Archive for March 2017

Never Miss a Charitable Deduction Again

The Wealthy Accountant is turning into a vibrant community. Readers share their stories helping me do my job of teaching you, kind readers, how to live a joyful life without money problems. Readers also do things your favorite accountant cannot. For example, you would never ask me anything about IT. On my best days I am dangerous when given the access codes to computer files in my office. Karen, my office manager, has a standing order with the IT firm managing all our information to never give me a pass code or access to any secure files. It’s better that way.

When it comes to taxes, the story is different. I immerse myself in taxes the way a college guy plays video games. Most tax questions are front brain answers to me and minor research for most of the rest. (Every now and again someone throws me a curve requiring serious research, but we will not talk about those times to protect the ego of the innocent accountant in the room.) Then a reader sends me a link for a website that blows my mind. John Haldi did just that. Read More

How I Get Everything from Amazon for Free

And just think, you get $25 while Fido takes all the risk.

A few years ago Mrs. Accountant and I attended our first Camp Mustache in Seattle. It was my epiphany to the personal finance community. Sure, I had decades of experience under my belt and a history of writing on the subject, but never before did I have such a platform to spread the gospel.

It didn’t take long for people to know who I was. I have that effect on people. Many attendees were still working a job as they moved toward financial independence and early retirement. From the minute I arrived people knew I was a tax guy. People were interested in what other people did as they worked toward their financial goals.

It didn’t take long before Mrs. Accountant was asked what she did. She hesitated for the smallest fraction of time. It was a tell. But Mrs. Accountant is fast on her toes; you have to be if you live with a crazy accountant. She said, “I work in his office,” pointing to me. Of course, they pressed her for details on the kind of work she did in my office. It wasn’t pretty.

Later, when Mrs. Accountant and I were alone, I explained to her that this is one group you don’t have to bullshit. They get the early retirement thing. Somewhere back in her early 30s Mrs. Accountant checked out of the regulated work routine. She did what I was supposed to do.

Early retirement doesn’t mean ‘waiting for death’. Mrs. Accountant is very active. Sometimes it takes me upwards of an hour to catch her. I’m getting old. Read More

Applying Cost Segregation on a Tax Return

A few weeks ago I wrote about the massive tax benefits to investment property owners and business owners who also own commercial real estate using a cost segregation study. Some of you took me up on the offer and now are up for a significant tax reduction. Then the problems started. I didn’t anticipate the large number of tax professionals who didn’t know how to handle cost segregation studies on a tax return.

Before you call your tax preparer bad names, know most tax professionals rarely, if ever, see a cost segregation study in their office. When the rules changed a few years back I doubt 1 in 100 accountants handled their client tax returns correctly as it pertained to the repair regs and tangible property rules. The good news is the changes only required certain actions in the first year of accounting method changes. The bad news is that most tax professionals don’t know how to handle a cost segregation study on the actual tax return when a client comes in with one. Not to worry. Your favorite accountant will spill the beans on how to get it done right.  No picking on your accountant either. This is advanced tax planning and tax law can be miles from tax application at times.

Tax professionals will find this helpful; taxpayers should find value, too. Knowing of a tax advantage is only worth something if you can apply it. There are two major issues surrounding cost segregation studies: tracking the components/elements listed by the study and taking full advantage of the additional depreciation allowed.

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Tax Deductible, Low Cost, High Speed Internet You Can Take Anywhere

Internet service in the U.S. can be spotty for people living out in the boondocks, like your favorite accountant. Travelers need to hunt for an open Wi-Fi hotspot to stay in touch. Even worse, internet is frequently bundled with cable, forcing you to buy both or face wildly overpriced stand-alone internet service. They got you where they want you and your pocketbook is the victim. There has to be a better way. There is. And since I’m an accountant I want a big tax deduction too.

Internet service can cost $50 a month and more for high-speed broadband. (Please sit for this next part. I don’t want anyone falling and getting hurt.) How would you like fast internet (I’m talking 10 Mbps and higher with 10 people on at the same time) for $41.67 a month, paid annually? That works out to $500 per year. After the first year the cost drops to $400 per year or $33.33 per month. You can take this little gem with you on vacation, too. Your fast and low-cost internet is as small as a cell phone, has a 10 hour battery life and is very portable.

Okay, enough of the baiting. Time to get down to facts, get a tax deduction and details on obtaining this money-saving, tax deductible gem.

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Everybody is Talking about the New Forum on The Wealthy Accountant

The ever talented Kevin Clack is at it again. He put together an awesome forum here on The Wealthy Accountant. Now you can share ideas, get help and help others with the most pressing problems in your life as you move toward financial independence and beyond. I can’t answer every question or meet every demand, but as a team we can solve anything. Don’t be afraid of subjects outside the tax and accounting field. I talk tax in maybe a third of the posts at most for a reason. Taxes are a fun hobby to keep more money in your pocket. But the important stuff is learning to live right, to live the good life. That is where we are all most valuable. Money is great; friends better.

Finding the right professional is easier than ever now that you have a resource on your favorite blog. (I wonder why they let me in the place. Hmmm.) Have fun and be nice. Kevin and I will moderate the forum in these early days. As traffic grows I will ask for a volunteer or two to keep peace in the forum. You never know when a Hummer driving, spendaholic will show up. I trust you guys can take care of any unruly guests.

Stop Paying Your Quarterly Estimated Taxes!


When life is good the revenuers have a way of raining on the parade. A large year-end bonus, mutual fund distribution, or large year-end sale at your business can crimp your tax situation in more than one way. A quick call to your accountant gives you the answer: Make an estimated tax payment.

But making an estimated tax payment can hurt you! A quick payment at the end of the year to eliminate a tax liability still subjects you to an interest penalty in many cases. What you need is a quick and dirty guide on estimated tax payments to avoid nasty surprises, and even better, a way to game the system. (Who doesn’t like gaming the tax system? It’s this accountant’s favorite pastime.)

Our goal today is to pay as little as possible for as long as possible. There are two reasons for this: 1.) The longer you keep your money the longer it keeps working for you earning interest, and 2.) When you know you owe money you start thinking of ways to reduce the liability you have to eventually pay. I understand interest rates are very low as I write this. Still, keeping you money invested longer in your account is better than paying the government. If you are in the “digging out of debt” phase of your wealth building, keeping your money longer means less debt for longer. Since debt interest is significant, the later you pay the better for you. Read More

It’s a Small World

There is a ritual the accounting profession goes through every autumn. Eager tax professionals attend continuing education programs to hear all the latest tax law changes with interpretation. Large hotel venues fill with CPAs, enrolled agents, and even attorneys eager to learn. The room is filled with tax professionals all from within a hundred miles.

It amazes me how small the accounting profession is. Tax professionals are an even smaller crowd. A handful of conferences draw nearly the entire industry in each geographic region of the country. Smaller programs abound, but the annual refresher courses with tax law updates bring out the vast majority of the industry.

The same people attend year after year. We know each other. Sometimes personally, sometimes we are only aware of each other’s existence. Many times we talk and share ideas, talking taxes, clients and business management. There is respect in the air. We have something in common and feel comfortable together.  Some of us worked in the same office or worked together on a client’s file. Few members of the crowd feel we are competition.

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Why Trade Wars Never Work

An old nemesis has returned to the United States and other nations around the planet: protectionism. These leaders, and the voters who bought their snake oil, falsely believe protecting their borders by building walls, taxing imports, claiming currency manipulation and threatening to dissolve trade agreements will bring jobs back home. They’re wrong.

What these well-intentioned people forget are the lessons of history. They forget about The Tariff Act of 1930, also known as the Smoot-Hawley Tariff, the one piece of legislation that hastened, accelerated and prolonged The Great Depression. People forget about the jobs created that did not exist before due to current trade agreements and the lower prices consumers paid for goods and services.

The misguided perception that jobs will be created for nations with trade deficits by preventing trade does not work. And we are dangerously close to poking the sleeping giant again. Once a trade war begins it is hard to stop the cascading effects. The damage is swift and painful with few options available less painful. Best to leave the sleeping beast where she is. But politicians sometimes have an agenda we all pay the price for.

But why do trade barriers cause job loss? If the U.S. has a massive trade imbalance, curtailing imports should bring the jobs home to create those products, right? It’s not that simple. Today we will explore why curtailing trade destroys jobs in all countries involved. Open trade is beneficial to everyone.

The Truth of Trade Wars

Conventional wisdom says if you deny products from entering your market, local businesses will begin producing those products to meet demand. If conventional wisdom were correct, countries with trade surpluses would suffer the most in a trade war and countries with trade deficits would actually benefit from restricted trade.

But history is clear this is not what happens. Restricted trade hurts all economies involved. The 1930 tariff in the U.S. hurt domestic businesses and foreign. Foreign nations instituted their own trade barriers to protect their local markets. It didn’t work. Even countries with trade surpluses suffered economic decline and significant job losses. It took World War II to really kick production back into high gear. Unwinding the devastating trade barriers were too difficult for any nation to handle unilaterally. Voters demanded trade barriers decline in tandem or that the other guy go first. The fear open trade would do additional harm to local economies froze everyone in their tracks. The lesson is clear: It is easy to set up barriers through unfounded fear and nearly impossible to tear down the barriers once erected.

Open trade took decades to develop. Large numbers of trade agreements fueled economic growth, jobs, and lower prices over the preceding decades. Decades of work with all the accompanying advantages are now threatened. Decades of work can be undone in a few months or even days, requiring additional decades to return to previous levels.

What is so amazing is how Americans cheered President Regan when he said, “Mister Gorbachev, tear down that wall.” are the same people cheering as America plans to build its own wall on her southern border. The same political party screaming FREE TRADE 30 years ago is the same party screaming PROTECTIONISM today. It is a dangerous time.

#trade wars #tariffs #trade #freetrade #deficit | trade wars | free trade | tariffsWhy Restricted Trade Never Creates Jobs

The logic jobs will come home if trade is restricted is wrong-headed. The reason production went to another location is due to costs or other considerations. Restricted trade reduces competition, thus increasing prices as supply is reduced or eliminated.

Think of it this way. Suppose Japan was sick of paying for imported oil. They decide to slap a massive tariff on oil imports or restrict foreign oil entering their market. What would happen? Would the oil industry expand in Japan? It might. But Japan is oil poor and no amount of investment will bring much additional domestic oil to their market. Alternatives would be explored. Solar, wind and nuclear could make up for some of the losses.

Still, with any amount of investment, Japan would struggle to bring additional energy supply to their market to offset the trade barrier losses. Even if Japan reached energy parity it would takes year, or more likely, decades, to replace the losses and at significantly higher costs. All Japanese products would suffer a competitive disadvantage as higher input costs would make all Japanese products more costly. Japan, in our example, would put an end to the trade deficit they have in the oil trade, but at a massive cost to the local economy. Higher energy costs would reduce demand for goods domestically and for export. Jobs would be lost from the trade barrier even though they eliminated the huge oil trade imbalance.

I use Japan as an extreme example. It is easy to see how Japan would have a hard time offsetting self-imposed oil import restrictions. It is easy to see how jobs domestically would be lost by such a strategy.

The same applies in other industries in other nations. The idea restricting trade with Mexico would bolster the U.S. economy is idiotic. Don Quixote had more sanity when he chased windmills.

What will happen if the North American Trade Agreement were scraped and trade between the U.S. and Mexico curtailed? Production of automotive parts and accessories would be brought home. But the reasons (efficiencies) for outsourcing the production would be lost. Price would be higher and it would take time to build the production facilities so the production jobs would be at minimum temporarily lost. Higher prices would shrink demand. That is the simple law of supply and demand. Higher prices, even if consumers demand more, will reduce demand consumers can actually afford. Their pocketbook will run dry before the same number of items is purchases. Therefore, fewer jobs are neded.

Worse, Mexico will now have fewer jobs and fewer resources to buy goods and services from the U.S. Even with a trade imbalance, the country with the surplus will suffer job losses and economic decline! The market for all parties involved is smaller since they are limited to their local market which is smaller than the world market.

Fewer domestic jobs slows the economy. Fewer foreign jobs due to reduced trade will reduce international trade, which means less demand, which must lead to fewer jobs and a declining economy. The idea of a trade barrier to protect a domestic industry will do exactly the opposite.

Fair Trade

The problem starts when one country feels as if trade between them is unfair. Regardless the care taken to create a trade agreement, one side will have an advantage, even if slight. In most trade agreements there are multiple areas of trade that favor one side and other areas of trade favoring the other side. As time goes on and economies evolve, disparities can become acute.

Trade agreements work. This is not the time to scrap free trade policies; it is time to review trade agreements and make modest changes so all parties win. And trade is like that. Everyone can win! Yes, some industries will see job losses, but more jobs (usually better paying) will develop. Guarding your job like a mouse defending his stash is short-sighted and self-defeating.

Of course, you can always buy domestically produced goods and services whenever possible. It’s not always possible. But do you really want to do every darn thing yourself? I personally find no issue with Mexicans (in Mexico) producing auto parts or legal immigrants working in the U.S. I love doing many things myself, but I also have no problem with non-white middle aged men doing the work. My eye doctor is black and he is darn good at what he does. I’m not changing doctors due to his skin color. Are you nuts? Racism hurts the racist most of all.

We need to be careful our desire to erect borders is not really jealousy somebody else might be improving their life and their skin color, or religion, or gender, et cetera, et cetera is not the same as ours.

These are dangerous times. We need to tread carefully and think before we step. This is NOT an “us versus them” situation. Trade agreements do need adjustment. Immigration is an important issue for many countries. Planning is needed.

We can make our world, our nation and our local community a better place if we think as we move forward. Building walls are an unproductive use of resources. Regardless your nationality or political affiliation, President Regan was right, “. . . tear down that wall.”


More Wealth Building Resources

Personal Capital is an incredible tool to manage all your investments in one place. You can watch your net worth grow as you reach toward financial independence and beyond. Did I mention Personal Capital is free?

Medi-Share is a low cost way to manage health care costs. As health insurance premiums continue to sky rocket, there is an alternative preserving the wealth of families all over America. Here is my review of Medi-Share and additional resources to bring health care under control in your household.

PeerSteet is an alternative way to invest in the real estate market without the hassle of management. Investing in mortgages has never been easier. 7-12% historical APRs. Here is my review of PeerStreet.

QuickBooks is a daily part of life in my office. Managing a business requires accurate books without wasting time. Quickbooks is an excellent tool for managing your business, rental properties, side hustle and personal finances.

A cost segregation study can save $100,000 for income property owners. Here is my review of how cost segregations studies work and how to get one yourself.

Amazon is a good way to control costs by comparison shopping. The cost of a product includes travel to the store. When you start a shopping trip to Amazon here it also supports this blog. Thank you.