Two major tax increases are about to crush middle class Americans. The first tax increase has already been passed into law and will soon go into effect. The second massive tax increase is more sinister. The amount of the increase has yet to be determined, but we can get a good idea how much will be pried from your wallet if you don’t take steps to defend your wealth.

The Tax Cuts and Jobs Act of 2017 (TCJA) lowered taxes for the vast majority of individuals and regular corporations. There were a few losers. Taxpayers with high state and local taxes (SALT) found their deductions declining faster than rates fell causing a sharp pain behind their left eye on April 15th.

Other taxpayers feeling the pain of a tax increase include truckers, sales people, artists and others with work related expenses. Unreimbursed employee business expenses were eliminated. Truckers (and others) no longer can deduct their work expenses. The TCJA hurt a large number of hard working Americans. Even the mortgage interest deduction was slightly curtailed. Not as many felt that sting, but all the same, the TCJA was uneven in reducing taxpayer liabilities.

Regular corporations saw the biggest benefit. Corporations now have a flat 21% tax rate. Except for corporations with less than $50,000 in profits, this was a tax cut.

Small business owners fared well, too. The qualified business income deduction (QBID) lopped off 20% of profits from the taxman. Income property owners also benefited from QBID, but with a different formula. 

Here is where is turns ugly. Regular corporations saw a permanent cut in rates; individual tax cuts were only temporary. Truckers might find the reversion back to 2017 tax rules in 2025 a reprieve. The bulk of taxpayers, however, will see a serious tax increase. 

 

Planning for the Inevitable

Rumors have surfaced that a Tax Cut 2.0 is in the works where the temporary tax break for individuals would be extended another 10 years to 2035. The treasury will suffer a $1.4 trillion reduction in tax collections over the time period involved if this is the case. Regardless, the proposal will not pass prior to the election and once the election is past, promises are less likely to be kept.

I place the odds of taxes reverting to 2017 laws at 80%. That assumes taxes are not hiked earlier after the election when the new Congress sits with whomever wins the White House. The odds the temporary tax cuts for individuals get extended to 2035 is less likely at 20%. More on this in the second tax increase discussion below.

Several tax planning opportunities exist under the temporary rules. The amount of long-term capital gains taxed at 0% is much higher right now. Those affected by the SALT limitations need to throw out old tax theory until rules revert back to before the TCJA. Tax brackets are lower and extend to higher income levels. These and other changes from the TCJA mean you must be multi-year tax planning or you will seriously overpay your taxes.

Here are some of the things you need to consider when reviewing your long-term financial planning as it involves taxes:

  • Forget old rules of accelerating deductions and delaying income. It doesn’t work for individuals in most cases anymore. Preserve those deductions as long as possible in anticipation of the old rules kicking back in where they have more value.
  • Business owners need to forget the above rule as well. QBID has turned that philosophy on its head! Business owners — and to a lesser extent, income property owners — want to accelerate income and delay deductions, especially when the end of the temporary tax cuts approaches. Business owners get up to a 20% non-cash deduction on profits under current tax law. 
  • Truckers, musicians, sales people and anyone else with large amounts of unreimbursed employee business expenses needs to think of ways to delay some of those expenses. I understand it is hard to delay many of these expenses and here is an alternative. You must always be aware of any costs you can defer. If you can slip it far enough into the future the expense might reduce future taxes, whereas, they have no current tax benefit.
  • Pay property taxes as late as possible without incurring a late fee. Preserve as many SALT deductions as you can. At some point these expenses will potentially regain their larger deductibility. Pay at least $10,000 of SALT since that amount is deductible if you normally itemize. Otherwise you want to push out as many SALT expenses as possible for as long as you can. Once again, the idea is to preserve as many deductions as possible for when they could regain deductibility.
  • The 0% tax bracket for long-term capital gains is very high at this time. Tax loss harvesting might be the worst idea at this time. Tax gain harvesting has some powerful incentives while the TCJA remains in effect for individual taxpayers. Locking in gains at 0% or even 15% could amount to serious tax savings.
  • Be sure to consider the other effects your actions will have on your tax picture. While you might enjoy a 15% long-term capital gains rate with tax gain harvesting, you also need to consider the Net Investment Income Tax issues if you take this to higher income levels.
  • Lower income taxpayers also need to consider Social Security benefits. Accelerating income might increase the amount of Social Security benefits subject to tax.

There are many additional tax planning options under the TCJA. I encourage a serious conversation with a qualified tax professional to maximize your benefits. (Wait until after tax season before jumping every tax professional you know so they can get their tax season work completed in a timely fashion.)

Virtually nobody is thinking long term with these tax issues. Nearly every client in my office is getting advice that will affect them in future years and the dollar amounts are not small. Consulting clients find I am drifting strongly toward multi-year tax issues. Saving money today is not enough! How much you pay in tax for all years is a far better planning strategy!

 

The Second Secret Tax Increase

The first tax increase discussed above is fairly easy to plan since the rules are defined, at least for now. The rules might change, but the concepts will remain static. Under current tax laws businesses want to accelerate income in most instances and defer expenses to maximize QBID or the lower corporate tax rate. Individual taxpayers want to push out certain expenses to the future where they might have some benefit.

The second tax increase is harder to quantify and involves some logic and deduction. We know the tax increase is coming, but the timing and amount is uncertain.

Estimated federal government revenues for the 2019-20 fiscal year are estimated at $3,644.8 billion; outlays are projected at $4,745.6 billion. (See tables.) This leaves us with a projected deficit of $1,100.8 billion. This gets added to the credit card, aka the national debt which is now over $23 trillion. The actual deficit will be different, of course. It could be better or worse. In any case, the amount of debt being added is huge and these are economic good times. What happens when the economy slows?

At some time the party will end. I refuse to call an expiration date because many people much smarter than I am have called it wrong up until now. What we do know is this cannot go on forever. Eventually the price will be paid. Inflation or lack of confidence in the government’s ability to repay the debt will effectively end the party. If the government can’t support the debt the house of cards collapses.

The national debt in and of itself is not bad. If the debt rises at less than the rate of economic growth the debt would actually be getting easier to support. Unfortunately, the debt is rising faster than economic growth currently. Therefore, the national debt, as a factor of GDP, is growing. That is unsustainable. The only question is: When will it end? And will we regain fiscal sanity before the forces of nature enforce it upon us?

A closer look at the federal budget will outline the seriousness of the issue and why it will end sooner rather than later. 

We have an estimated revenue for the federal government of $3,644.8 billion this fiscal year. We will assume this number holds true for our examination and no recession makes an appearance. Most of the revenue comes from personal income and payroll (Social Security and Medicare, aka, FICA) taxes. (Table 5)

We need to make some logical conclusions on where the nation’s finances are headed and the likely consequences. The real question is: How many bills can be paid with $3,644.8 billion of revenue?

Looking at Table 6 we see the biggest expenses for 2020, in order, are: Social Security, national defense, Medicare, health, income security and interest on the debt. If we drop income security to zero and forget every other item on the spending side of the budget we can balance the books! Of course that means TSA is gone. Just think! No more waiting in line to enter a plane. Very convenient. No more Ag Department. Yeah, food will go unregulated. But the corporations will take care of that just fine. Right? No more R&D, no more housing or FHA loans, no student loans, no development, no international or wall on the southern border, no energy, no immigration policy. It would be funny if not such a serious issue.

All that remains are Social Security and Medicare, national defense, health and interest on the debt. Obviously we can’t cut spending close to enough to balance the budget. Well, unless you want to cut Social Security and/or Medicare. But do we still collect the payroll taxes for these expenses if we no longer provide the benefit? So Social Security and Medicare are a nonstarter. 

We could default on the debt and refuse to pay the interest. But, that would destroy American banks and insurance companies. Also, we would never have the ability to borrow again regardless the crisis, so we probably should pay the debt.

Maybe we can cut national defense? Is there anyone in the room who wants to cut the military the amount needed to balance the budget? We could save some by reducing waste. Unfortunately, there isn’t enough waste to cut to solve the budget deficit problem in more than a token amount.

Then we come to health. Well, America has such an enviable health care system it can take come cuts. We are the most expensive in the world and no longer rank in the top 25 in most surveys of health. Besides, a little coronavirus never hurt anyone. Again, this is no joke. We could make meaningful changes to medical care to reduce federal spending and for individuals as well. Still, it will not be enough to stem the red ink.

Obviously this does not work. We can’t cut government spending enough to come close to balancing the books. And all the money printing hasn’t given us economic growth above 3%. The only remaining variable is taxes. Whether we like it or not, they will eventually go up in the near future. (For the record, I like lower taxes. Don’t take my conclusions as wanting higher taxes. My job is always to help clients pay the least tax by law.)

How much will taxes have to rise? We don’t have to cover all spending. If the national debt climbs at a slower rate than economic growth the debt becomes easier to manage in the same way Bill Gates can manage a million dollar mortgage better than someone in the middle class. 

If we assume (I know, I know) inflation hovers around 2% and real economic growth does the same, we get nominal economic growth of around 4%. Yes, that means the national debt can grow around $920 billion per year without the national debt becoming a larger burden compared to the size of the economy. 

There are two issues with my simple analogy. First, it assumes interest rates never climb and forgets about the unfunded liabilities (Social Security and Medicare, most notably) facing the federal government in the near future.

A $300 – $500 billion tax increase could solve the budget problems for the foreseeable future. We would still run large deficits, but if the economy kept growing it would not be a serious issue. The national debt looks big because we are largest economy on the planet. 

There is no doubt sovereign debt is climbing worldwide. U.S. debt is also piling on rapidly. At some point, under the current system, we face a fiscal crisis. A recession throws my modest proposal out the window and balloons the debt fast. Taking steps while the world is wonderful and kind economically makes sense to this weary old accountant.

Taxes will go up. The federal government has shown no desire to stop spending. Individuals received a temporary tax cut only. And still, to fulfill all the promises the government has made will require more money. And you can’t just print it out of thin air unlimited. At some point Uncle Sam will eye your wallet.

There are 6 tables for your review in this post. You can come to your own conclusions with the data. I spent a lot of time playing with the numbers. I will be interested in your prediction for future tax rates and the steps individuals can take to reduce the bite. You can read more about how the federal budget works here.

 

 

 

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?

Side Hustle Selling tradelines yields a high return compared to time invested, as much as $1,000 per hour. The tradeline company I use is Tradeline Supply Company. Let Darren know you are from The Wealthy Accountant. Call 888-844-8910, email Darren@TradelineSupply.com or read my review.

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.

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.

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

Worthy Financial offers a flat 5% on their investment. You can read my review here. 

Business owners are in trouble. Income property owners, too. The demands of running a business or managing investment properties has reached an all-time high and banks are demanding more detailed financial statements than ever before. And therein lies a side gig opportunity with high income potential.

Every tax season my office sees hundreds of financial statements prepared by the client or their staff. You can’t imagine the mess most are in.

The client always thinks they are doing an awesome job of keeping their books. . . until they need a loan and the bank is less willing to decipher their books than the accountant.

The ability to read a financial statement is a powerful wealth building skill. You can detect fraud, analyse an investment and manage business liquidity. 

Banks will not spend time trying to figure out a mess. It is easier to pass. If the funding required is significant pristine records are not an option.

In short, reading a financial statement is a requirement for wealth building and business management. The financial statements tells you how the business is doing and the direction it is heading. Often, the financials will indicate problems before they are apparent in the real world. These festering problems are easier to fix when they are still small.

Reading financial statements are a good opportunity for you to generate extra income. It can even be a high-paying full-time business. Understanding how money works requires you to understand how money is recorded and that means financial statements. The number of business owners looking for help in securing a loan is a business opportunity that starts with the ability to read financial statements.

Buyers of a business are investing serious money and definitely need help understanding the value of the investment. Real estate buyers the same.

Accountants and attorneys are an obvious choice. However, many do not handle this kind of work. As a specialist, you can solve a business owner’s financing problems while earning an excellent income.

We will now review the three most common financial statements: the balance sheet, income statement and cash flow statement. The examples used are filled with errors I see in my office frequently. You can find more errors than I discuss as I added plenty.

By understanding common mistakes business owners make you can become familiar with the issues and become a value added service. Good financial statements (good records) are not an expense! Clients seeking help improving their records will be more profitable and therefore, a long-term client.

 

The Difference Between an Income Statement and the Balance Sheet

This may come as a surprise to you, but very few people know the difference between an income statement and a balance sheet. And don’t get me started on the cash flow statement.

I see clients recording entire loan payments as an expense on the income statement. For some reason they know loan proceeds are not income because they don’t want to be taxed on that money. However, when it comes time to pay the loan they think the whole payment is an expense (and deductible). It isn’t!

Loan proceeds go on the balance sheet, of course, as a long- and/or short-term liability. If you require detailed records for a business sale, purchase or bank loan, you will need to separate a loan into long-term (amounts due in over one year) and short-term (principle due in one year or less). If the business is small the owner may not want to separate the loan into long- and short-term. In those instances the loan should be recorded as a long-term liability. (The correct way is to list long- and short-term. In no way do I feel the shortcut of listing all loans as long-term acceptable.)

Loan payments have three entries in a general journal: cash out of checking (balance sheet), principle portion of the payment (balance sheet) and interest payment (income statement). As all accountants know, only the interest is an expense. 

If you can clean up this one issue you will save more businesses than you can imagine. If your client is making this mistake you may need to junk the entire set of books and start over. The books are a mess and in no condition for a banker or the tax accountant. (Tax accountants deal with this all the time and if the books are bad enough and the client unclear in explaining what they are doing, taxes can be wrong as well. If you give your tax accountant clean records she will save you money in taxes versus wasting time trying to ferret out what your numbers really are.)

 

QuickBooks Does Not Make You an Accountant

The biggest mistake business owners make is thinking QuickBooks makes them a good bookkeeper or accountant. This is about as true as saying TurboTax makes you a tax professional. If you believe that I have some cheap ocean front property to sell you in Montana.

The only thing QuickBooks lets you do is dig the hole faster unless you understand basic accounting. 

As we review the following financial statements you will see some of the crazy things tax professionals see every tax season: balance sheets with equipment and no accumulated depreciation and negative numbers where they don’t belong. (Yes, I know contra accounts happen. But negative petty cash?)

I gathered financial statement issues from multiple sources and introduced as many issues as I could in one set of financials. I started with a sample account QuickBooks provided in an older version to construct this monstrosity. I have seen worse unfortunately, but this will do for our needs. 

Do not focus only on the errors. Keep a keen eye on issues the financials expose. Getting the books in order before presenting to a bank is vital. Once the bank (or investors) start expressing concerns over the financials they start to lose confidence. Deal with the weaknesses of the financial statements before presenting. You still need to provide honest information and it must be clear. Having answers prepared in advance can make or break a deal.

The same rules apply from the other side. As a buyer of an income property or business you will be looking with the same jaundiced eye at the financials. If the books have errors it becomes difficult to trust the investment is solid.

 

Balance Sheet

You can click all financial statements in this post to open in a second, larger window.

Novices always want to start with the income statement. The income statement is too easily doctored to give a false picture. Assets and liabilities are the place you want to start, especially if concerned with the value of the business..

The above balance sheet has the head-scratcher of a negative petty cash account. In effect, this means the petty cash account is overdrawn. Someone will need to explain that one to me. 

The other account issues that make no sense is a negative loan to John Doe, a negative bank loan for equipment, negative accounts payable and receivable, and negative payroll taxes due. You might be amused by this, but half or more of all business financial statements I see each tax season have these types of errors.

To be fair, QuickBooks (QBs) is a disaster when it comes to payroll. Payroll taxes payable need to be adjusted periodically for some reason on the balance sheet. QBs even has a neat tool to make the adjustments. The rest of the payroll module is accurate, just the balance sheet has this slowly roaming error that needs periodic correction.

I’m not sure how you get a negative accounts receivable and payable. 

This balance sheet has too many loans to friends. Don’t loan money to your girlfriend from the business. Take a distribution (if allowed) and give a personal loan to your girlfriend. Better yet, don’t be your girlfriend’s banker. It never works. I see that in the office, too.

Under fixed assets we have office equipment listed without any accumulated depreciation. Land isn’t depreciated, just about everything else is. Was depreciation expense missed, too? Yup.

All these errors are the result of incorrect accounting entries. The loan to John Doe shows up as a liability because I treated it as paid from a payroll deduction. John is an employee. It takes fancy footwork to get the books this bad in QBs.

Financial records this bad are unsalvageable. You will need to start over. Fixing this mess would take more time than building a whole new QBs file. You could have a full-time business just setting up QBs files for businesses. If you never turned a client away you would have an army of employees hired to keep up. There is that much to do. Almost all records kept internally by the client are in need of attention. And if you think this balance sheet example is bad, you are wrong. This is typical. The only matter is the degree of issues involved.

I intentionally excluded the equity accounts to save time. 

 

Income Statement

You can click all financial statements in this post to open in a second, larger window.

There are plenty of concerns on the income statement, sometimes referred to as the profit & loss statement. 

There is a large amount of non-taxable revenue listed. This should be clarified and listed below sales for aesthetic reasons. I’m concerned this could be “other income” or a refund of some sort that should be listed under Other Income at the bottom of the statement or treated as an adjustment to an expense. 

Auto expense requires explaining. Was the IRS mileage rate or actual expenses used. If the mileage rate was used there is an opportunity to add the depreciation portion of the mileage rate back into income for lending purposes. (What condition is the vehicle log for tax purposes? Were personal miles mixed in?)

Contributions were really donations to charity. Sometimes a business can deduct donations as a sponsorship. Personal donations to church are not a business expense and should not come from the business account. 

Miscellaneous expenses are high and need to be accurately classified. 

Payroll and payroll expenses should utilize sub accounts. The officer’s wage looks fine (if this is an S corporation) compared to net income, but the type of business may change that determination. Removing contributions and a few other items from the expense column could leave the reasonable owner’s wage requirement a bit light (for corporations only).

The SEP/IRA is a concern. Is this a retirement account run through payroll or an IRA contribution for an owner paid out of business funds? It needs to be cleaned up or clarified. Payroll with sub accounts would be ideal to address the lack of clarity.

The business portion of Social Security is listed, but is the wrong percentage. The Social Security portion of FICA is 12.4%; half paid by the employee, half by the employer. The Social Security expense of $5,562.26 is more than 10% of the officer’s wage of $53,800. The employer’s portion is only 6.2% and there are no other wages listed on the income statement!

Payroll expenses are listed as $18,909.25. Is this employee wages? It would explain the FICA issue. This would need to be cleaned up/clarified before presenting to a bank or buyers.

Finally, utilities are not an “other expense”. This needs to be moved up with the regular expenses. The sales tax adjustment also needs addressing.

 

Cash Flow Statement

You can click all financial statements in this post to open in a second, larger window.

The cash flow statement is my favorite. I want to see where the money is coming in and going out. This includes loan proceeds and retirement of debt. If the statement is accurate it can tell you a lot about the health of a company. As you can see, this is not an ordinary business.

If the balance sheet and income statement were clean I would have confidence in this cash flow statement. However. . . 

We discussed several issues on the income statement and balance sheet which reflect here. The item I want to point out is the shareholder distributions. Added to the officer’s wage, we get the total cash the owner received from the enterprise in 2018. 

Even with terrible books we are still able to get a vague idea how much the business is disbursing to the owner. The odds are pretty good the owner received a $53,800 wage and $35,950 in distributions. Cash was negative at the beginning of the period (unbelievable) and around $34,000 higher at year-end (believable if the rest of the books were not a mess). Messy books means the business probably throws off close to $90,000 in cash to the owner, more if contributions are not really a business expense. If the books were clean we could add the $34,000 increase in cash for the year since I don’t see any lending activity.

 

Analysis and Opportunity

Obviously this was an extraordinary mess used to illustrate multiple recordkeeping issues. Many businesses have books this bad, if they have any records at all. A thriving business can fail due to mismanagement of recordkeeping. Poor records can cause a business to over-pay taxes, lose bank funding and result in a lower sale price of the business at the end of the owner’s career.

Warren Buffett has said many times Accounting classes were the most important he attended in college. I agree. Without a fundamental knowledge of accounting it is difficult to build serious wealth and almost impossible to run a successful business. With a sound understanding of accounting and financial statements you are qualified to manage most businesses and investments, including finding the true value of the asset.

You don’t have to be a banker or financial analyst to use financial statements. Investing in a stock is investing in a company and should be treated the same way as buying an entire smaller local firm. Buying income property successfully requires understanding financial statements to make a sound decision. You want to know the rent history and expenses, plus required deferred maintenance, before making a decision to buy or pass.

Since most roofers are good at roofing and poor at keeping accurate records, you have a powerful side gig opportunity to make a difference in your community while earning above average income. 

All business eventually need funding. Your ability to read financial statements allows you to consult with clients at a higher level and to gain desired result. You can handle the raw data entry if you want or farm it out to a bookkeeper. Regardless, you lead and give directions. 

Done right, you and your clients will profit.

 

Coda

So how can you start reading financial statements as a side gig or person use if you don’t know how already? You could always take a college or technical school course. Or, you can self-study. Here is a good book to get you started. It will cover 99% of what most people will ever need. Note you will still look things up from time to time. It is the nature of the skill. The linked book is a good reference source. 

 

 

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?

Side Hustle Selling tradelines yields a high return compared to time invested, as much as $1,000 per hour. The tradeline company I use is Tradeline Supply Company. Let Darren know you are from The Wealthy Accountant. Call 888-844-8910, email Darren@TradelineSupply.com or read my review.

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.

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.

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

Worthy Financial offers a flat 5% on their investment. You can read my review here. 

Now that tax season is under way it is time to consider audit proofing your tax return. Small steps you take today can save you time, money and headaches later. 

First, the good news. Audit rates have been falling the past decade by a substantial amount. For 2018, the IRS audited .45% of individual returns, down from .59% in 2017. IRS funding cuts between 2011 and 2017 cost the IRS 27% of its enforcement staff (an 18% decline in tax examiners and a 40% reduction in revenue officers), according to the Government Accountability Office. 

The reduction in IRS enforcement efforts does not mean the IRS doesn’t have the authority to aggressively deal with tax scofflaws. The IRS still carries a big stick and focuses on certain problem areas. Taxpayers claiming the earned income credit faced an audit rate in excess of 1% in 2018, compared to the overall audit rate of individual tax returns the same year.

 

Two Kinds of Audits

There are two types of tax audits: the correspondence audit and field audit. 

  • Correspondence audits: Of the nearly 1 million tax returns audited in fiscal year 2018, over 75% were correspondence audits where the IRS simply sent a letter to the taxpayer outlining where the IRS records differ from the return filed. If the taxpayer disagreed with the IRS the taxpayer had an opportunity to point out the IRS error. If the taxpayer was in error, she could then arrange payment. 
  • Field audits: The field audit is what most taxpayers think of when they think of an IRS audit. In the field audit the IRS reviews detailed financial transactions of the taxpayer. This can happen at the IRS office, the taxpayers business, the office of the accountant of the taxpayer and even via mail and email. 

Correspondence audits can lead to a field audit. If the information triggers the IRS system a taxpayer’s return may be flagged for additional review. This is why it is so important to file an accurate return the first time.

 

 

Correspondence audits rarely take long to complete. The information required to fix errors is clearly outlined (usually), making it easy for the taxpayer to resolve the issue with a letter or two. 

Field audits are not so fast. A field audit can take anywhere from a few months to years to finalize. Field audits can also come in the exceptionally virulent kind where the IRS drills deep into the paperwork of the taxpayer. This can happen when the IRS is concerned significant amounts of unreported income and/or over reported deduction or fraud are involved. Periodically the IRS conducts compliance audits that are nothing short of a proctology exam on the taxpayer. Compliance audits are picked at random to help the IRS figure out where taxpayers mess up. Pray you never get one of these audits from hell.

Even a correspondence audit is enough to make a person’s heart miss a beat. Letters from the IRS never are a sign of good news so we will now turn to avoiding the whole unpleasant mess in the first place.

 

Avoiding a Tax Audit

Income is a major determinant of audit risk. Taking the earned income credit is another large risk. (About 35% of all individual tax audits involve the EIC.) These risk factors are hard to avoid. Reducing income just to lower your audit risk is akin to killing the patient to cure the disease. The same applies to tax credits like the EIC; if you qualify you should take the tax credits you qualify for. 

Income and tax credits take a lot of heat, but it doesn’t acknowledge what is going on under the hood. As the chart below shows, taxpayers with zero or negative income have a high audit risk, at nearly the level of those earning $1 million to $5 million per year. Why is this?

Taxpayers with zero or negative income achieve this with deductions and/or credits. Zero and negative income taxpayers probably also have small business income reported on Schedule C or income properties on Schedule E. What the IRS doesn’t tell us is some of these audits involve taxpayers with $1 million or more in revenue and expenses even greater than the income. 

Taxpayers getting audited the least have an adjusted gross income between $100,000 and $200,000. It is a nice spot to aim for if an IRS audit is your concern. Those with an AGI of $10,000,000 or greater face the highest risk of audit, at over 6.66%. 

 

Audit Risks You Can Control

While income and tax credits are mostly out of your control (unless you choose to forgo income or tax credits you qualify for), there are several things you can do that increase your audit risk several fold. The first, and most common, is mismatched information. 

Undisclosed income: The IRS gets loads of financial information on you each year. Forget to include a prize or gambling win and you are virtually guaranteed a letter from the IRS. The same applies for dividend and interest income reported on a 1099. Business owners frequently get a 1099-K for credit card payments for goods or services sold. You need to report at least this amount of income or attach a good explanation to the return to account for the discrepancy. All 1099-MISCs and 1099-Ks added together is the minimum you should report as business income on your return. Any lesser amount will require an adjustment to the originally filed return (more on this below) or dealt with later when the IRS contacts you.

S corporation basis: A growing area of audit risk is basis. If you get a K-1 from a partnership or S corporation you need to track basis. For an S corporation you need to track both stock and debt basis. Many individual returns now require the basis statements be attached. If there is an error it can eventually lead to a full-blown field audit. The time spent now building an accurate basis statement is less than the time it takes to fight an audit, plus the costs of defending yourself in an audit. Basis is the latest IRS focus. Hire a tax professional if you need help with this. It’s that important.

Itemized deductions: With the standard deduction much higher now and state and local taxes capped at $10,000 and miscellaneous deductions, subject to 2%, eliminated, it is hard to itemize unless you either have a large mortgage or donate a lot to charity. Low interest rates and a reduced limit on the amount of mortgage interest eligible for deduction on Schedule A leaves charitable deductions as the one line that plays a large role in helping you itemizing under current tax laws. However, a large charitable deduction on Schedule A increases audit risk significantly. If you have a business or own income properties you might have a planning opportunity to deduct charitable giving as sponsorships or promotional expenses for the business or income property. You can read more on this strategy here and here.

 

Source: 2018 IRS Databook

 

Deflecting an Audit

Sometimes there is no way around it. No matter what you do, it will be an audit risk. Not claiming a large charitable deduction is foolish; you still take the deduction. Sometimes information returns (1099s, W-2s, K-1s, etc) are wrong and the IRS has the bad information. Now what do you do?

There are two lines of defense and I use both liberally in my office that leads to an audit rate among my clients of under .1%. This keeps both clients and friendly tax professional happy. (The best audit is the one I never have to fight.)

The first line of defense is Form 8275: Disclosure Statement. Yes, you intentionally squeal to the IRS on yourself. It sounds counter-intuitive, but it really works. If you do the leg work to determine the correct way to report data on your tax return the IRS knows it is not low hanging fruit. In over 30 years of practice I never once had the IRS audit on a return I filed with Form 8275! And I file as many as 50 of these animals per tax season.

Coupled with the first line of defense is line two: attach documentation to the e-filed return. As many as a third of the returns I file in my office have some sort of attachment. My office does focus on very large and business returns so attachments are required more often. Required or not, I frequently attach documentation along with Form 8275. Here are a few examples:

Example 1: Several years ago a client received a large inheritance and donated all of it to his church. The contribution was larger than his income. Past experience said this client was in the cross hairs of the IRS for an audit. Not only did I attach copies of the church receipts and copies of cancelled checks, but a copy of the inheritance paperwork as well. The client never heard a word from Revenue. If he was audited the IRS never let him know about it. They had what they needed for a narrow audit. This avoided a larger audit that would certainly have included his business.

Example 2: This example happens to more clients than you think. An incorrect 1099 or K-1 comes in and the taxpayer can’t get it fixed. If you report the correct amount the IRS computer will blow a gasket and trigger an audit (and let’s hope it is a correspondence audit only). I recommend you report the incorrect information so that it matches the IRS computers and make an adjustment elsewhere and attach a disclosure with documentation to the return. If it is a business that receives an incorrect 1099-MISC with additional income, report the income and then take a deduction as an adjustment and disclose. If it is a gambling win you can make the adjustment same as a gambling session. The same applies to prizes won. Be sure to always disclose and attach documentation. Keep good records in case the IRS has questions!

 

It is impossible to completely avoid a tax audit. They happen. You can, however, reduce your chances of an audit several fold by following the few simple rules above. 

Keep good records! If you are unfortunate enough to face an audit, nothing shortens the audit faster than good records. When the taxing authority realizes there is no low hanging fruit they lose interest fast. Clean records also avoid a deeper look into your finances. You just don’t want the hassle.

 

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.

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.

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

Worthy Financial offers a flat 5% on their investment. You can read my review here. 

 

How does the IRS choose who to audit?

High income is an obvious indicator for audit risk. However, very low income taxpayers face audit rates nearly as high as those with multi-million dollar incomes due to tax credits used in fraud, like the Earned Income Credit. It is not recommended you avoid tax credits you are entitled to. Instead, fully disclose the proper information with the tax return to lower your tax audit risk.

What triggers an IRS audit?

The number one reason for getting a letter from the IRS is unreported income. Always take care when preparing your tax return making sure you include all income. The IRS already know most of your income. Not including it on your tax return is a sure way to get audited. Other audit triggers are high deductions in comparison to income, small business income and refundable tax credits.

How to prevent a tax audit?

Simple returns have no low-hanging fruit for the IRS to audit. The IRS computers are looking for the unusual, the things that might contain overstated deductions or unreported income. Whenever your tax situation has something unique disclose the issue on Form 8275 and attach any supporting documents. If the IRS does decide to look they may accept the provided documents and explanation without expanding the audit to the remainder of your return.

 

Summary

  • 50% gains possible according to Buffett in arbitrage situations Altria potentially has.
  • Scott Gottlieb has a conflict of interest when it comes to Juul.
  • Altria has a large arbitrage situation currently overlooked by many investors.
  • A Peter Lynch style analysis reveals unrealized value in Altria.
  • Earnings should provide more clarity on how fast this unrealized value is reflected in the stock price.

Warren Buffett made one of those extraordinary claims that require extraordinary proof in a 1999 interview with BusinessWeek. He said investing large sums is a lot harder than investing, say, a million dollars, where he felt he could generate 50% annual returns. Then he corrected himself and said he guaranteed he could do it.

Fast forward to modern times where Buffett has passed at least one rein to younger people to help him invest the massive pile of cash at Berkshire Hathaway (BRK.A). He said he didn’t place any significant restrictions on their investments as long as they didn’t get him in trouble, like buying Microsoft (MSFT) or tobacco companies like Altria (MO). (Buffett is a personal friend of Bill Gates, founder of Microsoft, and could have a conflict of interest if he invested in Microsoft. Buffett worries an investment in a tobacco company would harm his reputation.)

Buffett’s wisdom is legendary. In an interview I once heard him say when asked about tobacco companies: The product costs a penny to make and it’s addictive; What’s not to like?

Indeed! I believe Buffett avoids Altria mostly for reputation reasons. Most readers here, however, are interested in maximizing wealth and are unconcerned with owning oil, automotive, chemical or tobacco companies, as long as they are conducting business in a legal manner.

 

50% Gains

So how would Buffett achieve 50% gains with wealth levels readers here actually possess? 

Buffett said he would look for arbitrage situations to capitalize on. This would mean scouring small companies with hidden value. Of course, this would be a full-time job. But hey, if you can pull a clean half mill a year it might be worth the effort.

If you are allergic to those levels of research there is an easier way if you are willing to earn an above market average, but probably less than 50% annually.

The market is at lofty levels as I write. Most listed companies are trading at nosebleed levels. Unless you are willing to consider the damaged (Boeing (BA) might be on your watch list) or the hated, you are stuck doing the research or accepting market returns, wherever that leads from this market level.

Altria has been a portfolio holding for me for a very long time and it has served me well. Before Buffett asked, What’s not to like? I already knew I liked the company, even if I never use the products. 

Holding Altria for such a long time means I have spent considerable time researching the company. I was there when the world was coming to an end for tobacco in the 1990s due to the massive settlement. 

It seems Altria (and tobacco in general) loves to go into a tizzy every so often. It makes for awesome buying opportunities where the stock price is lower and the dividend yield is higher. Rumors of tobacco’s death are greatly exaggerated. 

Altria is starting to exit one of these “end of the world” scenarios again. The Juul/vaping scare was worse than the damage done in the 1990s when there was a real existential risk.

Of course, there is plenty to worry about. Juul isn’t working as planned. (When does business go as planned?) And cigarette volumes are in a long-term decline. 

Altria does have something Buffett salivates about: pricing power. Altria is likely to increase prices faster than consumption declines. That means more dividends for patient investors.

Juul isn’t dead either! Yes, there are serious problems with getting the Juul transactions approved and Juul is dealing with litigation issues and a declining market share and increased regulations. The Juul approval is more a matter of time and what changes to the deal the government will require rather than a deal that will end up in court or unwound. 

Vaping isn’t dead either! Growth in vaping has slowed. But if you looked at the vaping growth rates a year ago it was obvious growth rates had to slow. Juul was on pace a year ago to be bigger than the entire U.S. tobacco industry in less than 7 years. Reference Stein’s Law: Anything that cannot go on forever, doesn’t.

Health issues surrounding vaping was not due to Juul products. Illegal street vaping pods, usually involving THC, were the chief culprit and maybe the entire culprit.

Juul’s market share has declined from over 80% to ~60%. However, vaping has continued to grow so Juul is getting a smaller piece of a larger market. Like it or not, vaping is the future of nicotine consumption.

 

Scott Gottlieb’s Conflict of Interest

Scott Gottlieb, the former commissioner of the FDA, has managed to get himself a cushy job at Pfizer (PFE). Gottlieb has made it his mission to bad mouth tobacco, but has a special hate for vaping and Juul, the leader in the industry. Now why is that?

Well, vaping has the real possibility of reducing tobacco use and is partly responsible to the increased rate of decline in cigarette use. Gottlieb should be happy with that, but seems to hate the good news. What gives? First, Gottlieb works for Pfizer now, which sells the leading smoking cessation product, Chantix. It becomes clear quickly why Gottlieb is more addicted tobacco than an 84-year-old chain smoker once you realize his income stream is at risk if smoking rates decline too much or too fast.

Second, Chantix is reported to be no better than nicotine patches. Nicotine patches are cheaper than Chantix with fewer side effects. Gottlieb doesn’t seem to want to address this issue during public interviews. 

Third, Pfizer has been busting tail to get a serious warning label removed from boxes of Chantix. Gottlieb took care of that problem promptly once he was working for Pfizer. I’m not saying Gottlieb did anything illegal or unethical. I’m just saying the circumstances does lead one to wonder.

Once you consider Gottlieb’s past with his comments, it becomes clear he likely has an agenda that might not jib with reduced cigarette smoking rates. When regulators and investors realize Gottlieb seems to be encouraging more tobacco use to benefit his employer’s bottom line, his crusade against vaping declines.

 

Hidden Treasure in Altria

I don’t know if Warren Buffett could actually deliver on his promise of 50% annual gains. I do know that arbitrage is an excellent way to spike your investment returns.

A Peter Lynch style review of Altria reveals massive unrealized value. It is easy to forget Altria is more than cigarettes. There is a dash of wine in the portfolio, non-combustible tobacco products, Juul, Anheuser Busch inbev NV (BUD), Cronos (CRON) and on! Nicotine Pouches in the product line as well. 

Let’s take an impossibly negative approach to Altria and see if the company survives or is loaded with large hidden treasures. 

For starters, let’s value Juul at zero. I know, I know. It is worth at least something, but we take no prisoners around here when we tally up a business’s valuation under a worst case scenario. 

Next we gut Cronos’s value and place it at zero, as well. In fact, let’s just value everything outside tobacco at zero, with the exception of BUD.

Altria owns 10.1% of BUD, with a valuation of ~$14 billion as I write. 

Altria has a market cap of ~$95 billion. If everything they own is worth nothing, except for the investment in BUD, which has no restriction on the holding starting in 2021, Altria has a core valuation of ~$81 billion. 

This valuation is for a company kicking out over $7 billion in cash flow without help from Juul! 

And let’s be honest, all that other stuff Altria owns has some value. How much is still to be determined. That is how it works with businesses. Value has to be created to be realized. (Remember the formula for value creation: Return on Invested Capital (ROIC) minus Cost of Capital (COC). A positive number is value creation.)

What we do know is Altria’s core business is kicking out loads of cash to pay down debt (on the 3rd quarter earnings call Chairman Howard A. Willard stated Altria paid down $1 billion of debt in the 3rd quarter and planned on paying down a similar amount in the 4th quarter of 2019), buy back stock, pay dividends and grow the business. 

 

Earnings Report

Altria’s upcoming 4th quarter 2019 earnings report will clarify some of these issues. I am interested to see how much debt was actually reduced. I also want to see how cigarette volumes are holding up and if we will have two or three price increases in 2020. 

Juul is the unknown. Will more write-down be in the cards? My gut tells me things are stabilizing at Juul, but gut is not an acceptable investment tool and has a poor track record. Cronos still has a lot of work to do to reach profitability.

A bright spot is the non-combustible tobacco products. Chew has been growing, but is still a relatively small part of the business.

What interests me more than any other product is iQOS — the heat, not burn product — licensed from Philip Morris International (PM). FDA conditional approval is a significant advantage Altria received in 2019. iQOS is rolling out in a measured fashion as you read.

The future of tobacco is in the non-combustible, reduced-risk products. Wouldn’t it be a kick if Altria found serious value in iQOS instead of Juul?

Either way, I think there is massive hidden value in Altria. With such a diverse mix of products, Altria is well situated to keep pumping out large, growing dividends for a long time to come. 

Unless you have a convincing argument people will quite smoking tobacco and using weed, chewing, vaping and drinking beer and wine, I think Altria has a bright future.

 

* Notes: As longtime readers of this blog know, I own shares in Altria and use it as an investing test model. Originally written for Seeking Alpha, this post provides an update on my reading of the tea leaves. I still own and plan on continuing to own shares in MO and PM. I own a small amount of BA and MSFT as part of my watch list. I do not own shares of other companies mentioned in this post at this time with no plans to open a position either.

 

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.

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.

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

Worthy Financial offers a flat 5% on their investment. You can read my review here. 

In 1968 Nick Murray had to sell investments the hard way. He met most clients in their home. The tool of choice was the mutual fund. Most people he sat with were hard working people, but unsophisticated  investors. Fee-based advisors were rare in those days for the small accounts families had. Fees were high and people were risk adverse. To top it off, the market was having bouts of volatility, suffering a noticeable decline even to those who didn’t follow the market on a regular basis.

It was in this environment Nick Murray had to convince his clients and potential clients the best course of action for them. Investing in mutual funds came at a steep cost. Loads (aka sales fees) were as high as 8.75%. 91.25% of your money went to work right out of the gate trying to get back to the even water mark.

Nick Murray

Young families had to consider equities for at least a portion of their portfolio if they were ever to have enough money for a comfortable retirement, and Nick Murray knew it. The high fees were one issue; the market another. The question was always the same:

“Do you think the market will go up?”

An honest financial planner will never tell you the market will go up because no one has a crystal ball. Markets do go down at times, and significantly. In the long run stocks would provide the best return on investment if placed in a broad-based mutual fund. The gut-wrenching declines that show up now and again was the problem. Nick Murray had to provide comfort for the clients he served while encouraging the best financial behavior. He said:

“I do not know if the next move in the market will be up or down. The next 20% move could go either way and I have no way of knowing which way it will be. The same is true for the next 50% move. I just don’t know if the next such move is up or down. The same with the next 70%, 80% and even 90% move in the market. But I can guarantee you the next 100% move in the market is up, not down.”

How could Nick Murray make such a claim? Of course, the next non-100% move in the market is anyone’s guess. But to guarantee the next 100% move was up! 

Nick Murray spoke at a H.D. Vest Financial Services conference in Dallas in December of 1994 when he told this story. (I might be off a bit on the date as I’m pulling from memory only. It was December because H.D. Vest always had their December conference in Dallas. The year was 1992 to 1994, with my bet placed on 1994.) Murray explained why he made the statement to clients he did. He said:

“I could guarantee the next 100% move was up because the next 100% move has always up. And if I were ever to be wrong there would be nobody left to discuss it.”

Those words always stuck with me. Every bump in the night, ah, the market is not a cause for panic. Even if I bought at the height of the market in 1987 or 2008, it didn’t take long before another 100% gain was notched onto the market. Even the 1929 high eventually fell to substantial 100% gain after 100% gain.

Once again we face a market with a long up trend and worries abound. 

And now is a good time to ask if you need a financial planner.

 

What a Good Financial Planner Does

Financial planners come in so many flavors. Some are honest and good at what they do. Some are out for a quick buck. Others are incompetent, at best.

Earlier this week I met with a client in my office. This elderly couple had worked beyond the normal retirement age, but now were putting traditional labor in the past. They are simple people that prefer as little complication as possible. 

My husband/wife client have never used a computer. Normally I suggest a good index fund at Vanguard or Fidelity. That wasn’t the right advice in this instance. The 401(k) administrator (Transamerica) presented all the options. 98% of the page was annuity choices: single life, period certain, joint life. Way at the bottom was the lump-sum option.

My client was clear they did not need any of the money. They were aware of the required minimum distribution and that is all they would take from the funds.

So what does an honest financial planner tell a client in a situation like this? They didn’t need the money. They were not sophisticated investors. They were risk adverse. They had more than enough for anything they wanted.

After a half hour of discussion it was clear to me my client did not need an index fund or any other fancy sort of investment. I asked where they banked. It was a good local bank. I explained to them what laddered CDs were. They understood CDs and what I suggested. By the time you read this they will be working with their banker carrying  out what I feel is in their best interest. The interest earned will be small, but it is what serves this client best.

 

A good financial planner will be honest with her clients. No one size fits all. Usually when working with young families I have to spend serious time getting them to invest in equities. (Too often I must work my fingers to the bone convincing them to pay down debt and invest even a token amount.) 

I’m not a big fan of life insurance. (Don’t get me started on annuities.) However, there have been instances where the facts and circumstances indicated a client should have term life insurance. Business clients might best be served with key-man insurance or a policy for a buy-sell agreement. There have even been a few cases where the facts required I suggest annuities. With annuities I always go into a long-winded explanation of the high commissions so clients understand how much it pains me to make such a recommendation because I know commissions are ultimately paid by the client.

 

The most important task a financial planner has, in my opinion, is to prevent clients from panicking in a downturn and contain greed when the market is soaring.  Nothing else a financial planner does will do more to increase the value of a client’s account. 

As an accountant I see many clients. Over the years way too many have committed financial suicide because they got scared out of the market at a bottom. I’ve also seen too many invest on margin (borrowed money) when the market is hot. If I could have one wish, it would be to go back in time and convince more clients to walk away from a hot stock tip. A good financial advisor should encourage good long-term investments, like index funds. Sophisticated investors can invest in individual stocks because they know how to value a business. They use different financial planners from the proletariat. 

 

The duty of a good financial planner is simple: Stay in touch with clients to understand their financial plans and needs, helping them achieve those goals. In other words: Know Your Client!

It is easier than ever to walk the financial road without a financial planner. Mutual fund fees have collapsed to zero in some cases. (Does anyone pay a load anymore to buy a mutual fund?) ETFs are very low cost to buy. Automatic investing is easier than ever. 

The real questions is: Do you need a financial planner? There are only a few questions you need to ask yourself to get the answer:

  • Do you understand the investment choices available and the risks and consequences? Honestly!
  • Do you understand the tax implications? Or have a trusted tax professional to help you understand the tax issues?
  • Do you tend to want to “trade” the market?
  • Have you ever sold or panicked when the market was down? Be honest! How did you react, or not react, to the 2008 economic, housing and market meltdown?

 

Financial planners are different from the past. Many brokerage houses (E*Trade, Vanguard and Fidelity, for example) have in-house advisors available to help you make financial decisions.

Some advisors still pay house calls, but they are getting rare. And since commissions are totally different from a few decades ago when I was in securities, an alternative to a financial planner might be a better choice.

 

 

Alternative Financial Planners

While many consider stock brokers and insurance people financial planners, the truth is they are really salespeople for the firms they are appointed with. These traditional advisors still play a role in financial planning. However, their role is diminished compared to even recent times.

The stock broker wants to sell you stuff that generates a commission or fee-based product. So does the insurance guy. It’s how they keep the light on and I have no problem with that. Many financial planners are fee-based only today, charging 1% or something similar per year on the assets they manage for you. The fee seems small, but accumulates to a large amount over the years. And remember, the fees paid also no longer generate future returns for you.

 

There are two natural professions that can help you with your financial planning needs: attorneys and accountants. The accountant should not also sell products or fee-based services as well or you will find recommendations slanted toward what they sell.

Helping a client by telling them the truth — that they should use laddered CDs — is something an accountant can tell you. I don’t get paid a commission. I charge for my time and have no vested interest in the investment the client makes. 

As an accountant I can also help facilitate the process. If a client needs a Vanguard account I can walk through the set-up process with them or they can call Vanguard. All the client pays for is my time. 

Attorneys can play the same role. They might be more expense and have less time to work with you, but attorneys play a vital role in personal finances. Wills and estate issues will require an attorney anyway. The attorney and accountant can work together to help you deal with issues such a Medicare and future potential nursing home expenses. 

A good attorney and accountant can also keep you honest when the market is soaring or in free fall. These professionals have seen it all before in the market and in their client’s accounts and they don’t shake easy. Clients in my office know I wear cast iron underwear when it comes to taxes, investing and personal finance issues. I’m not moved by headlines! And I doubt your attorney is either.

 

Have an honest discussion with your accountant or tax professional. They might be the perfect choice for a financial planner. 

This makes even more sense if you handle your own finances. Having a disinterest third-party to bounce ideas off of in very valuable. When I’m not writing or preparing taxes, I am working with clients and readers of this blog, consulting on a variety of issues, including: index fund/equity investments, insurance, retirement planning, Social Security and Medicare planning, tax planning, business formation and session planning, and more. It amazes me the topics I discuss with clients. I get to enjoy some unique research at times which keeps me young.

 

Many people reading this blog are informed enough to actually be a financial planner themselves so you probably think you can handle it all on your own. I understand. The history of financial planners and advisors is not encouraging.

Consider an alternative to the traditional financial planner. At least in my office, I help clients make the right choice for them and send them to the most appropriate professionals to carry out the directives.  

Most important, always keep learning because everyone actually does need a financial planner. And the best one you can ever have is you. Because no matter how hard I try to know my client, you know you better than I ever will. My performance is best when my client also understands the rules.

 

This is an important topic. I hope we get a lively debate in the comments on how you, kind readers, interact with financial planners. My ideas are good, but as a team our knowledge will be more than the sum of the parts.

 

 

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.

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.

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

Worthy Financial offers a flat 5% on their investment. You can read my review here. 

Short-term money held for later investments or emergency funds pay paltry returns. It might be expected since these investment vehicles are not long-term. However, money market and checking accounts can do better than a fraction of a percent in interest payments large banks are offering. 

Over the past year my most popular posts involved investing short-term funds. I paid lip service to High Interest Savings Accounts Few Use and Unique Savings Accounts Few Know About. In each case I was soundly trashed for focusing on wealthy people (which is a lie since all the accounts I listed can be used by people of any wealth level) and avoiding the one checking and savings account tailor-made for people in the backwoods of Wealthy Accountantville. 

Let me introduce you to Redneck Bank; a bank folks from the backwoods of Nowhere, Wisconsin and the back streets of New York City alike can enjoy. And if you stick around to the end I’ll show you a debit card paying up to 2.5% cash back. Mix these banking vehicles together for an acceptable return is something even backwoods folks, like me, find mighty tempting.

 

Mega Money Market Account

Y’all know I’m going to have a hard time not drifting into backwoods talk. I’ll do my best to be professional.

Interest rates are subject to change, of course, but as of this writing my brothers at Redneck Bank are paying a stiff 1.75% on their Mega Money Market Account on balances up to $50,000. 

Don’t get yer knickers in a bundle! Redneck Bank is fer normal folks, too. They pay that awesome interest rate on balances up to $50,000. There is no minimum balance and you only need 500 bucks to open a darn account. Even normal folks in the boondocks have that much laying around, probably in the sofa cushion.

If all you are looking for is interest you are leaving some of the best features of Redneck Bank on the ground. Backwoods folks are more frugal than that, if you didn’t already know. 

Mobile deposits make it easy to work with my Redneck buddies. Take a picture of checks received and they are automatically deposited into your account.

An underused feature is Online Bill Pay. Your Redneck money market account offers 10 free bill pay transactions per month. This saves time and postage. Smart rednecks automate their life whenever and wherever possible. That is just good money management. 

You can read all the sun-baked details here. (Note: Redneck Bank is not an affiliate or related to the author in any way.)

 

Redneck Rewards Checking Account

For smaller sums of money I think the Redneck Bank checking account is a better offer. Interest accumulates at 2.25% currently on up to (that is up to) $10,000. That is very competitive and comes with plenty of additional valuable features. 

Mobile deposits using a secure app make all Redneck products easy to use. Your Redneck Rewards Checking Account also comes with 10 free bill pay transactions. No minimum balance required, but ya need 500 bucks to open the account. Check the sofa.

For kind readers who enjoy traveling, up to $25 in foreign ATM fees are refunded each month. 

There is one small catch to the checking account, however. (What did you expect with a checking account paying 2.25% on up to 10 grand?) You need to make 10 or more debit card transactions (online or in the real world) using your Redneck checking account each month to qualify for the high interest rewards. If you make fewer debit card transactions you still earn .50% (almost like an account at a big bank). 

You can read all the details about the Redneck Rewards Checking Account here.

 

Facts and Circumstances

Redneck Bank might be the perfect bank for you. Their products offer excellent rates of interest for emergency and short-term funds. I recommend reading the two previous posts I published using the links above for more high interest options.

No one product fits everyone, however, and many people will find multiple investment vehicles best for them. (You are not limited to one account at one bank, if that needs saying.) The previous articles published, listed at the opening of this post, have offers for much larger amounts for readers dealing with larger sums. 

It is important to review your personal financial situation. Something as easy and fun as Redneck Bank might cover most or all your banking needs. Then again, as life evolves, it is possible new financial challenges will arise. This is when it is good to come armed with multiple tools to get the job done. It isn’t a crime to change banks when facts dictate such a move.

The interest rate paid is only part of the solution. Yes, earning reasonable interest is the most difficult problem to solve and why you are probably here. But is can be done, as this and previous articles published on this blog, indicate. The real value in these high-interest accounts extends to services too. Online banking is convenient, but free bill pay saves time and postage. Be sure to review many banking options. If you have more than 10 bills each month, it might make sense to have more than one bank. The fine print is your friend in this instance.

 

Awesome Deal I Promised

I promised an awesome deal if you read to the end and I meant it. I haven’t seen this one promoted much (or I just live in a secluded backwoods world) so most of you may not be aware of this offer.

Let me tease first. How many of you would like a credit card paying back 2.5% cash back with an up-front cash bonus? Oh, I see a lot of hands. Some credit cards offer more, but 2.5% cash back with a bonus is still pretty good. 

Now, how would you like a debit card that offered the same? With an up-front bonus? Thought so.

Debit cards are notorious for paying small or no cash-back. Dave Ramsey fans and those with an allergic reaction to debt don’t want to use credit cards so they miss out on the juicy rewards. These are cash and carry people that will only go as far as a debit card. I get it.

PayPal recently sent me an offer. To be fair, this might only apply to business accounts, but I see nothing that disallows you from opening a business versus a personal account. 

The landing page says PayPal pays 1% cash back, but PayPal gave me a $100 cash back reward for spending $1,000 in December and $25 for every $1,000 of spending. This means with a small amount of planning I can get close to 2.5% cash back on normal spending (no crazy spending for a reward, as if I have to mention this) on my debit card before the bonus reward.

The money comes from my checking account (PayPal automatically deducts the payment); I don’t keep any money on deposit at PayPal, thought that is allowed, as well. 

PayPal has other options than the $25 per thousand in spending, but I think that offer is the best. 

This is also a new product for PayPal (I think). I have had a PayPal account for years for my tax office. PayPal decided they were sending a debit card for the account regardless. (I opted out of the debit card feature in the past.) To sweeten the pot they offered cash. What can I say? The accountant in me couldn’t hold back.

The PayPal offer might be for a limited time. I still wanted to get this in your hands as soon as possible so you can take advantage of the offer if possible.

 

Common Sense

As always, kind readers, use common sense. There are numerous banking options out there. Mix and match those that serve you best. It used to be so easy. Just go to the local bank and open an account. Today there are more moving parts, but that works to your advantage if you are willing to invest a small amount of time. 

Also, as a reminder, you are not wedded to a bank. If the terms change, you can always change banks. Some offers are meant to get folks in the door with the hopes they are too lazy to leave (or notice) once the offer ends. Don’t be lazy! You work hard for your money. The banks are making money just fine. You take care of you!

Check out Redneck Bank. Maybe add it to your list of financial options. There is a bit of fun involved, too. And life should be filled with amusing moments.

Look into the PayPal offer, as well. It might be limited to current accounts or some other crazy thing. But it might be something of value to you. Getting north of 2% cash back using a debit card is the best this crazy accountant has seen to date.

Be sure to share high-interest accounts you use (or know of) in the comments section below. Worthy Financial (in the More Wealth Building Resources section below) pays 5%, but is an affiliate of this blog and is not a bank.

I hope this short post kept your interest. (Yes, one last bit of humor before leaving you today.)

 

 

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.

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.

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

Worthy Financial offers a flat 5% on their investment. You can read my review here. 

Guest posts are always difficult. Too often the material that crosses my desk is of very low quality or thinly disguised ads, usually both. I pass faster than a speeding bullet. 

Then there are people I know that I would love to have write a guest post. They are articulate and care about the reader. Unfortunately, they are also busy. However!!! Through good fortune I was able to convince one of these people to to write down her wisdom for you, kind readers.

Debbie Todd has followed this blog for a long time and is a recommended tax pro on the Find a Local Tax Pro page of this blog. Seeing Debbie work with clients on social media has left no doubt in my mind of her level of knowledge, experience and willingness to serve her clients at the highest level possible. 

This post started over a discussion on Facebook. Debbie left a comment and I said I would love to hear all the details about it, preferably as a guest post. It was a lot of work, but she complied. As a result, you get to pull back the curtain and see how things run in a smooth operating tax office that serves clients like royalty and how you can get the same results with your tax pro. I wish I always lived up to those high levels.

Be sure to read to the end. I will copy Debbie’s contact information from the Finding a Local Tax pro page to the end of this post, along with a link to a worksheet you can download. You want that worksheet!

Thank you for the post, Debbie. It will help readers and me alike.

 

Guest post: Debbie Todd of iCompass Compliance Solutions, LLC

 

SECRET INSIDER Bean-Counter Chat Alert – Earlier this year, the Wealthy Accountant and I chatted online about what CPAs and Enrolled Agents like to talk about — innovative ways to serve, educate — and yes, sometimes even boot our clients in their business behind — while keeping our sanity and a semblance of family balance.

I promised to share a couple of strategic tips and a tool I developed that transformed not only my own business, but also generated amazing results for my firm’s clients. Then unexpectedly, LIFE got in the way of delivering on that promise — until now.

I lost two long-term step-parents within 3 months and then both my brothers had major cardiac events. Experiencing sudden and profound change, loss and grief sure puts things in perspective. Not an excuse — but I hope you can relate. Life throws unexpected curve balls which get in the way of best laid plans for your business, your personal life and even your legacy. Decisions matter! Adjust, breathe and take the next step. And the next…

Just as Summer gave way to Fall — and now as our lungs are filled with the brisk air of Winter — know that Spring 2020 is just around the corner. A new season, a new decade and untapped new opportunities await.

Read on to learn how…

 

David or Goliath – What Mattered Most?

The log in the fire is crackling, casting a rosy glow of warmth on the stockings, the twinkling tree and the ribbon-wrapped presents… 

As happens so often during the holiday season, I spend time reflecting on what worked well (and didn’t) with my beloved clients. I muse on the opportunities and challenges they faced in growing their business this year, adapting to new tax rules, employee issues, as well as several experiencing traumatic family events, which suddenly altered some of their best-laid plans.

What tips and tools could I share to allow them to be more successful in 2020 and beyond? I’m their CPA, their trusted financial coach and I take that privilege seriously. So do most of my amazing bean-counter friends.

Whether you are a large international company, a locally owned small business entrepreneur or a trendy global digital nomad, having rock-solid business goals and smart financial processes behind you is critical for your success. It’s not your size — it’s your heart, purpose and willingness to take action. Like David. . . 

Let’s face it, you’re toast without it… and often sooner rather than later.

 

Seizing a New Decade of Opportunities

As I gaze thoughtfully into the log’s dancing flames and scratch our aging Labrador’s graying ears, I realize that in just a matter of days, we will usher in a brand new decade…and brand new opportunities.

With last year’s tax law changes, a plethora of retirement planning opportunities (the SECURE Act, for example), combined with continuing economic growth, this reflection seems more weighty, more impactful and infinitely more exciting than prior years.

So, as a seasoned tax and financial strategy practitioner, I regularly share updates on these opportunities with my clients via email and during our quarterly meetings — but, how do we address (get to know) new businesses who want to join our cherished client family?

 

Communications and our Beloved NCO Triage

Like the log’s embers keep the fire going, providing both light and warmth, having a foundation of trust, clearly stated goals and objectives fueled by open communication, regular review and adjustments — translates to success on both sides of our client relationships.

Think about when you go to the doctor or the emergency room. You want the professionals taking care of you to listen and understand what is going on with you so you can get the correct diagnosis and treatment, right? Well the same holds true for your business or family financial health.

Over the last several years, I have developed what we call our NCO Triage, or New Client Onboarding Triage. It has blossomed to over 7 pages – and NO, this is NOT like your tax organizer. It’s a strategic financial life goals framework that helps me help you turn your dreams from vision into reality.

Yes, it asks questions about your business like what kind it is, what state(s) you operate in, your revenues, status of tax filings, who does what in the finance functions, etc, but also covers key details like a SWOT analysis (strengths, weaknesses, opportunities and threats).

Next, we learn about your life goals… not just for your business, but how your business fuels your life’s passions and dreams. 1, 3, 5, 10 and even 20 years. After all, that IS why you are working, right? Finally, we discuss your communication styles and preferences so we are both comfortable with how we will play together going forward. Ninety-five percent of preventable challenges stem from miscommunication.

So, WHY is this Important?

Keeping an eye on the fire is important. Left unattended, the fire eventually dies out and the cold will seep in. A few strategically placed money tips will keep your financial fireplace warm and toasty.

As stated earlier and without sounding too cheeky (okay maybe just a little) — your cash flows, financial foundations and habits are the lifeblood of your business. Your goals and vision sets the heartbeat and pace with which you operate. Slow and steady wins the race.

Wanna know something cool? Meeting with your CPA or EA can actually be FUN! Seriously…

I just wrapped up Q4-2019 meetings with many of my clients. Most calls start out something like this… ”Hey Deb, I’d like to meet with you for an hour this time. Let’s talk about our financials and the tax items for the first 30 minutes or so. Then I have a couple of ideas I want to run by you, so put on your counselor hat for the rest of the call, OK??” What an honor to help them explore possibilities that will improve their lives. After all, wouldn’t you rather be helping transform your client’s future with smart financial tips and tools as opposed to simply fixing and filing their historical transactions? Seriously, I get just as jazzed up as they do — and LOVE to see their dreams become reality.

 

Key Takeaways and Next Steps for Caring Pros and Smart Clients

Mylie, our Lab, is looking at me with that “Mom, it’s time for bed” look. I get up, turn the Christmas tree lights off and add an all-nighter log to the fire — so it will have energy to burn, keeping our house toasty warm while we sleep and dream.

Fellow Tax and Financial Pros — Key Thoughts AND A GIFT

  1. Proactive Planning with Forward Focus: Understand that your best value as a passionate and knowledgeable financial professional lies in proactively helping your clients achieve their dreams and life goals. Right, wrong or sideways, you can only fix and file past transactions. Instead, help your clients avoid those mistakes in the first place while providing tools to make their future dreams a reality. (Hint: Start on page 4 of the NCO!) Leverage this mindset into your practice’s core values and I believe you’ll both be happier as a result. 
  2. It’s NOT about the Money: This is a lesson I learned the hard way. Don’t compete strictly on price – EVER. Not everyone needs to be your client. Read that again. It took you YEARS of training, countless exams and ongoing research every single year to do what you do and do it well. It’s about VALUE: The amount of money I save clients each year far supersedes their invoice amount. Don’t sell yourself short – your knowledge is worth it.
  3. Equip Your Clients: Many clients are NOT money gurus – they are great artisans in their own field, but need your financial expertise so their business can thrive and grow. Offering monthly or quarterly meetings, a Q4 tuneup and emails of key tips are simple ways you can help your clients go to the next level. Plus, it provides a reasonable revenue stream outside of tax season!
  4. The GIFT: You can download a copy of my NCO and adapt it for your firm’s use. The fun part starts on page 4! Understand, I am NOT giving tax or legal advice and this document does not replace your well-crafted Engagement Letter or professional due diligence procedures. Use the following link:

2019 NCO – New Client Onboarding Triage Initial Questionnaire Template

Smart Clients Wanting to Up their Game (It’s OK if you read the Tax pros list above too)

  1. Identify Your Goals and Vision: As 2020 begins, what do you want to accomplish in the next year or the next decade? Seriously, a little dreaming and planning can make a HUGE difference! Feel free to download the last four pages of the NCO, dream and jot down your thoughts (crackling fire and aging Labrador optional, but highly recommended)!
  2. Plan With Your Tax/Money Pro: If you are not planning with your tax pro outside of annually filing your taxes, you are missing out on a golden opportunity to make small (or even large), consistent improvements to your financial bottom line throughout the entire year. Yes, you should pay them for these meetings too – unless they are already on retainer.
  3. Execute, Review, Adjust, Repeat: Dreams and vision are great, but it’s ACTION that wins the race…100% of the time. I’d rather see imperfect action (within legal bounds of course) than a perfectly procrastinated idea. As part of your meetings, you can set timelines, deliverables, checkpoints and get objective feedback and insights to adjust course, as needed. Then repeat!

I, for one, am truly excited about spending quality time with loved ones and enjoying Christmas – celebrating Jesus and all the wonders we have been blessed with – and those opportunities which await. [Editor’s note: Debbie delivered this to me December 23rd. Your lazy editor didn’t get to it until after the 1st of the year.]

Wishing each of you a joyous, happy and safe Christmas and New Year – AND a next decade that blesses your family and business beyond measure!

Debbie Todd

Your Friend in Financial Wellness, Debbie

 

 

 

 

 

 

 

Contact Information

iCompass Compliance Solutions, LLC, dba 1 Hour Impact Firm #5917

Locations we prefer to serve: SW WA or Portland, OR Area. WBE certified in both OR and WA

Contact: Easiest to reach me via email or https://www.facebook.com/TheSpunkyCPA/

Email: deborah.todd.cpa@gmail.com

Areas of practice: Federal and state personal and small biz taxes, Non-Profit – 990s, IRS compliance and remediation, divorce and estates, also small biz startup strategy. Niche expertise in small business interactions with State and Federal Government Contracting.

In person or fully digital capabilities.

Areas of practice you don’t handle: Ex-Pat, valuation disputes, M&A.

Bio: You can learn more here, including govt background- http://1hourimpact.com/about-us/

Interesting tidbit: Special passion for teaching smart early childhood financial literacy using engaging, interactive theater.

 

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.

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.

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

Worthy Financial offers a flat 5% on their investment. You can read my review here. 

Reading is the foundation of every form of wealth: mental, spiritual and financial. There is even an argument to be made that reading good books is good for you physically, as you can learn to eat better and exercise more productively. 

Books are the cornerstone of knowledge. The more you immerse yourself in quality material, the better decisions you can make. 

Focusing on only recently published books is a mistake. Avoiding novels is also an error. A well rounded education comes from digesting material from all genres, even topics you normally don’t read. Even fiction can teach us plenty about the world around us and ourselves.

I read about a book per week. Some books are doorstops and require more dedication while there are times I polish off several shorter books in a week. The goal is never volume (pun intended). I never set out with a reading goal for a number of pages or books read in a certain time frame. The goal is to absorb as much knowledge as possible from the text. Some books read fast while others slow to a glacial crawl. If it takes longer, so be it. As long as I acquired the information and it sticks.

Without intention, my reading habits were unique this past year. I read some recently published material and plenty of older stuff. Novels played a bigger role than at any time in over two decades. Even a few self-published books made the cut.

I re-read a few books this year, too; some is part, some in entirety. Some of the Stoics come to mind. Re-reading a good book is something more people need to do. As with good movies, you pick up more with each reading. 

Before I share the 3 best books I read in the past year, let me point out this isn’t an exact time frame. I don’t mark a place on my bookshelf to delineate the changing of the calendar. Books I borrowed from the library are not included on my list because I can’t pull them up or easily quote from them. I have a bias toward my personal library.

Be aware the links in this post are affiliate in nature. That means I get paid a small fee if you use the link/s to buy the book.

 

Business and Investing Book of the Year

It might surprise you that I don’t spend all day reading investing and business books. Sure, I read plenty of business reports and financial statements; and most classics of the genre have been consumed and re-consumed. Only a few published each year are worthy of my time.

Many bloggers in the personal finance field have been self-publishing books. I’m unconvinced my time is well spent reading how a young person either dug themselves out of debt or retired at an early age. Without any personal debt there is nothing to resonate in the debt books. And since owning my own business is something I want to spend the rest of my life doing, retirement of any kind is a foreign concept to me. (I might slow down just a bit as age takes its toll.)

The best books of the genre tell personal and non-personal stories. This is where Business Adventures by John Brooks comes in and is our pick for this category. Brooks shares the tales of twelve intense situations on Wall Street. The stories are older, but the lessons are as valuable today as ever. Rather than a how-to book, Brooks allows us to learn from example.

While I may not “officially” read a personal finance book, I spend plenty of time reviewing personal finance books consumed in the past. The list would easily break 100 if I started dropping names. One book does stand out, however. My friend, Jim Collins, published The Simple Path to Wealth several years ago. As far as I’m concerned. this is the most modern classic of the genre. I page through the book for a short read constantly. You would do well to have a copy next to your reading chair. I keep a copy at home and the office. Yes, it is that good.

 

Novel of the Year

There was a time when I read over 100 novels per year. Science fiction topped the list, but anything was game. I’m a sucker for a good story.

SevenEves would have been the winner were it not for a strong showing by A Gentleman in MoscowSevenEves is a powerful science fiction novel mixing story with scientific facts. I enjoy science fiction stories that twist stories around realism. If it is possible, even if improbable, it makes for an engaging story.

But the nod goes to A Gentleman in Moscow. I finished this novel as year came to a close. The classic Russian novels have always intrigued me which is what attracted me to this novel. Gentleman is in the style of the Russian classics. 

A Gentleman in Moscow starts in 1922, at the dawn of the Communist Revolution, and ends in 1954. Count Alexander Ilyich Rostov is sentenced to house arrest in the Metropol Hotel for life for writing a poem years earlier, before the Revolution. We later learn he didn’t even write the poem.

Rostov befriends staff and guests at the Metropol as he settles into his life of house arrest. His vantage point is unique as he watches the horrors of the 20th Century unfold. And then he meets a 9-year-old girl that changes his life. 

Gentleman is a novel about living life on your own terms. The history is impeccable, adding to your reading pleasure. You will learn a lot about yourself reading this novel, just like the classic Russian novels. The bittersweet humor brings the story to life. It’s almost as if you are there, desiring a life encapsulated within the Metropol as the world unfolds around you.

Whether you read fiction or not, you need to read A Gentleman in Moscow. It’s that good. . .  and important.

 

General Non-Fiction Book of the Year

The list of good non-fiction is extensive, necessitating an Honorable Mentions List to follow. How do you choose between Factfulness by Hans Rosling, Enlightenment Now by Steven Pinker, Thinking, Fast and Slow by Daniel Kahneman and Empty Planet by Darrell Bricker and John Ibbitson? It comes down to personal bias.

Thinking, Fast and Slow is kind of like a business or investing book so it appealed to me most. The list in the prior paragraph are also must-read books, along with the selections in the Honorable Mentions List to follow.

Thinking is useful in every facet of life: business and personal. Learning how and why you think the way you do helps reduce error. Fast thinking is a reflex. It’s easy, but sometimes wrong. Slow thinking, the kind that requires energy to think things through, takes effort to engage due to the work involved. Knowing when our fast thinking is wrong and when to force ourselves to think slowly is vital to achieving goals.

At Camp Accountant this year I used examples from Thinking to illustrate errors we make when investing in retirement accounts. It isn’t always as intuitive as you would think. I also published two posts this year using the information from this book: here and here.

President Obama’s 2019 Reading List

Honorable Mentions

Why only “3” best books of the year? Everyone else uses a longer list. Ten is a common number with a few going much longer. President Obama listed 38 books for 2019. I suspect that is every, or nearly every, book he read last year. 

Long lists need to be honed down to a manageable size. Not every book read is worthy of recommendation. I read a few clunkers last year that will not be sharing here. Even a few good books that just didn’t fit in right for this post were edited out. 

There is a logical reason for a shorter list. When you give long lists people tend to skim the list and move on without reading a single book. A shorter list takes away most of the decision and the odds go up exponentially you will read one or more of the three books. If this post has any value, it must get you to take action. And for the avid readers, the Honorable Mentions gives you plenty additional to chew on.

Factfulness and Enlightenment Now remind us the world is better than it has ever been and getting better. Both authors provide proof. 

Empty Planet informs us the demographic bust is coming with plenty of evidence human population will fall later in the 21st Century. Climate change isn’t mentioned in Empty Planet, but with fewer people and increased technology, greenhouse gas emissions will be coming down regardless what governments do or Greta says

I love Ryan Holiday’s work. Stillness is the Key is must-read material.

Vaclav Smil’s Energy and Civilization is also required reading. The history of energy utilization and prime movers is a fascinating story, dispelling the myths surrounding energy, consumption and pollution.

The classic, Lord of the Flies, entertained, as it has for over 60 years. Still, I had to give the nod to A Gentleman in Moscow.

I end with an extra special Honorable Mention, Maps of Meaning: The Architecture of Belief, by Jordan B. Peterson. The difficulty level of this book made me step back. Maps of Meaning may be the most difficult book I ever read. And important! 

Maps of Meaning looks at how we develop our beliefs and how they shape us. Archetypal stories help us define the world around us, offer a framework to culture and a map to living a meaningful life. Reading this book took a lot of time. Sometimes a sentence or paragraph would force me to put the book down for an hour to think about what I just read. If you enjoy deep thinking, you want to invest in Maps of Meaning.

 

Now it’s your turn. Share books you found valuable or important this past year in the comment section below so readers, and a certain unnamed accountant, can enjoy those books, too.

Happy reading!

 

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.

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.

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

Worthy Financial offers a flat 5% on their investment. You can read my review here.