Experiencing the magical moment when you discover you have reached financial independence is like no other. Early retirement, financial independence and becoming a millionaire are all possible. $10 million isn't what it used to be. #rich #poverty #personalfinance #earlyretirementI remember the day I realized I crossed the seven figure mark. The actual moment of crossing was lost because I didn’t know I was doing so well. There was no party or celebration.

The year was 1996, I was 32 years old and the bank needed a personal financial statement for an investment property purchase. The real estate partnership I had with my dad and brother was in full swing, but I wanted to add a few additional properties to my personal portfolio.

The bank asked for a personal financial statement. It had been a while since I filled one out so I was interested in where I would end up.

Don’t get me wrong. I track my finances closely. Each individual investment gets reviewed annually or semi-annually. I don’t always add up all the numbers to see where my net worth is, however.

As I gathered each asset and wrote its value down I could see this was going to be higher than I originally anticipated. My liquid investments had advanced a lot over the years and the real estate in my portfolio was adding a serious number to my net worth.

Once I had the assets added I knew I had crosses the million dollar mark before tallying the liabilities. Debt was low, even with all those rental properties.

When the final number was entered, my net worth stood at slightly over $1.2 million.

Most people would be excited if they discovered they were a millionaire. I was numb. I didn’t know what to think.

I was also depressed. Deep down I expected there would be some kind of positive feeling when I crossed the magical barrier. But, nothing. I was still me. I did not feel rich and certainly didn’t want to sell my tax practice. I enjoyed what I was doing.

And this depressed me the most. When I was a child I always wanted to be a millionaire and now that the goal was reached it didn’t make me feel different. What was I going to do now?

Growing up poor gave me a distorted illusion of what “rich” was. A million dollars was rich in my mind without understanding you can be rich with or without money. And now that I had a million dollars it didn’t change me. Something was wrong.

I shared the good news with Mrs. Accountant. She smiled and said, “That’s nice” as she went back to tending our first daughter, one year old at the time. Even my wife didn’t think it was all that big of a deal.

It became clear quickly why I wasn’t feeling the glory. In my mind the million had to be liquid, as in stocks, bonds, mutual funds and bank deposits. Much of my net worth was in income producing assets: a business and investment properties.

I never quite got my arms around the concept that I had arrived. After a while I found a way to let it go and not worry about it. Money, lots of it, would never give me the tingly feeling I expected it to. And crossing a net worth boundary wasn’t going to be something you feel as you cross it.

Such are the illusions of a young man.

Twenty Years Later

It was time for the mid-year review of my portfolio. Normally I wait until later in the summer, but I had a feeling I crossed another big threshold in my net worth. In fact, I was certain of it.

In the late 1990s my business exploded to the upside. Profits were very high and I was young enough and hungry enough to want to push hard. We started selling real estate holdings in the family partnership. By 2000 my real estate portfolio consisted of my farmstead, office building, and some real estate paper paying some very nice rates of return. No more dealing with tenants for me.

I kept adding excess cash to my index funds. Spending was always low because there wasn’t much I really wanted. I had my family and was completely satisfied with this awesome gift. There was nothing else I needed.

Late last year I was a whisker away from $10 million. With the continuing bull market I knew I crossed the threshold without as much as a twinge. I’ve been down this road before and expected nothing in the way of emotions this time.

Adding the assets always takes some time now. My liabilities are easy; I have a small mortgage of just over $100,000. The end.

Assets are scattered all over the place. I own the obligatory index funds in traditional IRAs, Roth IRAs, the HSA and business retirement accounts. The non-qualified account also uses index funds.

Real estate was next. I still hold a minor amount of paper on property, plus the farmstead and the office building. I estimated the values conservatively. No room for ego when calculating my net worth.

The hard part is the trusts. As an accountant I understand the value of using trusts to carry out my wishes when I leave this green earth. This leads to a number of entities. Gathering all the trust values required the most time.

Once the assets were tallied I sat back in my chair and wondered how my life ever turned out so good.

Remember the old adage: the first million is the hardest? Well, I crossed plenty of those in the last six months. The final number came in at $12,600,200.

Yes, I rounded! Real estate and the business are estimated, as I have said.

My net worth increased over 25% in six months! This is an astounding number to me. I’m sure it is to you too. Part of my luck stems from a solid increase in the index funds. Where I smoked it is from investments I made in the 1980s. Phillip Morris is one of my first individual stock purchases. I never sold. It kept growing and keeps growing. In the early days it was in a dividend reinvestment account so the dividends kept buying more shares. Morris later changed its name to Altria when it spun off Phillip Morris International a few years back. The dividend grows times two now.

A while back I bought some Tesla, Netflix, Facebook and a few other stocks. The “other” stocks did okay, going up with the market. I don’t have to tell you what Tesla, Netflix and Facebook did, do I?

Lost Dream

Twenty years ago I was depressed I missed the magical moment when I crossed from poor to millionaire. I expected something, I’m not sure what. But I expected it!

After the non-moment wore off I went back to doing what I always did. Nothing special. I ran my tax practice, read piles of books and satiated my curiosity whenever I could with a new project.

Since I invested nearly every dime I had in my paw, there were times money was tight. I subscribed to grandpa’s philosophy: Never take off the pile. I invested first and figured out how to pay the light bill later. What can I say? I always lived that way.

I always felt poor; still do. My goal was to return to the farm and twenty years ago we had just moved into the farmstead I still live in. My dreams were fulfilled. The office was out of the home. My business goals were simple: beat last year’s numbers. More clients, more electronically filed returns, more revenue. Always more. It was the only scorecard that mattered.

I drive bank repossessed cars and grow a significant portion of my own food. Mrs. Accountant loves canning and freezing our excess produce for winter consumption.

You want to hear the really sick part? Mrs. Accountant still refuses to buy any clothes unless it is marked waaaay down. And I mean way down! Like $3 pants and $3 shirts. It gets better. Underwear and socks are frequently purchased at Goodwill. You know, Goodwill sells undergarments with defects really cheap. My attitude is if they don’t have defects when purchased, they will about twelve minutes after I put them on. So I wear the cheap stuff.


Longtime readers of this blog know I muse periodically on why people like Warren Buffett and other very rich people still live frugal lifestyles. Buffett spends under $3 for breakfast he purchases at McDonalds on the way to work. Yes! On the way to work. At 86! He even uses coupons!!!

The exclamations points are for you, dear readers. I totally get why Elon Musk keeps starting new businesses and pushing forward even after snagging upwards of $300 million from his portion of the sale of PayPal. I get why Steve Jobs worked until his body failed. I know why Buffett says he skips to work every day at 86. I get why Jeff Bezos keeps building Amazon bigger when he is one of the richest people alive. I get it.

Do you?

Those guys all have more money than me by a massive amount. But once you reach a level where money is no longer a deciding factor or important, it becomes something else. A scorecard.

Working my business is not about more money. It is about providing value; doing something important; making a difference; finding fulfilling activities to occupy my time.

I invest and expect the investment to go up. I work really hard to make good investment decisions. If they go down my lifestyle will not change one bit. In reality, it doesn’t matter what happens.

But it does to me. I want to win. It is all a big game. And I like winning when I play. If I can’t win, or am not allowed to win, then I don’t want to play anymore.

In the office I still track my performance. I track my performance a lot more than I track my net worth that is for sure. I want to always keep growing.

There are things I wanted to do even after I crossed the million dollar mark. I wanted to farm, so I did. For a while. (A twenty year while, actually.) I backed away from the steers, but still have the acreage. Maybe I’ll go back into raising more animals, maybe not. Right now I have another goal I need to satisfy.

Everyone has dreams as a child. My dream was to grow up and be a writer. (I wanted to be a stock broker, too. That dream has also been fulfilled and I moved on.) I wrote my first full length novel in high school.

Earning a living writing is no easy task. Some of my work sold, but it wasn’t steady work and by then I had different plans. Still, the dream never died. I wanted to be a writer. A real writer.

Over the years I published a lot. The internet offered more publishing opportunities than ever before in history. But I didn’t feel like a “real” writer.

Now I have this blog and it is my dream. I write. I love writing and will keep doing so. The goal is to build traffic and profits. I call it ego, but it isn’t. It is a little boy inside me screaming out his dream. The sound is deafening.

My goals are detailed. Without wasting your time on the details, let me just say I want this blog to be a standalone business with employees and not a sidebar of my accounting practice.

Like Buffett, Musk and Bezos, I don’t need more money to make me happy or to put food on the table. My lifestyle will not change a bit if this blog grows to gargantuan size or fails. I just want it. That sounds so selfish and self-centered. It’s not.

Money is the scorecard to keep track of progress. Nothing more. Traffic statistics help me see how many people I am reaching; money allows me to see the difference I am making. I want lots of both.

I’ll spare you the gruesome details on how I plan to accomplish my goal. Sharing valuable ideas is more important. What I want to share is an insight you must have.

If you have already reached financial independence you already understand what I am about to say. For the rest of you, I want to share this one nugget of advice I wish I understood at a younger age: Stop worrying about what your net worth is. Relax. Don’t worry about becoming a millionaire. Live right and it will happen all by itself without any necessary worrying.

How Warren Buffett reacted when he became a billionaire. Reaching a financial milestone is anti-climatic unless you're prepared. Get rich! Build wealth Reach your financial dreams. Think rich, then become rich. #wealth #rich #billionaire #millionaire #investingI missed the magic second when I went from under a million to over a million. It was only a second and if for some reason it did cause some sort of feeling or euphoria, it would have been short lived anyway and a drug only offered once in life. When I wasn’t looking, there it was. I went from less than a million to $1.2 million. The same happened when I went to eight figures. It still blows my mind. Eight figures? And it makes not a bit of difference in the world.

My frugality is not forced. I am frugal with my money because it is who I am. Impressing the neighbors is something I never did. Let the neighbors laugh. It doesn’t bother me.

Saving half your income is easy once you allow yourself the gift. Investing is easy when you are not trying to shoot the moon. Debts and a low net worth encourages people to gamble with their investments. It’s not necessary. You do NOT have to shoot the moon! It will happen faster than you imagine when you let go. Buying a hot stock tip or a flyer is sure to end badly. Timing the market or your index funds investments usually ends in tears.

The rules are simple. Spend less than you earn and invest in a broad variety of established businesses (index funds). The rest will take care of itself.

One day you, too, will realize you crossed a magic threshold of net worth and missed the moment it happened.

It works that way. Hope you weren’t expecting more.

Wealth Building Resources

Personal Finance 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 Finance is free?

Medi-Share is a low cost way to manage health care costs. As health insurance premiums continue to skyrocket, 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.

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

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

Start your rewards card search here.

The biggest problem most people have with credit card bonus programs is meeting the spending requirements for the bonus. Business owners have an advantage. Landlords do too. Meeting a $3,000 spending requirement in 90 days is a snap of the finger for even a relatively small business or side gig.

But not every side gig has enough spending that can go on a credit card and if you only own a few rental properties and maintenance is not currently required you will need another source of spending to earn a bonus.

Readers of this blog tend toward the frugal side. Spending for the sake of spending for a bonus is crazy and you guys know it. Your personal spending is probably too low to earn many bonus cash awards or miles. Travel hacking gets harder when you save most of your income.

Manufactured spending is the solution bandied around the blogosphere. It sounds so simple at first. Find a source where you can recycle fake spending into cash and miles rewards. Well, how do you do that?

There are two problems with manufactured spending. First, it frequently requires a lot of running around and effort. It boils down to time and what you value your time worth. Running to the store to refill a debit card or jumping through hoops to add a few more dollars toward a spending requirement is a poor use of precious time.

The second problem with manufactured spending is cost. Recently I wrote a post on using the IRS and taxes as a way to manufacture spending. It’s a great idea to create massive amounts of spend, but it has a cost. The cost can be small, but costs, even small ones, add up. The cost of manufactured spending digs into the value of your rewards.

Turning Manufactured Spending Into a Cash Cow

I have never been a fan of manufactured spending. Recycling spending through a program to generate benefits is a fool’s errand. As fast as you can find a program to game the rules change. Siphoning off value costs somebody somewhere something. That somebody soon discovers the issue and changes the rules. Then you get to start the hunt for another source of spending to max out credit card rewards programs again.

There has to be a simple way to increase spending without real cost to the budget. To maximize the value of manufactured spending, the costs of creating this spend must be reduced or eliminated. Cost in this instance is more than just money; it is time, too. To be effective it must be fast, simple and no or low cost.

The ultimate manufactured spending would allow you to buy a large value amount of gift cards of a general use credit/debit card—a Visa gift card, perhaps. This in effect would extend the spending deadline, as required spending to meet reward qualifications are met, while the true spending could happen at a future date using the purchased gift cards.

Top Cash Back (affiliate link) has a unique program where you can buy American Express and Visa gift cards and get cash back. Buying a gift card frequently has fees attached and this case is no different. However, in this instance the cash back covers most, or all, of the fee.

Step-by-Step Process

Let me walk you through the process before I let you get on with your day.

Step 1: Research a credit card with a high cash back or miles reward that meets your goals. You can use this link to review just about any credit card reward program imaginable here. (If you use this link as your gateway into the CardRatings site and apply for a credit card and are approved this blog will receive compensation.)

Step 2: Apply for the card best fitting your cash back or travel goals. Maybe you are looking for a large cash back reward. Maybe you have a miles goal with a specific airline as you plan some travel. You can hone your efforts to any credit card you want without concern over meeting spending requirements.

Step 3: Once you have the credit card use it for all spending, as you have in the past, to get as much of the required spend used within the timeframe required by the credit card. Do NOT spend extra just to meet spending requirements for a reward. That kind of defeats the purpose of the program.

Step 4: As the deadline for bonus rewards required spending approaches, review your spending to see if you are short of the required spending.

Step 5: Go to Top Cash Back and order Visa or American Express gift cards to complete your required spending to earn the reward.

Step 6: You can either cash out the gift card (Visa only) immediately (there is probably a cost to this) to pay off the credit card bill or you can use it to cover future spending needs.

Many of the best rewards programs have daunting spending requirements. This no longer should be a concern for you.

There are many ways to manufacture spending. This is one additional tool to add to your workbench. No one program fits everyone’s personality or needs. The more ways you have to meet spending requirements the better and the more rewards you can earn.

Please consider using the links on this page to support this blog.

Bookmark this page for future reference and as a starting point in your research for additional rewards cards.

Please share this page on your social media. My ego needs the boost.

Share additional ideas in the comments section below.

Tax season is over. The long days and endless weeks are finally at an end. It’s time for a nap.

In my younger days I also ran long stretches with limited sleep. Farming is intense during spring planting and autumn harvesting; college was late night studying or visiting with friends; and now taxes provide me with twelve weeks of unrelenting work each year.

Society idolizes people who run with limited amounts of sleep. It is a badge of honor to pound your mind and body mercilessly and do it with lack of sleep.

As tax season clawed toward the finish line my performance was no longer acceptable. The amount of work I completed was down and concerns over accuracy started to pop up. Nobody can perform at peak while fighting fatigue and lack of sleep. Nobody.

I call these bursts of hyper activity “marathon runs”. Tax season is my current annual marathon run. It appeals to me because I have manic depression and I learned a long time ago autumn is a bad time and springtime is power time. It was a natural fit. The disease doesn’t always cooperate, but I have learned to control it enough to use it to my benefit.

Yet, the risks of long hours without sleep are a real problem. Lack of sleep is a leading cause of transportation accidents. Even if you read the news poorly you have heard stories of airline pilots, ship captains, train conductors and barges in catastrophic disasters due to lack of sleep. Doctors frequently perform surgery in the morning for a reason. Only emergency surgery is performed later in the day.

The Evidence is In

You don’t have to look any further than this blog to see first-hand the effects of sleep deprivation. With tax season over I can finally get some sleep. One eight-hour night of sleep does not make up for all the lost hours over the preceding months.

I am always tired this last week, even more so than when I was working. I get up and then take a morning nap. Once you reach that deep and are that over-tired it has consequences. Slowly my body returns to normal.

In 2011 I published a short piece on a content farm about living on 4 hours of sleep per day. I had convinced myself I was one of those special people who could live on almost no sleep and still function at a high level. While it is true each individual needs a specific amount of sleep—some more, some less—most people require 7 to 9 hours per day. It doesn’t have to come at one time or all at night either. An afternoon nap can be a powerful part of your sleep pattern.

Then there is the delusion. You need look no further than this blog for a prime example of how sleep deprivation affects cognitive thinking. A few weeks back I allowed a guest post which turned out to be a scam. The warning signs of sleep deprivation were in full flower. Still, I trudged on to the tax due date. Now, with tax season over and a few more hours sleep, you would think my mental capacity would quickly return to normal. It’s not that simple.

Friday’s blog post had all the hallmarks of a sleep deprived person struggling to recover from a marathon run. The story was solid and the information valuable, but I wrote a shorter piece with too much profanity. I was puffing up the story. Worse, over the weekend I edited some of the profanity out and tightened the story and noticed multiple glaring grammar and spelling errors. My editing skills were affected more than the writing process itself. I couldn’t even see my own mistakes!

Sleep deprivation allows you to think everything is okay when it is not. “I’m good,” you say when it is painfully apparent you are impaired.

Health Issues

Clients get upset when I refuse to set appointments the week after tax season ends. What they don’t understand is how badly I need rest.

Everybody want me, and only me, because they think I have some magic when it comes to taxes because I write a blog and speak around the country on the subject. Well, I am good at what I do, but no matter how good I am, there is a limit to what one human being can do before serious health consequences arise.

I need sleep and I bet you do too. You are no good to anyone, much less yourself, when you are running on fumes. Peak performance never comes after a marathon run.

But who hasn’t had an all-nighter? Me, for one. As much as I reduce sleep at times, I still don’t engage the legendary all-nighter. Been close a few times.

We all reduce sleep occasionally when we are doing something we really like. The late night party or a good book you can’t put down until 3:30 in the morning are examples of short-term sleep deprivation that works. The fatigue isn’t too bad the next day. It doesn’t take much of a leap to start deceiving yourself you can handle living with less sleep.

Trouble starts as soon as you do. Health.com recently ran an article on the benefits of adequate sleep. Several struck close to home for me. Better memory, longer life, more creativity, less stress and a healthy weight were all connected to appropriate sleep levels. These are important things to me and I bet they are to you too.

Yahoo Beauty recently discussed the same issues as they relate to appearance. Ladies, if you want to look younger, more alive, vibrant, get eight hours of sleep each day! You know this is true. You can point out a sleep deprived waitress from a mile away without knowing anything about the person. It shows on her face. Given enough years of sleep deprivation and you will show additional years of wear and tear on your face too. Is there a better argument for more sleep?


Okay, I understand I am preaching to the choir. I have sleeping issues, admittedly. When I try to sleep sometimes I can’t. It come and goes.

Success is important to me. I enjoy running my tax practice, serving my clients and sharing ideas here on this blog and with audiences wherever they will have me. Successful people sleep.

Contrary to my 2011 article chronicling important people who live/lived with only modest amounts of sleep, successful people sleep. A lot.

Jeff Bezos turned Amazon into the massive company it is while making eight hours of sleep a day a priority. Many business owners feel it is a badge of honor to run and keep running non-stop day in and day out. The relentless drive is all they know about success. It ends poorly. Heart attacks and questionable business decisions blanket business news. A few years back investments banking firms got in trouble when an intern died from lack of sleep working the job without rest or time off. Clue people: that is NOT success; that is torture! Stop torturing yourself.

Back in July of 2015 Ryan Holiday, a writer I admire and enjoy reading, wrote a piece on sleep. It’s short and to the point. I recommend you read it.

Holiday talked about how he found time to read so much and quickly made it clear it wasn’t sitting up all night. He went a step further and said ample sleep is what allows him to be a prolific writer and reader.

You can imagine how this sat with your favorite accountant. My love of reading was front and center. I could read more and enjoy it better if I had a good night’s sleep. As Kurt Vonnegut wrote: So it goes.

Secrets to a Good Night of Sleep

My mind races. Ideas are always pouring out of me. It never stops.

Over-the-counter and even prescription sleep medications carry the risk of dependence. Worse, if you are like me, they don’t work well or for an extended period of time. The only way to sleep is to turn off the kaleidoscope of voices demanding to get out.

Melatonin might be the sole exception to the medication rule.  This naturally occurring substance is produced by the brain to facilitate sleep. Many people find blissful rest using melatonin. I am not one.

An active mind is not a bad thing. The ability to turn it off is important, however, if you plan on keeping your level of creativity and performance high.

If you haven’t heard before, I’ll briefly say now: stay away from bright lights, TV, computer screens! smartphone screens! (yes, those exclamation points were intentional) and similar activities prior to nap time. You don’t need the phone by the bed. The President is not calling you. And if someone has died and you are not known for performing resurrections, voice mail can handle it. The body will still be there in the morning.

Reading a book can help you relax. But if you are like me and become engrossed in books easily, this can backfire. Regardless, reading is a great way to unwind the body, preparing your mind for slumber.

Meditation is the most powerful tool to encourage sleep. The last half-hour prior to retiring to bed it is a good idea to sit comfortably, close your eyes and focus on your breathing. This practice will help clear the mind of racing thoughts. When thoughts try to break in, let them. And then quietly ask them to take a seat to the side where you will deal with them the next day. Return your focus to each breath.

God knows I have put a lot on my plate at times and sometimes others have had a hand in it too. Each night before bed and each morning before starting my day are reserved for quiet meditation. Sometimes I reflect on the previous day or plan out my thoughts. Always return to focus on your breathing.

Thinking about issues important to you or upsetting you are best handled in the quiet contemplation of meditation. Ten minutes should be enough most days. Sometimes, when the world crashes in, you need more time to order your thoughts and prepare for sleep. Take as much time as you need.

We are not gods, people, as much as we sometimes like to think we are. In the three major monotheistic religions of the planet God created the world in six days and rested on the seventh. You are not better than God. You need your sleep if you want a long, happy life filled with meaningful activities.

You are only truly awake when you first have adequate, deep, nourishing sleep.

Now, if you’ll excuse me, I need to take a nap.

Tax season is officially over and not a moment too soon. As much as I love the work, when months go by without a day off it begins to wear on me. The worst part is the sitting. Too many hours planted in a chair coupled with sleep deprivation and health is not getting the attention it needs.

Loving something as much as I love tax work is also a challenge for people around me. Mrs. Accountant is an angel, allowing me the opportunity every year to disappear for months to help complete strangers and semi-strangers with their tax, accounting and financial problems. My daughters have learned from an early age dad is a very intense man when it comes to his work.

Work has never been a four letter word for me. (Considering my profession you would think I could count to four better.) Growing up on a farm meant everything was work, but not work. Running to the creek to fish was something you did. Planting in spring was fun, not really work. Harvesting was an addiction; sleep was hard to achieve until the crops were off the field. I know of no greater pleasure than watching a barn filled with bales of hay, placed there by my own hands. There is no greater thrill than to see the milk cooler fill each day to the rim. A full bulk tank meant money, and therefore, life. It was a good life and I had no idea what the real world was like outside my vision horizon.

Formalized work is another story. Working on a farm is just doing stuff you feel like doing. Calling the cows for milking was more pleasure than work. Even the farm dog knew when it was time to sic’em. Our worldview was narrow, yet innocent. And there is something to be said for ignorant innocence.

But I was smarter than the rest of them. And restless. Never satisfied, I had to know what was on the other side of the hill. “Greener”, you say? Well, I gotta see that for myself.

Innocents Abroad

The family farm was reaching the end of its lifecycle and the world would open before my eyes. With an optimism only the ignorant can feel, I headed out into the world as the family farm took its last gasp in bankruptcy court. The cows were gone and some of the land. The homestead and most of the land (the core holdings, for sure) were preserved in the family name. I had different ideas.

On one hand I say work doesn’t bother me, but you may have noticed I have yet another hand. Neat, huh? With this extra hand I’m lazier than shit. I wanted nothing to do with the daily grind and obligations of milking cows. Working for the man would never cut it.

Well, of course, those lazy-ass business owners have it made. Hire a bunch of slaves, ah, I mean employees, aka team members, to do all the work while I did the one thing I really enjoyed: counting the money.

This whole early retirement thing is an alien concept to me. Retire early? From what? My plan was to never start! Take that Mr. Money Mustache. Work until you’re 30. Pftt!

Unfortunately the world is not always kind to idiots, ah, innocence. I had a plan and life had a few plans of her own for me.

The Best-Laid Plans of Mice and Men

The best part of living in the middle of nowhere is that you never develop the bad habits of the world at large. As a kid, my biggest expense in life was dropping money into the plate Sunday morning. My senior year of high school I think my entire spending for the year never broke $200 and most of that was enforced school spending which pissed me off to no end. Come to think of it, I still have a burr in my shorts over it.

By nature I was fiscally tighter than a rusted ring shank nail. Working at saving was like saying I have to work to keep my heart beating. The darn thing does what it does without any conscious input by me. Money, saving and investing worked on the same rules for me. And good thing. If the world had taught me the bad money habits most people have you would not be enjoying this wonderful story this very moment. (I am not conceited. But I am right.) It was thrift which gave me a fighting chance to pull the stunt I was planning.

I needed to find a business where I could work very part-time and screw around whenever I wanted. My preferred screwing around was books. I loved to read and still do. I read every day. That is one better than eating because I periodically fast.

Out of high school I was still working on the family farm. A few months later it was gone. With few options available in the Rust Belt during the early 1980s recession I went to work for my dad’s agricultural repair business. Talk about work. This was nothing like farming! Hundred hour work weeks for minimum wage or less (I worked for family) educated me about the “real” world damn fast.

Bookkeeping, taxes and payroll all looked mighty good. Sure beat crawling into another dirty silo. (My brother, on the other hand—remember, most of us have two hands—enjoyed the silo work and still does. To each their own.) My dad hated paperwork so the task fell to me. For a few years I had my side gig while busting tail another 80 hours a week turning a wrench. Don’t feel sorry for me though. The lessons learned from hard work are never lost.

I learned I needed to get that side gig going and going fast. Sick of the ag industry, I left the family business and moved into my own home. I was 22. For the first time in my life I could indulge my reading habits with reckless abandon. Lucky me. My side gig was 50 or so tax returns each spring. Investments rounded out the rest of my financial needs.

My first home wasn’t much to look at. Houses are cheap in the boondocks. I paid $12,000 and change. Don’t quote me; I don’t recall the exact number, but I am close. I had money; I had books; I was happy as a pig in shit.

Then I met Mrs. Accountant.

From the FIRE to the Frying Pan

I would never have amounted to anything if Mrs. Accountant hadn’t found me and shown me the way. A year after we met we were married. Now some folks would say I went from the frying pan to the fire, but it ain’t so. I was in the FIRE (financial independence, retire early) and Mrs. Accountant kicked me back to the frying pan. And good thing.

Frugality allows for some serious laziness. When needs are small and desires nonexistent, so are money needs. Without debt, the required money needs are rather small. Any side gig would do. But the one thing I love was unfulfilled.

As Mrs. Accountant and I prepared for married life, the minister marrying us required we take marriage counseling. Innocent enough. As the counseling reached its end the minister commented on my lack of employment. He offered me a job as janitor (that’s custodian to you!) for the parochial school attached to the church. What could I say? I accepted. As memory served, I fought back tears at the time. Once again I was working a dreaded job by the clock. I thought nasty things about God. In his house, of all places.

Don’t let the whelming tears in my eyes cause you any emotional trauma. The work of a janitor is honest work and I took to it like a duck to water. The main reason it took so well is I discovered a janitor can get his work done in a fraction of the time needed. This allowed plenty of time for reading on the clock. God was coughing up a hairball for your favorite accountant!

Regardless how honest the work and wonderful the people at the church and school, I had other plans. It was during this one year swilling toilets, picking up puke and mopping floors that I decided on my official side gig: tax preparation.

I had it all figured out. I’m a smart guy and I’ll tell ya about it if you ask. If you don’t ask I’ll tell ya anyway and wonder what the hell is the matter with you. Tax preparation was the perfect job for a guy that really wanted to spend all day reading. For two and a half months I worked reasonably hard (don’t take on too many clients now) and for nine and a half months I do . . .  nothing! Ye-Haaaaa!!!

Back Into the FIRE

Remember how I told you I was a smart guy? Well, I lied!

The first few years in my retired side gig life were peachy. Mrs. Accountant and I had a new home and my office was in the remodeled basement. Life could not have been better. This is where a medical condition I have affected my so-called intelligence.

I record everything in business. I knew how many returns I did every single day. I still have the handwritten pages next to my desk going back decades. I can tell you how much money came in on any given day and how many returns I prepared that day. It was a sickness. Now the records are computerized in QuickBooks and Excel worksheets so I can micro-analyze the data even better.

There was only one goal I ever had in life: beat last year’s numbers. At first this was a noble endeavor. The numbers were small and tacking a few onto last year’s performance was no big deal. But compounding, as we all know around here, takes on a life of its own.

No longer satisfied with my performance, it was time my side gig went viral. (This is before there was such a thing as “going” viral. Back then viral meant you needed to see a doctor for that little indiscretion you had while traveling overseas.)

I wanted back on the farm so I bought my current office building and farmstead. The year was 1995. A mere five years after starting my serious phase of the tax side gig I was going all-in. The side gig was now a full-fledged business. I had employees working in my basement, but now we were putting on our big girl panties. (This is a family blog so there will be no pictures of people in big girl panties.)

I was back in the fucking rat race. (So much for a family blog.) An office building and more employees meant . . .  WORK! You may not know this, but I have a life threatening allergic reaction to work. I break out in hives and need plenty of rest to recover from any such incident.

Truth is, I was happy. The business had plenty of room to grow. And grow it did. A storefront sent a bulging client list into obesity. It worked for a few years.

Payroll and bookkeeping were minor parts of the company. A one-man (or woman) summer staff was all that was needed. Seasonal help made the office hum like a beehive. I lived for the thrill of tax season.

But I still had the sickness; beat last year. And beat it, I did. Within a few years I blew past 2,000 tax returns and was turning people away. Stress showed up about the same time. It was too much. My disposition was not conducive to this kind of business. I was never going to be a Bill Gates or anyone who would take a small tax practice to a multi-location regional or national firm. I knew what the price would be and refused to play. It was time to stop beating “last year’s numbers”.

I honed the client list down to 700 over the next few years. I was happy again. I was doing what I loved most: reading a lot, preparing taxes and researching tax issues. I was a pig back in the schmoo.

But . . .

Do we see a pattern here?

All that reading and knowledge really should be put to work. Right? Well, smart as I am, I started thinking. I pay property tax for the full year for the full building. I pay for building upkeep. I pay for computers. On ad nauseam. My thinking was simple. Computers cost exactly the same whether I use them for three months a year or if they are used all year long. What a concept!

So I started adding more payroll and bookkeeping clients. I felt I could hire and retain better employees if I could give them full-time work instead of seasonal jobs.

For several years I turned my practice into a job. Bookkeeping and payroll burst through the seams. Since my focus was tax, the payroll and bookkeeping never turned a profit of any size. Toward the end it even lost money. I’m a tax guy and know it.

I built strategic alliances for bookkeeping and payroll (yes, I know I still owe you guys a post on this outsourcing program). Most payrolls are handled outside my firm and bookkeeping is headed in the same direction. Yes, computers don’t cost more if they are used all year, but if there is no profit, why bother? Now the strategic alliances turn a profit, so feel free to contact my office for payroll and bookkeeping. We do it better and cheaper now. No stress for me; better service and price for you. And I make money. And last I checked that is the reason I am in business; side gig or no.

Danger, Will Robinson!

Tax season is over. I am writing from home. The office is quiet. My office manager and one tax preparer are all that remain. Friday’s are very short days. Only one full-time employee will haunt the halls of my practice until the next tax season. Even the office manager is on truncated hours. And me? I am writing, reading and speaking. My schedule is full. Too much traveling for my taste, but necessary for the life of a blogger who wants to turn it into a real business.

Livestock Dairy Farm Cattle Agriculture Milk Cow

And now we get to the real issue of this blog post. I hope you read this far.

I share my story because I want you to understand the dangers of a side gig. There is one last thing I haven’t told you yet. It is the worst possible thing ever anyone is forced to do.

My practice is more a side gig than ever again for the first time in years. The long hours of tax season are over and my lusts have been satisfied. I accomplished a lot and missed a few things I really wanted to get done for clients. Now I look into the maw of a summer without payroll issues. Some tax work still comes in. It is easier to finish a couple hundred tax returns over nine months than a thousand in two and a half. Yet my heart is heavy.

It is not lack of work to fill my days weighing on my soul. It is the people. My employees. Summer work is done and what started as full-time opportunities turned into seasonal work. As this tax season progressed I knew what had to be done. Good people, people I enjoyed working with, would no longer have work to do in my practice.

I am a coward in these matters. My office manager broke the bad news. My front desk: gone. Tax professionals: gone. Karen, my office manager, keeps the place running smooth. Dawn, an undiscovered tax prodigy (Don’t let it get to your head. Dawn likes to read this blog so I need to keep it real for her.) who somehow wandered into my sphere of influence is the sole remaining full-time employee. There is enough work for her to do as long as I send her on research projects for upcoming blog posts and for extensions and wayward taxpayers seeing the light.

Two years ago Mr. Money Mustache gave me a great honor by pointing out my office and work. He meant well and we get along fine. I do his tax work and even advise MMM on tax matters. When I feel punchy I tell people I’m the financial consultant of MMM. It impressed the shit out of people. He is a fine man and I will always be grateful for what he did for me.

Two years ago it created a huge challenge in my business. The side gig became the worst job ever. MMM has a huge following and it is hard to control the flow. A blog is easy by those standards. More readers are relatively simple to manage. Not so a massive influx of tax clients. There are only so many hours in a day and they were then all consumed. I learned new skills from the challenge.

Two years ago some people got jealous of my success. Why did I get such an honor from MMM when they deserved it? Worse, I had two jealous employees sabotage the business. They couldn’t stand an ‘ol farm boy doing well on such a large stage. Those employees went and the ones they poisoned.

New employees arrived and were trained. Life moved on and my practice grew in the right ways. There is still room for improvement and you can expect that from me as we move forward. There was no doubt I was out of my league two years ago when things hit.

And that is the danger of a side gig. Loving something can quickly turn into an obsession. A seasonal or part-time side gig means you will let good people go. Make no mistake, I fully understand the consequence of my actions. Families are affected.

And I never realized how many times I would have to tell people “no.” There is only so much of little ‘ol me to go around.

That is the real danger of a side gig. You do it because you like doing it. Then it takes over. Learn from the experiences of an old accountant from the backwoods of Wisconsin. Love can be very painful. It is not a character flaw; it is life. Know this before going in.

The side gig is the greatest thing on Earth. It will take you further than you ever imagine. Whoever though my practice would do taxes for Americans on the other side of the planet? Not me. Not even a wet dream. (Not even a wet dream.)

It started when I had a great business proposition for MMM that went beyond anything I could imagine. If I would have known how my life changed the second MMM interrupted my presentation three years ago in Seattle, I would have run from the room and never returned. You can’t mentally handle what the world has in store for you. You just have to take it as it come.

I’m still a farm boy from the middle of nowhere. Things like this don’t happen to people like me.

It was just a side gig, for Christ’s sake. What the hell went wrong?


Sometimes accounting can be a downright boring subject. It is the job of your favorite accountant to spice it up a bit with stories and jokes so the message resonates and therefore gets through. No matter how brilliant my idea to increase wealth or lower taxes, it is worth nothing if I can’t keep you reading to the end.

Many people find blogs like this by accident. The people hunting for blogs like this already are open to the concepts. Not so the wayward traveler finding her way here from search engines. I write for the choir, but always consider the wayward, too.

I use stories to convey the message. Money is fun to read about and have. To keep readers engaged I impose secret formulas to keep them coming back. It’s almost like a sickness the reader can’t quite put her finger on. How come I am so draw to this blog about (egads!) accounting, saving money, investing and retirement? the wayward soul asks.

Let me be clear. The message is simple: Save half your gross income and invest in a broad based index fund. All done. Now you have another 23 hours and 58 minutes to fill today. Money stuff is done.

Easy as it is, I still need to make a living writing this blog. I enjoy the writing process and telling stories. Changing people’s lives for the better is a bonus.

Didn’t See It, Did You?

The opening to this post contains a hidden secret. Writing is generally done in solitude and this writer gets lonely sometimes. His mind also wanders. Telling an engaging tale is no longer enough. Your friendly accountant includes a special something in about 10% of posts on this blog and you probably missed all of them.

Writing time is playtime for me. Everything is choreographed with a purpose in mind. Sometimes I deliver better than others, but under the hood there is a structure holding the whole thing together.

During tax season there are fewer hidden secrets within my posts due to time constraints and because I am sleep deprived. Writing a quality post takes time. Then I have to edit the thing until secrets are interlaced within the text.

A few weeks back I received an email asking if I knew my writing creates words in unusual places. The reader discovered the secret. But even this reader had no idea how deep the hidden messages are buried.

Take a look at the opening section of this post. The first letter of each paragraph spells SMILE. A casual reader will miss it every time. Of course this is waaaaay too easy. I’m a numbers guy so using the numbers in pi (3.14159265359) or a Fibonacci sequence happens more than once. The first letter of certain words, paragraphs, or even certain letter spacing is part of the game. There are a few instances where I use the screen width (will not work on mobile devices) to get letters to line up to create passages at angles across the page. Think of it as The Wealthy Accountant’s Bible Code.

Writing (and reading) should be fun. Finding hidden passages is only one kind of Easter Egg hidden in my work. If you crack the code you will gain access to work of mine not widely disseminated. Over the years I set up simple blogs with personal musings. They are not meant for public consumption. But I love to hide the url or other clues to my hidden writings to see if anyone figures it out. Since search engines don’t include these blogs in their search results I know when an intent reader finds the clue because I see the one lonely traffic data point in Google Analytics.

There is a second kind of hidden message buried within the tomes of this blog. The best way to describe these Easter Eggs is to point one out, kind of. Last Christmas I wrote a post titled: Silent Night. The storyline is true, but underneath is a reference to a movie that has a depressing Silent Night. Your job is to figure out the movie I refer to.

Of course, none of this searching for clues is required to enjoy this blog. However, some people keep coming back again and again. I provided something extra for these people who want to pull apart my work for additional meaning.

Yeah, I know. I’m messed up in the head. (Wasn’t it good enough to just write an interesting post and move on? No.)

The Sick Bastard in the Room

Before you shoot me an email asking for the location of all the secret messages, know that I plant the messages, but don’t keep a record. Kind of fucked up for an accountant not to keep a record. What can I say? I am a sick bastard.

Imagine the thrill I have when accidentally running across one of my previous word games! After a year or two I forget (I forget a lot sooner) where I buried the cash box in the back yard. Me bad.

All I can tell you is have fun. If you don’t like puzzles, feel free to keep reading as always. If you like a challenge, pick at the carcass of a few posts and see if you can rip some flesh loose. Some stuff requires inside information. Don’t worry about those Easter Eggs. Maybe I said or did something at a conference and then include a subliminal reference to the event only those in the room at the time would catch.

There are still plenty of goodies for everyone. Most of all have fun.

The End of another Tax Season

As you may have noticed, I wrote a bit shorter the last week or two. I needed the time to get as many tax returns as humanly possible out the door. Think nice things about me. (Or not. I’m good either way.) I also leaned toward simple subjects to write about (for me). I am burnt out on taxes so another tax problem to work through could have sent me into a psychotic rage. My brain just not could take another tax return right now. Besides, you wouldn’t want me to lose it on page, would you? (You in the back. Yeah, you. Sit down and shut-up. One more attempt to get me to flip out and the police will be involved.) (SECURITY!)

Okay, I like to have fun. Tax season is winding down and I am getting most stuff out the door I wanted done. There are a few things I need to focus on after the due date, but it is manageable. Regardless, I will have my life back. Lack of sleep has me a bit punchy. As if anyone could tell.


So this post isn’t too short, here are the posts coming up later this week:

Wednesday: The Risks of a Side Gig. A side gig is the easy way to check out of the rat race early and fill time once retired. But watch out for the side gig that becomes you.

Friday: The Trauma of Retirement. People don’t understand how traumatizing retirement can be. If you think you can save a ton of money, tell the boss to “fuck off” and travel the world, “See you in the funny pages (yeah, people used to say that 60 years ago), you have another thing coming. It takes a plan if you are going to avoid the emotional pitfalls of early retirement (retirement at any age for that matter).

It’s the best I can give you, this last blog post of the 2017 tax season. I hope all your returns were pleasant. I love all you readers. Thank you for stopping by and being a friend. Hopefully we can share more ideas over the rest of the year to make our worlds a better place. (Yes, I meant to say worlds, as in, we each have our own world we live in. How our worlds intersect and interact is what we call reality. Now go on a word hunt.)

Tax season is racing toward the finish line. There are 5 days left, including today. I’ll work every day, even Easter Sunday to get as many returns out before the due date.

The stack of tax returns on my desk is taller than I hoped by this time. Incomplete files are put to the side until all documents are in. All too often clients piecemeal information. This forces me to put these accounts at the bottom of the stack so I can focus on files with all their documents. Every time I open a file I review all the prior work done to ensure nothing is missed. Dribbling in data wastes a lot of time.

The good news is that every return with complete data in the office by April 1st will be done by the due date. In fact, most returns in the office by April 10th will be done on time. There will be the rare exception due to required research.

The days are long and I am beyond exhausted. There is a place past the “second wind” where motivation is based on sheer willpower. That is where I am now. I live for this last week like an addict anticipating her fix. Each year as the New Year approaches the taste coats my mouth. I lick my lips in anticipation. The game is on.

The number of tax returns prepared some days sometimes boggles the mind. There have been a few days where the number claws close to 20. Complex returns slow the pace down to a crawl with some days only moving one, two or three returns from the stack. I hate those days. I want to serve as many clients as possible.

Preparing so many returns takes a team effort. Many returns have the bulk of the data already entered for me. I review most returns before they leave my office. You would not believe the shine a man with 30 plus years experience can put on a tax return.

I am too tired and exhausted to write a high quality blog post today. The well is empty. Monday another post is due and I am not sure what will be left to write. My mind is too focused on real tax returns to waste any speck of energy on a random idea in a blog post. Tuesday the race is over. I will take a day to relax and work around the farm. I’ll get a better post out later on Wednesday as I will have time to think and reflect.

After tax season I have a podcast to prepare for. Around May 1st I meet Jim Collins as he visits the fine State of Wisconsin.  In late May I am in Seattle speaking at Camp Mustache 4. I might have two sessions I speak at: one on anti-Mustachiamism (I didn’t know so many people would be interested in that) and a second as a comedy skit. We’ll see how my preparations go before the final commitment is made. Standup comedy is a lot more work than you can imagine.

Rather than keep rambling, I encourage you to read a few posts appropriate for this time of year for those of you going through withdrawal symptoms. (Gawd, that Wealthy Accountant guy can sure spin a fine tale.) (Note: I am not conceited. Just tired as hell and getting a bit punchy.)

Knowing When Not to do it Yourself is a good start. Here is a post on filing an extension to pay and/or file your taxes. A word of warning: When tax season reached its conclusion last year and I wrote, egads, about tax stuff, I received a very nasty letter telling me how much I suck and that used to be such a great writer but now suck completely. I think the guy left a comment too. Go check it out.

For five days sleep will come in fits. The taste coats my dry mouth. The release when it is over is like nothing else you can experience.

Don’t cry for me, however. I am doing exactly what I love doing. This is what I want; this is what makes me feel alive. The numbers. The game. Some people desire retirement so they can travel, fish or golf. Except for that year I spent as a janitor, ah, custodian, I have never worked a day in my life. It isn’t work when you have this much fun.

Tired is a good feeling. Then the anticipation builds slowly all year until the holidays arrive. Then the sickness sets in hard again. The addict is ready for his next fix.

The demographic reading this blog does the things necessary to retire early. The same demographic believes in a side hustle to retire even earlier or to fill time once work becomes an elective. These facts make hobby rules an important consideration. The tax law has a massive loophole few use.

Accountants in the room will understand what I say next. A client walks in the door and his hobby finally turned a few dollars of revenue. No worries, the client says, I can lose money in my business for three years before I have to shut it down and start over. The client actually thinks there is a rule saying you must make a profit 2 out of every five years. By this yardstick, Tesla, a publicly traded company, would have to shut down. (Tesla has a decade of loses as I write this.)

The rule people think applies to small businesses actually is a hobby rule meant to serve the IRS, not you. If the rule wasn’t there, people like me would have a field day. Self-employment tax would be a thing you only read about.

People want to be a business when they lose money and a hobby (if they knew the rules) when they have a profit. Race car drivers want to write-off $48,721 of expenses because they won $2,100 of prize money racing. Sorry, it doesn’t work that way.

But there is a strategy here you can use to seriously reduce your tax burden.

Why You Want to be a Hobby

Hobby can be a four-letter word coming out of your accountant’s mouth. Hobby income is reported on the front page of Form 1040 as Other Income; Line 21 on the 2016 return. Expenses are deductible on Schedule A, subject to 2%. That means for you need to itemize before any hobby expenses actually reduce any of the hobby income. If you don’t have enough to itemize, all the deductions are lost. It also means the first 2% of your AGI doesn’t count either. A lot of stuff gets shoved into the subject to 2% line. Tax preparation fees, safe deposit boxes and work related expenses also go on the same line. All these items added together have to exceed 2% of your adjusted gross income before it counts.

Example:  If you have a $100,000 AGI, the first $2,000 you claim on Schedule A, subject to 2%, will not help you. If you have $2,000 of hobby income and more than $2,000 of hobby expenses, you have a problem. You can only claim hobby expenses up to the amount of hobby income. In this example, hobby income is $2,000 (claimed on Line 21 of Form 1040) and expenses of $2,000 (the maximum you can claim in this example) do you no good unless there are other deductions to claim, subject to 2%, and if you itemize.

But there is one advantage hobbies have over every sole proprietorship: self-employment taxes. Remember when I said clients with losses want to be a business and clients with profits want to be hobbies? Self-employment tax is the reason why. When you have more expenses than revenue you want to deduct everything so you want to be called a business. When you have profits, you want to avoid the dreaded 15.3% self-employment tax. The only way to do that is to be a hobby. Now you know why the IRS has the three out of five year rule for profits. It is not to determine if you can deduct business expenses; it is to determine if you are a business when you claim to be a hobby. Too many years of profits and the IRS can sock you with self-employment taxes.

Now you know the rules. And if you think about it, you also know how to game the system. But first we need to lay out the rules for determining what a business is before we attempt to game said system (and to keep you reading to the end of the post).

Business versus Hobby

There are nine factors in determining if you are a business:

  • The manner in which you carry on the activity.
  • Your expertise or that of your advisors in the activity.
  • Time and effort spent by you in carrying on the activity.
  • Your success or lack thereof in similar or dissimilar activities.
  • Expectations assets will appreciate in value.
  • Your history of income or losses with respect to the activity.
  • Amount of occasional profits, if any.
  • Your financial status.
  • Elements of personal pleasure or recreation.

Certain actions make it clear you are a business. Your actions play a large role in determining if you are a business or engaged in a hobby. There are reasons to want to be a hobby and times when you want to be a business as fast as possible.

Now I will show you how to put $10,000 or so of side hustle money in your pocket and pay $1,500 less in taxes. You will want to scroll back to the bullet points above as we work through a couple ways to game the tax code.

Make It a Hobby

For all our examples we will assume the same parameters. You have $10,000 of side hustle income with few, if any, expenses. You can play with the numbers on your own to include expenses. Remember, hobby expenses are claimed on Schedule A, subject to 2% of AGI and you can only deduct only up to the hobby income level. My examples are simple so we can work through them easily and compare each situation. (Note: The TCJA eliminated all Schedule A deductions, subject to 2%, including hobby expenses. See note at the end of this post.)

We will start with two examples combined: race car drivers and taxpayers in fishing tournaments. If you have one of these on your tax return, don’t call my office. I don’t want to do the return. You have a hobby and you don’t want to hear that from me. The $842 of income does not allow you to call yourself a business and deduct a $62,000 bass boat, trailer and SUV to haul it. If you won every race or every fishing tournament it would not be enough to turn a profit. If it is impossible to turn a profit you are a hobby. The end.

Look at the list above. You might have expertise, but you get a lot of pleasure from the activity. Pleasure is not an overriding factor. I love doing tax work. My tax practice is NOT a hobby. (Not legally, at least. If they let me call it a hobby I would kill’em on taxes.) There are no profits ever! You lose money fishing or racing and always will. Yes, yes. I know. You think you are Rick Clunn or Richard Petty. For everybody else you are a hobby. Suck it up.

Now it gets interesting. What if you are an Uber driver? Interesting, right? Would you buy a $20,000 car just to earn $10,000 on the side? Probably not. The expense is too much compared to the revenue. And many Uber drivers do it for a while very part-time and then quit. You even get a 1099-MISC telling you you have business income. But do you really?

Picking up strangers for chump change is not conducting yourself in a businesslike manner. Unless you are also a taxi driver it is doubtful you have prior expertise. Sure you know how to drive and have a driver’s license, but you are acting like someone out to make chump change on the side and move on. You already have more than enough money to retire so you are not doing it to feed the wife and kids. I think many Uber drivers overpay their tax as business owners when they are really carrying on a hobby. Then they stop. They don’t carry on the activity for three years and therefore can’t turn a profit three out of five years. (I see some people leaving the room to call their tax professional right now.)

I could go on, but you get the idea.

Two Problems Solved

There are still two problems to deal with: the pesky 1099-MISC telling you and the IRS you have business income subject to self-employment tax and how to figure out if you will actually turn a profit three out of five years. The future is only clear after it happens.

The 1099-MISC is an easy fix. We will use our Uber drivers again. Uber does their patriotic duty by telling you how much income to report to the IRS. They also tell the IRS in case it slips your mind. The IRS expects to see that income on Schedule C where they can tax the daylight out of it. It is best to tell the IRS computer what it wants to hear. Claim the income on Schedule C and under other expenses list the entire revenue as an expense, listing the item as Hobby Income Reported on Form 1040, Line 21. The Schedule C will have zero profit or loss. Then report the entire income on Line 21 on the front for Form 1040. Any expenses can go on Schedule A subject to 2%. The revenue/profits are only subject to income tax since there is no self-employment tax on hobby income.

The last problem to solve requires you to see the future with absolute clarity. I don’t know about you, but I am darn good at predicting the future. My day trading skills (okay, bad example) proves how well I can see future events.

How do you know if you will turn a profit three out of five years? Heck, when you start you don’t even know if you will want to do it for three years, not to mention five. The last thing you want is the IRS giving you a proctology exam over $1,500. It’ll take more than $1,500 before I allow anyone to probe my backside!

The solution is simple, kind of. You can postpone determination of your activity as a business or hobby by filing Form 5213, Election to Postpone Determination as To Whether the Presumption Applies That an Activity is Engaged in for Profit. (Only the government can create a form with a name like that.) The form is simple to fill out and simple means the statuette of limitations is extended for the hobby issue. A lot of tax software does not have Form 5213. Some hide the form on the Elections screen. You can also scan the completed Form 5213 and attach it to the return. When you efile the return, Form 5213 will go along with it.

Filing Form 5213 starts the clock. You can have two years of hobby gains without a problem. If you have three you need to go back and amend the return because you will file as a hobby while time determines if you are a hobby or business.

Nothing says you must continue an activity. After two years it might be in your best interest to do something else. There are plenty of other side hustles out there. There is also no rule that says you can’t start another hobby. Maybe you try Uber for a year or two and then quit for a side gig preparing taxes for a spell. This could go on forever. (Note on the tax preparation thing: Expertise is one of the determining factors in determining if you are a business. Certain professional businesses walk closer to the line when claimed as a hobby. If you do a handful of returns for friends it is probably a hobby; preparing a hundred for the general public might be a hard sell.)

If you discover you enjoy the profitable hobby enough to continue you will have to file as a business and amend prior returns to reflect the hobby income as business income. You will also have to pay the back tax. The IRS will probably assess an interest penalty, but should not assess any other penalties since you filed the required forms.

I dropped a lot on you guys today. You have enough information to make a solid decision in gaming the tax code to your advantage. Those near or in retirement can kick the crap out of Revenue. Be careful. People like to push this too far. Follow the rules and your side hustle can be a lot less taxing without self-employment tax. Cross the line and a friendly IRS auditor might remind you of the rules I informed you of here.

Most of all, have fun. It’s a hobby.


Note: The TCJA enacted in late 2017 changed the rules for hobbies starting January 1, 2018. Hobby expenses used to be deductible up to hobby income on Schedule A, subject to 2%, but no longer. Business income also gets the new Qualified Business Income Deduction and hobby income does not. Also, only business income is earned income, available to invest in a retirement account. Hobby income does not qualify for retirement accounts.

Today we have a first on The Wealthy Accountant: our first guest post. Offers to guest post are common once you reach modest traffic levels. Most offers are junk as they are nothing more than thinly disguised advertisements for things I do not approve of. (Anyone want me to promote forex trading? Thought so.)

Then a young lady, Patricia Sanders, emailed asking kindly if she could write a post for me. I did a Google search of her work and found she has a modest online presence. She sounds young, but genuine. Her writing is basic, but I took a chance and invited her to send me an article.

When I write I always try to find something few people are writing about. It is all about value. If I can share an idea with my readers I can make a difference, especially if it hasn’t been written to death before. I talk basic, but usually within the framework of a more complex financial or tax issue. Two things I shy away from—brevity and simplicity—works against me at times. My preference is for storytelling when attempting to convey a message. And no one had ever accused me of being brief.

Then I read the submitted article from Patricia. Her message was brief and basic. This started me thinking. My readers need to hear the basics, too. Michael Jordan was not a superstar because he made three-point shots. He was a superstar because he made the free throws without thinking. He was a superstar because he made the layup without thinking. He was good because the basics became automatic. Patricia reminded me of this.

It is important to encourage young people starting their life journey. We learn far more teaching than being taught. Patricia has a story to tell. Not some long-winded diatribe I like to spew. No, she has a simple message only a young adult can tell. Sometimes our old eyes forget where we came from and how we got where we are. I am not such a fool as to ignore the legacy granted me. It is a pleasure to present you Patricia Sanders today. She has a bright future. Maybe we will cross paths at a financial conference in the near future. It would be an honor meeting her in the real world.

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[My apologies to you, kind readers. Tax season is getting long in the tooth and I was hoping for a small break with a guest post so I could focus on more tax returns. I did a minor check online and found the author to be legit. Except, a reader discovered if you clicked far enough it was a debt consolidation BS site. I’m leaving the post below for those interested and promise to do better in the future. I do NOT support forex, debt consolidation sites and similar crap floating around the internet. I learned a valuable lesson and know I need to vet guest posts more. All links and references to the author are deleted to protect visitors. Forgive a sleep deprived accountant slogging through the last two weeks of tax season. You deserve better. —The Wealthy Accountant]

A year of part-time jobs after completing my higher studies made me realize the importance of frugality. The money I made wasn’t enough to cover my student loan debt payments and credit card bills. I had to think of ways to generate free cash. Frugality seemed the only option at that time.

 One Year of Frugal Living

The first few months were difficult since I was not financially disciplined. I had to fight with myself to be frugal. Every day was a challenge since I had to discover new ways to save money wherever and whenever possible.

I had to work hard on purposeful and goal oriented spending. For instance, I had short-term and long-term goals. My short term goals included covering necessary expenses and investing in things that have liquidity. On the other hand, my long term goal was to pay off my student loans and credit card bills.

I started saving money, applying the extra cash toward additional debt payments, built a short emergency fund and started investing in index funds. All extra funds retired debt in the beginning  so investing was out the first 6 months. After six months I was ready to start building my investment portfolio.

Where I Saved Money  

Food — I lived on homemade meals and gave up junk foods. Plus, I stopped buying frozen foods.

I planned the weekly menu before buying groceries and cooked something interesting every day with the leftovers.

Transportation — I sold my car and bought a smaller one to save on the maintenance costs, fuel, and loan interest. Earlier, I was paying $620 a month. But after switching to a smaller car, my loan payment came down to $373. It helped me to save 10% to 20% on my insurance premiums too.

Bathing — I stopped buying expensive essential oils. Rather, I used the old essential oils to make perfumes and air freshener. This helped me to save almost $5.70.

Home — I moved to a smaller apartment and saved $300 (per month) on my rent payments.

Clothes — I washed clothes once a week to save laundry cost. Plus, I sold old, unused clothing at consignment shops.

Medicine — The price of generic drugs are significantly lower than branded medicines. So, I bought generic OTC medicine whenever possible and asked my doctor to prescribe generic medications.

Energy — I installed LED lighting and insulated the windows throughout my apartment. Plus, I started using power strips to turn off electronics when not in use. It saved around $75 per month.

Events — I found a better way to celebrate birthdays and other social gatherings. I organized small parties at home for my close friends. In case of festive events, I looked for discounts on the goodies. I baked lots of chocolate-chip cookies and gifted them to friends.

Cell phone — I switched from unlimited plan ($100) to an economical plan (1GB data) and saved $50 per month.


One year later

Frugality became a part of my existence. It made me wiser as I now see things which I didn’t earlier. For example, I learned to live comfortably while trimming utility bills simultaneously. I learned how to survive on a small wardrobe. For instance, I used to buy a few t-shirts and jeans in solid colors. I could easily wear them in different color combinations and didn’t need to buy as many clothes.


Like I said before, I needed lots of money to pay off debts. Frugality helped me save 60% of my income every month. It made me realize that one could find happiness from the immediate surroundings without spending 90% of his/her income.

A year later, my life was happier and less stressful with over 40% of my debt retired. Frugality and a smart debt repayment strategy gave me an advantage and a psychological boost. It gave me hope my debts will soon be gone and I can start investing more than ever so I can reach my dream of early retirement.

Author bio: *** *** is a content developer and freelance writer. Her passion is writing on various financial topics. A coffee addict and a voracious reader by nature, her motto is simple: Live simply and spread happiness. 

I hope you enjoyed today’s guest post. There are a few things I would do different. I would switch out the phone for Google Fi and I would have mentioned birthdays and holidays as gift-free zones. But Patricia is still smokin’ with a 60% savings rate! Awesome! Hope y’all enjoyed.