5 Questions to Ask Before You Engage Any Cost Seg Firm (Including Ours)
If you are shopping for a cost segregation study, you are likely hearing a lot of promises. "Maximum refund." "Gold standard." "Full audit support." But here is the reality: Cost segregation is not a commodity product. It is a technical engineering exercise backed by tax law. If you hire the wrong firm, you risk triggering an IRS audit with no one qualified to back you up. We are USTAGI. We believe the only way to earn your business is through transparency. So, before you sign a contract with any firm (including ours), we challenge you to ask these seven specific questions.
1. Who will perform the physical analysis?
Some firms have salespeople posing as engineers. Others outsource the actual engineering work overseas or to third-party subcontractors who have never heard of your property.
The Red Flag: "We have software that handles the heavy lifting."
The USTAGIStandard: We assign a qualified engineer who understands local building codes and construction methods. They perform the site visit (physical or virtual) and remain your point of contact throughout the process.
2. What is your methodology for separating personal property from real property?
The IRS doesn't care about your "best guess." They want to see a clear engineering approach (specifically the "Cost Approach" or "Engineering Method"). If a firm uses a pure "Residual Method" or relies on software estimates, your study is a target.
The Red Flag: "We use an industry-standard model that the IRS accepts."
The USTAGIStandard: We use a detailed, engineering-based approach, breaking down costs line-by-line and anchoring every classification to IRS guidelines and legal precedent.
3. Will you provide a fully customized engineering report, or just a summary?
If the IRS audits you, the only thing standing between you and a disallowed deduction is the quality of your report. A one-page summary is useless in court.
The Red Flag: A 10-page PDF with generic asset lists.
The USTAGIStandard: A comprehensive, audit-ready report that includes detailed cost breakdowns, photos, legal citations, and a clear narrative explaining why each asset is classified a specific way.
4. Can you show me a sample of your audit defense credentials?
As we discussed in our previous post, "Audit Support" just hands you a document and answers a few questions. "Audit Defense" means they fight for you whenever you need it.
The Red Flag: "We’ve never been challenged before."
The USTAGIStandard: We don't just hand you the file and wish you luck. We stand with you. Ask to see our team’s qualifications, we have professionals experienced in dealing with IRS inquiries directly.
5. How do you handle 'look-back' studies for properties we bought years ago?
One of the biggest benefits of cost segregation is the ability to catch up on missed depreciation (Section 481(a) adjustment) without amending past tax returns. Not all firms structure this correctly.
The Red Flag: "We'll just amend your last three years of returns."
The USTAGI Standard: We properly execute a "change in accounting method" (Form 3115), allowing you to claim the entire missed depreciation in a single year without the administrative headache of amending past returns.
The Bottom Line
You should be skeptical of anyone promising a "guaranteed" tax refund without doing the legwork. Cost segregation is about math, engineering, and law. At USTAGI, we welcome your scrutiny. Ask us these questions. If we aren't the right fit for your specific property type or timeline, we will tell you. Ready to put us to the test? Contact us today for a free, no-obligation cost segregation analysis.