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small business

Early Retirement, Small Business

Starting a Successful Seasonal Tax Preparation Business

Readers of this blog are always looking for a side hustle. Seasonal tax preparation is a perfect fit for many early retirees. A small tax preparation business allows for an earlier retirement as the side income can easily be enough to live on for even a modestly frugal person. Another large reader demographic involves the accounting industry. There are plenty of blogs talking about tax issues, but few discuss the realities of starting, promoting and maintaining a tax practice.

I touch on the subject of practice building periodically, but my email folder is filled with requests for a more detailed post. A recent email from someone called Speed (I love it!) asked a series of questions that encompasses the bulk of practice management requests.  Much of what I discuss can be applied to most other business ideas with only slight modifications.

Rather than give a play-by-play on starting and managing a tax practice, I will take each of Speed’s questions and answer them. The reason for avoiding the play-by-play is because there are many ways of starting a successful business. I don’t want to give the illusion you are locked into one pattern to win. Life is rarely that neat.
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The Clock is Ticking

When my accounting practice went from a part-time seasonal pastime to a full-time firm I needed to bring in talented employees. Bev, a close friend of the family, had many years of experience working for other tax firms so I asked her to work for me. She accepted the offer.

Decades started to pile up. The joke around the office was Bev worked for my firm longer than I had. It wasn’t far from the truth. Bev was always a talented and faithful employee. She did good work and I could trust her.

But time counts, and keeps counting. Bev had something few people ever possess: talent and personality. Clients loved Bev and for good reason. She knew her stuff and made people around her feel comfortable. In my darkest hours she was there to hold the firm together. When my youngest daughter was born with birth defects she kept the office open while my mental wounds healed.

I have fond memories of those days. I also remember how it ended. Bev comes from a farming background; solid German stock. What I mean to say is she isn’t a petite girl. Wisconsin winters can be brutal. Arctic blasts made it difficult for her to breathe outside. I was worried about her. It was the excuse used to force her to retire.

But that was a lie. The truth is something was changing in Bev. It started slow and steadily advanced. She wasn’t as good at taxes as she once had been. Once she was great at taxes, now she was merely good and rapidly approaching mediocre. It is a terrible thing to say about someone with such an honorable and distinguished career.

I noticed the changes in Bev when she reached her mid-60s. It was small at first. Little things were missed. Sometimes the tax return was correct, but little things around the tax return were forgotten. A note was not updated; a basis statement not completed. And clients still loved Bev.

Each year got progressively worse until the work was unacceptable. I had to review all her work at a much higher level. Bev had to go. It was not an easy choice. She accepted her retirement and took to it like a pig takes to shit, but she was hurt at the time. She still brings her personal tax work in for us to prepare.

Is that Footsteps I Here?
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Deal Breakers for Investors and Business Owners

The most dreaded words a salesperson can here are, “I need to talk it over with my accountant.”

Accountants have a reputation for breaking deals. Behind the scenes we are actually called ‘Deal Breakers’ as a derogatory term. But the name isn’t fair. What we really are doing is protecting our clients.

The investor or business owner already thought of all the things that can go right. Accountants throw cold water on the deal by examining the numbers. They don’t always stand up to the hype.

And then there is my last blog post where I play a Sad Gus with robo-investing and Betterment. I think a lot of people really believed the tax benefits were much higher than they really are. There are real benefits, just not as many as some would have you believe.

That is where accountants shine. If you are going to serve your client you had better have the stomach for laying the truth on the line, even if the client doesn’t want to hear it.Continue reading

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Organize Your Life to Maximize Net Worth and Minimize Taxes

JD Roth

I had the awesome opportunity of meeting JD Roth! While not fast buddies, I look forward to meeting JD in the future. He is even better in real life than I imagined.

The following post is based on a presentation I gave at Camp Mustache SE in Gainesville, Florida on January 15, 2017.

There are several ways to convince someone to speak at your event. Stephen Baughier used the most sure-fire method ever. Stephen noticed I wrote a blog post back in August listing some people I would like to meet someday. He checked two people on the list and found JD Roth open to attending. He then called me and said, “Hey, Keith. I saw on your blog you wanted to meet JD Roth. Well, he is speaking at Camp Mustache SE in January. We would love to have you speak as well and you can meet a man you admire.” How could I say no?

Picking a topic of discussion is something I allow the event organizer to decide. If they have no preference I choose something currently exciting to me. In this instance Stephen thought something about organizing your stuff in preparation for meeting your accountant/tax guy would be a good choice.

I grimaced. My organizational skills are not legend. However, I do keep a tight fist on in financial organization.

Bookkeeping is not a topic which lends to filling an hour presentation. My first thought was to stand in front of the group and yell, “Shut up, and sit down!” while I stabbed my finger at them. “Enter your paperwork once a week and stop bitching about it.” Then I would grab a beer from the fridge and sit down. My first inclination had a slight flaw I thought might turn off the crowd and upset Stephen so I moved to plan B.Continue reading

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The Tax Loophole You Never Thought Of

al_capone_in_floridaWhen someone in the local area makes the news for embezzlement it is not a matter of if they will show up at my office, it is when they show up. The same scenario plays out every time. Someone gets caught with her fingers in the cookie jar (usually for gambling) and charges are filed. The district attorney prosecutes the case. (Embezzlement cases make the news and the district attorney is a politician who can’t help getting on her knees to earn some votes.)

Most embezzlement cases end with a conviction, or more often, a plea agreement. The accused is eager to make a deal that keeps her out of prison. The DA and judge soil themselves with the familiar sentencing template. The defense attorney has no choice but to recommend her client goes along with the deal to stay out of jail.

I see the same agreements again and again. The prosecutor demands a brutal repayment plan to the victim, the judge rubber stamps the deals and the accused jumps up screaming, “I’ll take it!”

Then the IRS letter arrives three weeks later and the house of cards is ready to fall. Ill gotten gains, you see, are still required to be reported as income and the IRS watches these financial crimes cases very closely. When the defendant loses or takes a knee the IRS swoops in for their share of the pickings. All that unreported income is now taxed with penalty and interest added. And no money to pay for it.


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Making the List

396px-a_list_of_the_names_of_all_the_adventurers_in_the_stock_of_the_honourable_the_east_india_company_the_12th_day_of_april_1684A reader of The Wealthy Accountant recently offered me lunch. I have a weakness when it comes to food. Offer me a free meal and I am virtually a prostitute.

I accepted the offer of lunch for three reasons: 1. He is a local reader; 2. He asked nicely; 3. He wanted to discuss quitting his current job and starting a bookkeeping business as a side hustle. The last point is what got me. A local guy who wants to do bookkeeping is also a guy I might build a strategic alliance with to handle some of my bookkeeping work.

As we talked I shared stories like I do here. Eventually I got to a story I like to tell a lot, but failed to mention on this blog so far. I am not sure where to fit it in, but the story is so powerful it needs sharing. So I decided a story about making a list would be perfect for the Christmas holiday.


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20% is Enough Effort

8632234386_56ed10483b_zOver a hundred years ago an Italian economist made a discovery while in his garden. Vilfredo Pareto noticed on a pleasant 1906 afternoon that 20% of the pea pods in his garden produced 80% of his pea production. His interest piqued, Pareto wanted to know if this 80/20 ratio applied to other areas, including business. In every place he looked the ratio held. 80% of results came from 20% of the inputs.

Today we call this the Pareto Principle or the 80/20 Principle. The ratio isn’t perfect, but more of an approximation, somewhere around 4 to 1 or 5 to 1. And it happens everywhere, not just in business or an Italian’s garden! Think about it. You wear 20% of your clothes 80% of the time; use 20% of your home or apartment 80% of the time; eat the same food 80% of the time.

Illinois Tool Works is a large public corporation that has turned the 80/20 Principle into a profitable business plan. ITW buys smaller competitors on a regular basis and then sends in their teams to ramp up profitability by firing clients! Sort of. The 80/20 Principle says 80% of profits come from 20% of clients. Yup. It does. I ran the numbers in my own office. A small list of my clients brings in the bulk of profits. And ITW capitalizes on this fact to improve profitability in companies they purchase.

Think of your personal life. You spend 80% of your waking hours doing the same 20% of activities. If a normal day includes 20 activities, about 80% of the time will be spent on four of those activities.


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Get Paid to Take a Vacation

frog-897418_960_720Mrs. Accountant and I recently went on a business trip. Like most business trips we invested time, but no money. The trip was better than free; we came home with more money than we started with and did nothing crazy like house-sitting or couch surfing. We enjoyed meals at excellent restaurants and slept in 3 and 4 star hotels every night. We drove in this instance because we like seeing the sites as we go. In all it took three weeks to complete the business trip. It was a great time for Mrs. Accountant and me to spend quality time together without interruption.

There are a million ways to travel for free. Many people in early retirement dream of doing so. But what about the rest of us? You might not be retired. And then there is the unique breed of animal called the business owner. I fall into the last group.

Traveling is something I avoid. Life on the road is not something I look forward to. As I get older I find myself on the road more and more for longer periods of time for business. Now you know why Mrs. Accountant works for my company.

The reason for the trip is not important. What is important is how I accomplished the feat of three weeks of travel and got paid to do so. Actually, three entities paid for our trip: the organization I was asked to speak for, the bank, and the government. The government paid the largest portion of the bill and it was all legal.

Speaking engagements are the biggest reason for time away from home now. Training conferences are second. Many conferences extend over a long weekend, four days in this instance. The four days at the conference were covered: meals and lodging. Personal entertainment and travel were my own.


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