA?
• On a look-back study, who prepares Form 3115?

How we answer

Sample reports are available on request, so you and your CPA can see the deliverable before you engage. Every report is signed off by the Head of Engineering. On a look-back study, your CPA files and signs Form 3115 and adds the taxpayer information, and we prepare everything else: the narrative, the form, the calculations and the supporting schedules. We work directly with your CPA throughout, and we have deep experience delivering these for large look-back study portfolios.

Pricing and timeline

Questions to ask

• Is the fee fixed, and when will I see it in writing?
• How long does a study take from engagement to final report, and what drives that timeline?

How we answer

Fixed-fee pricing, with a written proposal in 24 to 48 hours. Typical turnaround is 3 to 5 weeks, including the site tour, information collection and study creation, given good collaboration. The fastest studies are the ones where the closing statement, plans, pay applications, photos and prior returns arrive early.

Questions specific to commercial property

Commercial assets raise questions that a residential-focused process may never have to answer. A firm that studies commercial property routinely should be able to answer these without hesitation:

• How do you treat site work on a property where paving, utilities and drainage are a large share of the basis, such as an industrial site, a retail center or an RV park?
• How do you decide whether electrical, plumbing or mechanical capacity serves the building or serves equipment and a process?
• On a mixed-use building, how do you split the structure between residential and nonresidential use before the component analysis begins?
• On a renovation, how do you identify qualified improvement property and value the components that were removed?
• For a manufacturer, how do you separate qualified production property from offices, parking and the other areas that §168(n) excludes?

Our answers come from Engineering, which has completed studies for every commercial property type, from hotels to lumber mills. If a firm cannot walk you through these questions on your own property type, that tells you something about the study you would receive.

Where to start

If you are comparing firms on a specific property, the most useful thing you can do is put the same property in front of each of them. Request a proposal and you will have an engineering-prepared estimate and our fixed fee in writing within 24 to 48 hours. If you are a CPA or advisor evaluating a partner for your clients, start with our page for CPA firms.