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Lifestyle, Small Business, Taxes and Investing

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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Increase Blog Traffic Faster Than Naked Kim Kardashian Pictures

blog-1027861_960_720By this time I am mildly qualified to intelligently explain how to increase blog traffic. My online writing goes back to the AOL days in the 90s and grew over the years. The Wealthy Accountant is my most popular blog, but I have two fantasy fiction blogs pulling around 4 million pageviews a year, an astounding number for online fiction. The Wealthy Accountant numbers are lower, but the traffic is higher quality; in other words, Google, advertisers, and readers like it more. This blog now boasts 40,000 page views per month with a strong growing trend line. There are a few tricks I learned over the years to accelerate blog traffic. I am no expert on the subject and there are many with greater skills at increasing blog traffic. My experiences, however, should provide a solid framework to take a blog from zero to a million pageviews in a year.

The first year is always the hardest. Unless you have a name people know growing traffic is done the old fashioned way. It takes work and time. My three steps to building a blog are:

  • First, create content
  • Then, build traffic
  • Then monetize

Jumping the gun on any step can harm traffic. You need content before building traffic; you need traffic before monetizing. Growing quality content is the hardest part for many people. Writing is supposed to be easy. You just sit in a chair and type. And bleed.


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Treat Taxes Like a Game

staunton_chess_setLife in the accounting business can be difficult at times. Clients are as close to friends as you can get without actually being friends. You know all the details of their private lives. I know a divorce is imminent many times before the spouse does. I get details on illnesses in the family. I have to. Part of the tax preparation process is to know your client. When you ask about medical expenses you get the details too. In Wisconsin we have a deduction for certain private school tuition. When I ask about the kids I get the low-down on little Billy. And I don’t mind one bit. I care about my clients so I listen and interact. The line between client and friend is thin indeed.

That is why it bothers me when I can’t communicate a message to a client. Try as I may, some clients could care less about their taxes. They are willing to overpay their taxes to get out of all the reporting. They don’t understand the amount of money left on the table.

A few weeks ago I emailed a client reminding them to verify their retirement contributions and to provide a log for business miles and business overnight stays. To be honest, I didn’t expect a response. They are awesome clients and I love’em to death, but they just don’t engage at the level I would like and it bothers me because it is costing them dearly.


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Year-End Tax Planning 2016




imagesThe end of the year is fast approaching. Time is running out to modify your finances to optimize tax savings. I will run down the more common ideas to reduce taxes. Keep in mind this is not a comprehensive review. Your facts and circumstances will determine what is best for you. Use this review as a guide to reduce your tax liability.

Investments

Most readers here have significant investments so we will start there. All adjustments to investments should have an economic reason beyond taxes. Reducing taxes is the goal, but the increased costs of selling can offset a portion or all of the benefit.

If you are not using an automatic tax loss harvesting program such as Betterment, now is the time to review your non-qualified (non retirement) portfolio. Mutual funds and stocks with losses can reduce the capital gains distributions of other mutual funds or ETFs. You can also report up to a $3,000 loss against other income on your federal return. Your state taxes will differ. In Wisconsin, for example, the loss against other income is limited to $500.Continue reading

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