Posts Tagged ‘small business’

Easy is the Hardest Thing in the World if You Want to Be Rich

This moment was brought to you by hard times. Difficulties and challenges make you stronger. The only way to have an easy life is to embrace hard times. #easy #financialindependence #easystreet #success #motivationRichard Branson outlined in his autobiography, Finding My Virginity: The New Autobiography, 75 times he had close calls in his life. Recently he published number 76 on his blog. It seems strange for such a successful man to have had so many close calls. Branson has several successful businesses and a life most can only dream of. He is living the dream.

From the outside it always seems easier. I hear the same thing from readers. “You make it sound so easy, Keith.” To which I respond, “Then you haven’t been reading close enough.” Life has been anything but easy for me. Most people have difficult lives. It is these difficulties that define us. We either rise to the occasion and grow or wither and die. One path leads to a sense of accomplishment, the other pain and loss.

The challenges are endless. To outline a few highlights of my life’s plights: heart disease and a heart operation at age 13, shot in a hunting accident at age 13 which led to the discovery of my heart disease, numerous attempts at business ideas that failed, two daughters with serious medical conditions. Need I remind of the attempt to destroy my business only a decade after its inception? The attempt almost succeeded. Now might be a good time to repeat the millions of words I wrote and published over the years before I attracted even a modest following. No, kind readers, it was never easy.




Beg for Hard Times

From an early age, telling me “No!” was nearly a virtual guarantee I’d check it out. Don’t climb that haymow. Don’t walk to the creek alone. Don’t play with the vase! {crash} “Sorry.” And then the tears.

I was blessed (or cursed if you see things that way) with an insatiable curiosity. The only way to grow, to succeed, is to do what nobody wants you to do. And that means plenty of painful moments.

My dad wanted me to work in the family business working in agriculture. Our family has a long history in agriculture. I wanted something different. When I announced my intentions of going full-time in taxes and accounting my dad told a neighbor, “You won’t believe what my idiot son is going to do.” I have a great relationship with my parents, but that one hurt. The neighbor he told ended up an employee for two decades. (Clients: Remember Bev? She still comes in every year.)

Even people you love and trust will sometimes cause pain and make it harder. They mean well, but they don’t understand. Readers around here have stories to tell about their family’s reaction when they pursued early retirement and world travel. It’s never easy.




Burn the Ships

In 1519, Captain Hernan Cortez arrived in the New World at Veracruz. The first thing he did was order his men to burn the ships. Cortez knew his men would always hold back when retreat was an option. With nowhere to retreat, Cortez and his men pushed forward. What other option was there?

Early adulthood had me wondering what I was going to do with my life. Fortune (and frugality) allowed me to build a nice nest egg. If I watched my spending close I probably could have checked out in my early to mid 20s. That wasn’t my intention or goal.

Working in the family business wasn’t for me. I grew up on the family farm and had no intention of working in agriculture the rest of my life. (Now I live on a farm and have raised many animals. How times do change.) The family farm ended in bankruptcy the year I graduated from high school so the family business in ag repair was my only option. (It was the Rust Belt in 1982. There were few options.) For anyone looking for the easy road; I wasn’t on it.

Then I met Mrs. Accountant. If anything went according to plan, my relationship with the awesome and adorable Mrs. A was it! It’s about the only thing that went off without a hiccup. (Actually, if you get us in the corner we could share some stories. It would be inappropriate to share publically on a blog.)

Marriage also had challenges. Easy wasn’t in the lexicon. We worked hard to build a solid relationship.

The marriage process threw a massive wrench into the works. I was slumming when I met Mrs. A: enjoying loads of good books and a few college courses to round out my days. A good husband, the minister who married us said, needs to provide for his family. So I was hired as the janitor for the church.

Fourteen months later I quit to move full-time in my tax/accounting practice. I was young and foolish. Like Cortez, I burned the ships. I knew if I had an escape route I might take it. There could be no going back.

My client list was less than 50 when I started. Since I moved into town I left most of my regular clients behind. No problem, I thought. I know exactly how to get more clients. I quit my janitor job January 31, 1989. February 1st I was living the dream as a full-time business owner. I worked out of my home. What could be better?

Two and a half months later, on April 15th, I stared out my bay winder and thought, Oh, Sh{beep}! I didn’t exactly replace all the lost clients. To be exact, I had 48 clients and ~$3,000 in revenue. (I said revenue.)

Don’t tell me about easy. There was no easy in that moment. Looking back it seems foreordained. It was anything but! My nest egg was hit hard by startup expenses. The ships were burned. I HAD to move forward. My wife counted on me. To say I was nervous and worried would be an understatement.




Kick’em When they’re Up, Kick’em When They’re Down

You know how the story ends. I survived and even thrived. That’s why I’m here. That means my story is colored by survivor bias. The ones who didn’t make it aren’t talking to you on a blog about it.

Richard Branson had some really close calls in his life. I’m sure there are many more we don’t know of. Every business, every marriage, every relationship, every parent has stories to tell. After the fact it looks easy because all the while we are listening we know the endgame. In the warzone it was anything but clear how things would turn out.

There was no guarantee I would survive heart surgery in 1978. My cardiologist died of AIDS later. One nick of the glove and you’d be reading something else right now. I was a third of a millimeter away from a very short life.

Tempering make the iron stronger and more pliable. People, too. Difficulties and hard times give you the strength to grow. #success #motivation #life #lifelessons #personalfinance #freedom #growth #strengthThe hunting accident also put life in perspective. First, it saved my life by exposing my condition. Without that I would have died of a massive coronary sometime in my 20s, or at the latest, early 30s. It would’ve been just one of those things. Family would have spoken of the tragedy for years until I was all but forgotten. But I was shot. And if one of those pellets would have been a half inch deeper I would have died before anyone knew I had a medical problem. Luck does play a role.

Luck didn’t make me feel invincible; it made me feel vulnerable, like I was living on borrowed time. I tried everything. Burning the ships was a natural act. Prodding myself, forcing myself to move ahead was exactly the situation I set up.

Here is the secret: Every failure, every painful moment, drove my harder. My life appears easy because it has been so hard. I’ve been kicked and beaten unfairly and if you want a really painful story pull me to the side sometime when I’ve had a couple so my defenses are down. You’ll find out how easy it really was.

Zig Ziglar once said we should pray for hard times and difficulties. He understood. Ziglar went on to say hard times and difficulties make for an easy life and easy makes for a very, very hard life. The message was clear. Iron is brittle until you heat and hammer it. Fire and stress harden and strengthen the iron. With the right ingredients you get steel. But there is no chance for strong steel until you apply heat. It is the tempering which makes the metal strong.

And so it is with people. I know you have dreams. That is why you are here. Your goals of financial independence and/or early retirement need nurturing. Starting your dream business will not be easy. I can tell you what to do and it will not be enough. You will need to adjust, try different things, to succeed. Frugality is challenging. An awesome marriage is work. Some days it doesn’t work. Then you try something else and if that doesn’t work you try something else, and on and until you win.

In relationships it is easier. The endless effort is noticed by all parties involved. It makes a difference. My marriage isn’t great because I’m so good. No. My marriage to Mrs. A is awesome because I never stopped trying to make our marriage more alive. Mrs. A and I work daily on our relationship. Even when we don’t feel like it. (That happens, too, even in solid marriages.)

You will get kicked and hard. Thank God for that! If you never took a groin shot you would never grow. I know from experience I grew and learned the least when things were humming along. It was the challenges that strengthened me. All the idiots of the world who attempted to tear me down made me the success I am today. Don’t stop hating me now. I’ve got new heights to climb.

Pray for the same. Pray for money problems so you can learn really money lessons; pray for marital problems so you can appreciate your significant other and build a more solid foundation; pray for a bad economy and job loss; pray for bad weather. Pray to whatever god you believe in and ask for hard times.

It’s the only way to have an easy life.

 

 

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.

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

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

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

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

 



Increasing Profits and Efficiency in a Tax Office

The most valuable resource of any company is its people. Train them well.

Running a business is similar to conducting a science experiment. Unsuccessful proprietors use trial and error hoping to find a winning strategy. Gamblers do something similar. Successful business owners do things a bit differently; examine where need exists and then search out a plausible solution.

Success is similar across all industries and business sizes. Whether you are managing a massive international corporation, a regional firm, a small local business or running a side gig to pay the bills while you enjoy all life has to offer, the rules of success are similar from top to bottom.

Today we will focus on the side hustle and small local businesses. The conversation will also focus on the tax preparation industry.

I own and run my own accounting practice which is centered on tax and have been doing so for over three decades. What worked in the 1980s and 1990s would bring you ridicule if you tried the same thing today. For example, I offered free electronic filing in my community before any other tax firm. Offer free electronic filing as you shtick today and you’d get a plethora or dead stares.




Transformations

My tax office morphed into something different on a regular business since the beginning. Of interest to you, kind readers, is the current transformation.

There are a variety of tools underutilized by most tax offices that would increase productivity, reduce stress and increase profits.

Why these tools are so underutilized is a mystery to me. It shouldn’t be such a personal mystery since I had to be dragged into the room kicking and screaming. What forced the current transformation of my business was an unusual event a few years back.

A series of events led to this blog and a national footprint for my very small firm. All the technology I pooh-poohed in the past now was desperately needed. I was so unprepared the first year from the influx of work I almost lost my practice. It was a disaster.

I’m not the kind of guy who quits! It was time to open my mind and transform my practice once again. Now with several strategies implemented I want to share how I increased my business footprint, reduced headcount, reduced stress and sent profits higher than ever before.

Profit Power Plays

The old model of tax preparation required an army of tax professionals plugging numbers into the software. Since tax preparation is nothing more than glorified data entry (sorry peers) it was easy to automate virtually every aspect of the preparation process. (So a rabid mob of tax professionals don’t lynch me, the tax profession is more than data processing. Yes, tax preparation IS data entry. As long as you know where to plug the numbers you are golden. However, it is still rote, mind numbing work. Where a tax preparer turns professional is when she consults with clients helping them get different numbers before the fact to plug into said computer. Better?)

There are three things I implemented in the last year or two which made all the difference and a few things which didn’t work.

The three things which worked well are Gruntworx, outsourcing and cloud services. What didn’t work was outsourcing. Yes, some outsourcing worked like a charm and one attempt was a disaster. I’ll elaborate on each winning attempt and the one thing I wish I wouldn’t have wasted my time on.




Gruntworx

Gruntworx was the best thing I added to my practice in the last decade.  For a couple thousand dollars Gruntworx eliminated the need for several data entry staff. Most returns cost less than $10 to send to Gruntworx in my office.

The trick of turning Gruntworx into a profit engine requires some explanation. First, simple returns are virtually completed, requiring only your review. At first I resisted sending small returns with a few W-2s, interest income, dividends and mortgage interest. Then I realized Gruntwork practically finished the return for a buck seventy-five, or thereabouts. There is no way I can get the work done in-house for close to that cost. A quick review, adding any items Gruntworx doesn’t handle, and the return is ready to present to the client.

Larger returns still require an experienced tax professional. Gruntworx handles a variety of traditional tax reporting forms (W-2s, a variety of 1099s and other similar type forms), but can’t input most Schedule C, E and F expenses. Gruntworx will enter 1099-MISC income to Schedule C. But, since expenses are beyond the capabilities of Gruntworx my office quickly elected to handle those entries internally.

Brokerage statements are a snap with Gruntworx and probably the biggest time saver of all the forms except W-2s, and W-2s only take more time because there are so many of them on almost all returns.

There are a few caveats. Gruntworx is really fast, but is slower to get data entry back to you as the April due date approaches. My office had a response to most files sent within 24 hours, sometimes only a few hours. By mid-March to the finish line it became a few days.

Gruntworx pricing.

Another caveat involves brokerage statements. Clients with massive trades will send the Gruntworx bill for that client quite high. One client had a thick stack of trades which would have wasted a day entering the data. Gruntworx charged $78.50. Still a deal, but my policy is to scan and attach pertinent pages of the brokerage statement and enter only the consolidated numbers in the software. This is fast AND cheap and you know how cheap this accountant is. (Some accountants disagree with my policy. I’m good with that. Just send it to Gruntworx and get the workload out of your office.)

One final caveat involving Gruntworx. Review is necessary! As every tax professional’s eyes will attest, tax documents can be hard to read at times. We found two errors this tax season from Gruntworx. The computer entered a smudged number wrong. There is still room for the tax professional in the Gruntworx world.

Gruntworx works with Drake Software, which I use in my office. It also works with some Intuit, Thomson and CCH software. If your tax software isn’t on the list still check with Gruntworx as it still might work. If not, similar products are available for all the larger commercial software packages.

You can estimate the cost of Gruntworx for your office here.

Gruntworx and Drake are used by my office, but are not affiliates. Regardless, I highly recommend both for large and small tax offices. These companies will supercharge your tax prep side gig run out of the home or store front firm. Gruntworx makes you look like a larger and more professional firm




Outsourcing

Outsourcing is admitting you don’t have to do everything yourself. In the past we handled payroll, bookkeeping, tax, audit and consulting all under one roof. This is a lot for a small one-location firm.

There are different levels of outsourcing. The level which worked for me involved payroll. Payroll requires dedicated staff and I didn’t handle enough payrolls to keep payroll dedicated staff. Also, payroll is a commodity business with national firms sucking all the profit out of it for small and local firms.

Virtually all payrolls are now handled by someone else. You can read about it hear, including who I use. (Reminder: the payroll service I use is an affiliate.)

My firm earns more profit not preparing payroll than we did doing all the work. Outsourcing freed valuable resources for other important tasks.

Where payroll was a success story, tax preparation was not. I knew there were serious issues to manage if it was going to work, but in the end it was a complete failure.

I will keep business names out of it. My goal is not to defame, but to inform.

First, I asked several local clients if they’d be willing to allow me to outsource their tax return to a U.S. source. A small number agreed to help with my experiment.

A VPN was set up with security locked tight to protect data. To make a long story short, the outsourcing firm made so many mistakes it took more time to fix the returns they worked on than if we just did the whole thing ourselves. We did not run the outsourced returns through Gruntworx.

VPNs are slow and clunky which might have been a very small part of the problem. Unfortunately, the real problem was quality. The outsourcing company failed on many levels. Their preparers were very green. If we would have rolled out the program the cost per return would have been favorable, but not nearly as generous as Gruntworx.

Due to lower profitability, security issues, time constraints, quality of work and incessant errors, I do not recommend outsourcing tax returns at this time unless you consider cloud services, which we will cover next.




Cloud Services

Cloud services come in a variety of flavors, just like outsourcing.

I’m a big fan of cloud computing. I can work anywhere I have an internet connection without logging into the office system with a VPN.

Cloud computing can get expensive, but compared to the cost of IT services and servers it is a steal.

Never touch an accountant’s coffee cup! Here you see my mug protected at my gym. Like I said, I can work from anywhere. (Sure beats another round of power reps.)

My office is undergoing its largest cloud build-out ever. Drake Software allows us to host their software on the cloud. (Don’t quote me, but I think the cost is $600 per year for the first user and $300 for each additional user. I’ll update when I get to the office or discover a different price.)

There are several benefits to hosting Drake on their cloud. The biggest benefit is working from home is easier. No more driving to the office on weekends.

Another benefit with hosting the tax software in the cloud includes outsourcing again. Some outsourcing firms are outside the U.S and that opens a host of problems. My experience shows how U.S. based outsourcing firms can also fail big-time. But with the tax software hosted in the cloud I can hire qualified employees from anywhere and train and supervise them on my terms!

This blog brings in complex tax returns most tax offices only see periodically. Finding qualifies tax professionals has been my greatest challenge and it’s wearing me out. Cloud computing will open the frontier. I can hire awesome tax people from around the country. There is no reason to house the entire team under one roof!

I sound optimistic because I haven’t had my head slammed in the door yet with cloud. It is a work in progress with lots of opportunity. Best of all, no VPNs!

Finding team members who I can vet and train is a powerful advantage only cloud services allows me to do. Training my team is the only way to assure the best accountants serve my clients.

Final Notes

Business is always an on-going work in progress. What worked a decade ago doesn’t today. Successful business owners are constantly reinvesting their company.

The ideas I shared today are the ones I felt were the most important. I’ll publish more on this in the future as my firm evolves. If you are considering tax preparation as a seasonal side gig consider the information above. It makes a difference.

Tax services is a profitable industry, but has its risks. Current tax professionals can glean what they need from the proffered information. At minimum it can get you thinking about your business and the various ways you can increase the bottom line while keeping your sanity.

Stay tuned.



Wealth Building Resources

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

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

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

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

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

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

Taking the Lottery Out of Scholarship Applications

Today we have a special feature. My daughter provided today’s post as promised last week. It is hard to capture the work she did in preparation to winning all those scholarships and the pitch contest. She practiced in front of anyone who would sit still long enough for her to get it out. She honed her presentation until it was as smooth as silk. I even tried to interrupt and distract her as she practiced so she would be prepared for anything.

A few notes are in order. When Heather says the pitch conext was organized by a local bank, local business owners and the college, know I was not involved in any way with the program and had zero influence over the results. I listened to Heather practice, but did not attend the event. I didn’t want to be a distraction.

I want to point out Heather mentioned hard work. Sorry to say you can achieve great things as long as you are willing to do the work necessary to succeed. Another point I hope people don’t miss is Heather’s encouragement to never give up. If one thing doesn’t work, research and study more and reapply. The prize frequently goes to the consistent and persistent.



Taking the Lottery Out of Scholarship Applications

by: Heather Schroeder

 

I’ve never been comfortable with bragging. I wouldn’t go around telling people I got the best grade on a math test or that I got accepted into one of the best colleges in the United States. This is something I just can’t get myself to do. So, when my dad asked me to write a blog post about a recent success I had, I had to tell myself that it’s OK to be excited about winning something.

I struggled when I was in primary school. I was in a special reading class as I couldn’t read at the level I needed to be at and I was equally horrible at comprehension and writing. My reading disorder continued throughout my middle school career and I thought, based on my experiences, that I would never be able to read. Once I entered high school and wasn’t forced to read, I willingly picked up a book at my high school library. In less than a year, I had read more than twenty books and suddenly I knew how to write. This was the starting point that has led me to where I am today—an entrepreneur, a mentor, and a teacher.

I’m currently a student at Fox Valley Technical College in Appleton, Wisconsin. Fox Valley Technical College has a 94% employment rate, the highest in the area. This was the first year that the college had a pitch contest for FVTC students. A local bank, several entrepreneurs in the area, and FVTC staff all supported and funded the pitch contest.

Naturally, I felt a need to sign up, but even though I signed up, there was no guarantee that I would be picked to be one of the eight finalists. Three months after I signed up, I got the email stating I was accepted as one of the finalists. I was rejoicing, and I felt like I was on top of the world. There was only one problem, though—I had a lot of work to do because my business was not what the judges were looking for. And if I wanted to win the grand prize, I needed to switch from being a solopreneur to an entrepreneur.

Think about it. I started a tutoring business with the intention of being the only employee and taking on as many clients as humanly possible. This worked great and was a nice way to have some extra cash coming in on the side; yet, I wasn’t making enough to survive. This is one of the reasons I decided to go back to college. I knew I needed an education, no matter how little or how much, to be taken seriously as an academic tutor.




I had one month to come up with a 90-second pitch for the Fox Trap Pitch Contest in hopes of winning the grand prize. First through third place were guaranteed a financial award. This is something I was bound and determined to win.

My adrenaline was pumping as I entered the room full of judges and FVTC staff. My entrepreneurship teacher was also running the show. I had to make him proud as my entrepreneurship teacher is the reason I’ve come so far. My pitch went great and the judges seemed interested in my teaching style I created and the opportunities for people in the valley and around the world to become employed by me. I’m an ambitious little thing that doesn’t let my size determine how big my dreams can be.

I won first place at the Fox Trap Pitch Contest. This was one of the first times I’ve seen myself succeed at something and then be told that I need to continue with my plan. I learned many things when I prepared and presented my 90-second pitch. The most important thing I learned was that writing a pitch is nearly identical in writing an essay for a scholarship.

When preparing my pitch for the contest, I had to identify a problem, identify the target market, identify the solution or solutions, and determine how my idea will make money. I also had to identify what I was going to do with the winnings. This outline is exactly how many scholarship essays should be written.

All scholarships follow the same general rules including determining the winners by how creative the applicant is, how well written the essay is, the quality of the information, and determining if the applicant is a right fit for the scholarship. When writing an essay for a scholarship, follow these simple rules.

  1. Identify the problem or identify the topic

When writing essays, research reports, and personal memoirs, the stories or the introduction introduces the audience to the situation. Research reports are the easiest when determining and solving a problem. With my pitch, I determined the problem by stating startling statistics and examples of why it’s important to help “at risk” students and students in special education succeed.

 

  1. Identify the target market or who you are trying to reach

Scholarship essays usually want applicants to write about issues that are affecting others in the United States. One scholarship I run across yearly is the drinking and driving scholarship that requires applicants to write about and videotape themselves on describing how they think they can help make people aware of the risks that come with drinking and driving. With my pitch, I determined my target market by identifying who I wanted to help. My target market is “at risk” students and students in special education. The target market for the drinking and driving essay could be people who drink often and take the risk of driving or college students. According to the college drinking prevention website, “1,825 college students between the ages of 18 and 24 die from alcohol-related unintentional injuries, including motor-vehicle crashes.”



  1. Identify the solution or what you think could be done in the future

When writing a scholarship essay, determine what you think could be done to solve the problem. My solution for my pitch was offering academic tutoring services for “at risk” students and students in special education and teaching these students by utilizing my teaching style, which has so far been a success.

 

  1. Identify what you will do with the winnings

Like with the pitch contest and writing scholarship essays, judges want to know what you will do with the winnings. I determined in my pitch that if I won I would use the winnings to go to China to determine if my business idea can work globally. With scholarships, determine how you will use the winnings. I usually state that I would use the winnings for housing, tuition, food, and supplies.

The last piece of information I can give is to research how to write scholarships outside of reading this blog post. I have given some valuable information, but there is so much more available online. I suggest looking on YouTube and searching for videos on pitch contests. These contests have great insight on how to reach your audience and make a difference in lives of others.

I wish you the best of luck.

May the odds be ever in your favor.

Endnote: Once again I encourage you to reach for your dreams. Heather is 23 years old and living her dreams. She is on her way to China for a month to teach in a few weeks. More opportunities are coming her way as a result. I don’t like to travel; she does. I never asked my kids to live the life I expected of them. I always encouraged they walk their own road. There will be bumps and even painful experiences. It’s part of life. But the journey is all worth it.



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 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.

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

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

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

Amazon 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.

 

How to Develop Your Occupational Living Will

Bev working with a staff CPA, Jeff Dorn.

As children we dream. We dream unfettered. We dream of traveling to the stars; we dream of life as a policeman, fireman or even a doctor. Some fall in love with numbers and can’t think of anything else. We dream of great discoveries as scientists or helping people reach their dreams and goals financially.

Then we grow up.

Society tells us we must prepare for retirement as soon as possible. The financial services industry breathes and dies by our willingness to buy into their story.

The news feeds are filled with stories of people who started early, saved hard and retired early. As someone living inside said community I notice a pattern. A large majority of people who take a knee at an early age—any age, in fact—go through a predictable pattern. Travel dreams are realized. Some want to golf or fish. After a while golfing or fishing all day becomes the job. Travel turns into a drag. Living on the road looks far more appealing from the outside.

Experiencing new destinations is what people really want. The actual traveling is sheer pain. I’ve never heard anyone say she can’t wait to be sealed inside an aluminum tube with her 260 closest friends for several hours.

Even with travel dreams alive, it is as common as weeds in a garden for people to pick up a side gig (some call it a side hustle) after the gloss of retirement wears off.

Then, there are people who find their calling early and live their side gig from day one. We call these people entrepreneurs or business owners.




Never Ending Story

Whether you find your calling early or after you retire from a “traditional” career, life is best when you discover what provides you the greatest joy. Once you find the activity you enjoy most you begin to build a life and habits around said activity.

Starting a business or side gig requires planning. The one issue rarely addressed is the exit plan. As I look down the barrel of my fast approaching 54th birthday I have to ask serious questions about my tax practice. What if I were injured or got sick? Either event could destroy what I spent a lifetime building.

As we age and accumulate wealth we quickly discover the need for a living will. I propose a significant percentage of people also need to consider an occupational living will.

Vision of the Future

Of all the employees I ever had, Bev is the only one still asked about every tax season. Bev hasn’t worked for me in seven years!

Bev was my first employee. Her skills and work ethic assured my efforts to build a firm were successful. Bev wasn’t the fastest, but she was consistent. And for the record, fast isn’t always better in taxes and accounting.

When I let Bev go it broke my heart. I wrestled with the decision a long time. Her abilities were more than adequate, but bitter Wisconsin winters were taking their toll. Cold air took her breath away. There were times Bev would need several minutes to catch her breath walking from the car to the office door. Her health was more important than a few more years of service.

Bev still comes to the office every tax season to get her return done. It’s a continuing fringe benefit for a rockstar employee. It’s always a good day when Bev walks in the door.

But there was another reason I asked Bev to retire.




Lost Step

When winter turns nasty and the hours long Bev felt the effects. She lost a step as tax season wore on. If the weather added to the stress I could chart the increase in errors.

I review virtually every return in my office. Some get a minor once-over and other returns get a proctology exam. Bev started to lose a step in her 60s when the workload increased and weather added stress. If only I found the fountain of youth to keep Bev at her post.

Dementia is an insidious disease. It approaches gradually. People around you may notice, but we have self-defense mechanism to delude ourselves. We are the last to know our quality is no longer up to par.

Bev is still mentally sound. Stress and health were the real deciding factors.

Lifetime of Love

I was lucky. I found the work I enjoy early in life. As a business owner I can choose my hours and workload within reason. This is a lifelong occupation. If I were to sell my practice I’d probably be doing taxes and consulting on the side within months. (Either that or Mrs. Accountant would hit me with a rolling pin as I started to bounce off walls.)

As much as I love my work I must accept the day may come when I’m no longer proficient at it. Worse, a car accident or cancer could end my ability to serve my clients. In the past the issue wasn’t as acute. The returns I handled back then were more traditional. Now I manage accounts from around the nation, all with advanced issues. Finding qualified staff has been a challenge. Dementia in unwelcome.

I’m not alone in this. The Washington Post had an excellent article dealing with these issues and it’s where I got the idea for this post.

The more you love your calling the less likely you want to retire from it. Unfortunately, the day comes when we no longer serve our clients adequately. That is where an action plan set into place well in advance can protect you, your family and your clients.




Occupational Living Will

Your facts and circumstances will determine the necessary steps in your occupational living will. Below are steps I’ve taken over the last several years in preparation for my demise.

  • Create a business bible. Around the time Bev took the long walk I had a come to Jesus moment. I knew the day would come when my body couldn’t cash the checks my mind was writing. Every member of my office team was a part of building the office bible. Every task was outlined step-by-step. Should any employee be on vacation, quit, retire or become incapacitated, there was a guide for each process our company performs. We discovered the office bible is an excellent tool when we get in a bind and it gets regular use. It is also a part of the training process for new employees.
  • Create redundancy. Certain people handle certain tasks. In a small office it is hard to have several people working on every project. While it is natural for one person to handle most issues around certain tasks, it is wise to train staff to have at least a working knowledge of other tasks. The increased payroll expenses should be minimal.
  • Create a succession plan of ownership. This is hard for business owners. In my office if I’m ever unable to perform my duties I would lose the right to vote my shares. In effect I would lose control of my company to someone already in place and able to make the decisions necessary to keep clients serviced and the company alive.
  • Train and train some more. It is almost impossible to over-train your team. Cross train so more than one person is competent in all areas of practice.
  • Keep your family informed. Planning for dementia, accident or other disease is not the highlight of the day. Still, keep a copy of the office bible available to family members with additional information on operating the business. Remember, your family will be under serious stress if something happens to you. Provide a guide to make it as easy as possible for your loved ones in your time of incapacity. Be sure to inform family of pass codes and where the money is, including working capital, online savings accounts and lines of credit.

Here are considerations I’ve had a difficult time handling, yet MUST be addressed.

  • Find your replacement. It is so easy for me to fall into the trap of I’m so good at what I do nobody can measure up. That’s ego, not intelligence speaking. Once upon a time I had a much larger staff. As my practice transformed into serving fewer clients at a higher level it grew harder to find experienced tax professionals to compliment my talents. My primary goal this year is to find my replacement. Instead of sending me out to pasture I can have more free time during tax season and a seasoned pro to compliment my tax skills. A true win/win situation.
  • Work with peer/competitors. At first blush this one sounds stupid. But think about it. You already work with other professionals and businesses in your field. Start a dialog to build bridges for unforeseen personal events. It could lead to a sale or merger of your business. Or, it could compliment both businesses, reducing stress and increasing profits for all.

Estate planning is often put off to the detriment of family. In business it is even more important to plan ahead. Having trusted friends and family in place to guide you through an illness or dementia might be uncomfortable, but it is necessary if you care about your clients, employees, friends and family.

There are alternatives to retiring. Your workload can shift, be reduced or more focused. When you love your work as much as much as I do it is hard to plan for the day it will be reduced or completely out of your life.

But it is still the right thing to do.



Dealing with Clients Who Want to Take Illegal Deductions

Tax professionals all have stories of clients who wanted to cheat on their taxes. It might be tempting to nudge the line a bit to the left to keep a client happy and collect a fee. But you need to think long and hard before you make your decision.

If you prepare your own return you can avoid all the pesky demands of tax professionals to file an accurate tax return. Just as a tax professionals face serious penalties, so does the taxpayer. If you talk a tax professional into an unreasonable position on your tax return you will be penalized a lot faster than the tax professional. Tax preparers are really just entering data. She may not be aware of the malfeasance. That leaves you blowing in the wind. And a cold wind it is.

Then we have those instances where the issues are not clear. You can take a questionable deduction, within reason. If you disclose the position you’re taking you should be secure from penalties from an overzealous IRS agent.




The Client Not Worth Having

Bring up the subject of the unreasonable client or client from hell with tax professionals and they all go into cataleptic shock.  A tax season isn’t complete without at least a dozen or three requests to do something industrial strength stupid.

A few years back my office had a client who included a receipt to deduct IMODIUM® and underwear. I pointed out the receipt and informed the client he hadn’t seen my bill yet so the deduction is not “regular and ordinary” and therefore not deductible. He is the good kind of client. He withdrew the deduction without complaint.

This tax season wasn’t as polite. As hard as I try to winnow down the client list somebody always comes up with a position that will not stand IRS scrutiny and has preparer penalty written all over it.

The client in question this year has been with my firm a few years. He always pushed the envelope too far and should have been shown the door a long time ago, but a certain accountant was a nice guy and listened to the BS.

In the past the client had us do his bookkeeping. That was too expensive so this year he threw everything in a box. I have employees who work exclusively bringing order to chaos. These employees are generally not tax professionals, but we do train them to sift the wheat from the chaff. Items in questions are reviewed by an accountant and added to the numbers if the deduction is allowed.

My friendly client likes to eat out. A lot! As in every meal. He threw every receipt into the box. Working on the road he filled the van with fuel often. Included on the receipt was always a bottle of water, gum or some other snack. The other items are NOT DEDUCTBLE!

If a few small items slip by I don’t lose sleep over it. I’m not auditing the return; I’m preparing it. Sorting wads of paper in a box isn’t bookkeeping. If you don’t care enough about your business to manage it correctly don’t expect me to work for free during the busiest time of the year bringing order to the mess. We separate receipts into piles based on our interpretation of type of expense (or if it is even a business expense) and run a z-tape on each pile.

Back to our client. All those meals and extra items on gas receipts were disallowed by my office. Dawn, a preparer in my office, separated out the questionable items and told the client she would not put those expenses on the return. The client was pissed. The only answer? Gotta talk to da boss.

The boss was having none of it. If you have a meal expense it is your responsibility to record the business purpose. You can NOT deduct everything you eat while on the road and dinner on the way home because that was related to work. NO IT’S NOT!

Smart tax preparers explain why the deduction is not allowed to the client. This is actually required by Treasury Circular 230, the publication regulating tax professionals practicing before the IRS. Section 10.21 clearly states a tax professional must inform the client of an unreasonable position. Nowhere in Circular 230 does it say you must fire the client, but Section 6694 of the Code is very clear: an unreasonable position by a preparer, even if disclosed, can result in penalty and even censure. Preparer penalties start at $1,000 for an unreasonable position and $5,000 for disregard of the rules.




The Most Important Number Every Tax Professional Must Know

For many years my office attended professional education classes taught by Jack Surgent. Jack is one of the smartest tax guys I’ve ever met.

During one of these training sessions we focused on ethics. When the topic of clients wanting to take illegal deductions came up Jack never stopped for comment. All he said was, “800. . . 799. Get it?”

The whole room better have. What Jack meant was if you have 800 clients and lose one you still have 799. Barely more than a tenth of one percent. No one client is worth it.

What Jack didn’t say, and I will, is, if you keep these clients it will hurt the profitability of your practice. Clients always pushing the envelope don’t want to pay for quality consulting. They want to cheat and if the boom is lowered will throw you under the bus before you open your mouth.

800.

  1. Get it?




For the Folks Back Home Preparing Their Own Return

Nothing is more annoying than a highly trained and competent tax professional disallowing bogus deductions or not allowing unreported income. I see bloggers publishing some of the things they think are allowed. I quietly smile as I read knowing I’m not the one who will have to defend them in audit.

Treasury Circular 230 regulates most tax professionals. That doesn’t leave DIYers off the hook. The penalties can get large real fast for playing it fast and loose. Just failing to file a tax return by the due date (without a valid extension) subjects you to a 5% penalty per month up to five months (25%). If there is no balance due you at least avoid this one.

Section 6662 provides for a 20% accuracy penalty if you disregard the rules by failing to make a reasonable effort to comply with the tax code. The IRS automatically assumes you didn’t make a reasonable effort if they assess additional tax because if you did you wouldn’t owe the extra tax. You can fight this in appeals and might even win if you can substantiate you did make a reasonable effort.

Considering my ex-client above, he went to another preparer to get his return done. The other preparer has serious risk if she allows the deductions. The client is still on the hook for a Section 6662 penalty or even a $5,000 penalty for filing a frivolous return. If the numbers get big enough—I don’t think they were in this case, but then again I could be wrong—Section 7201 comes in to play. Section 7201 is the willful attempt to evade or defeat tax which is a felony, subject to a fine up to $100,000, up to a year in prison or both.




Don’t Be Scared

Now that I put the fear of god in you it’s time to take a deep breath and gain perspective. Honest mistakes are generally minor and the IRS rarely assesses a penalty or removes them relatively easily.

The discussion above isn’t about minor or honest mistakes. Small changes in an audit are usually disregarded by the IRS and treated as a “no change” audit. Most IRS auditors are pretty darn nice people. I’ve worked with them for several decades and one was an employee before she bed down with the enemy, ah, the IRS. Yes, there are a few knucklebusters out there, but even they don’t cause problems unless you invite them to.

Fear of an audit or penalties is unfounded unless you played fast and loose on your tax return.

If you do your own return you MUST take the time to educate yourself on the issues affecting your tax situation. Consulting with a tax professional doesn’t mean they must also prepare the return. I personally consult with many people who prepare their own taxes. I even consult other tax professionals. (It happens when you become the old guy on the block with three decades in the trenches.)

The takeaway from this post is thus: If you are a tax professional, do NOT relax your ethics for a fee. Educate your client, if they allow. If the client refuses to follow the rules remember Jack Surgent: 800; 799. No one client is worth your career, a fee or the headache. Move on. Life is better that way.

If you do your own tax return or hire a tax professional, insist on accuracy. Educate yourself on the issues affecting your taxes. There are so many ways to legally lower your taxes it is nothing short of insane to cheat on your taxes.

The only excuse is laziness and then you deserve what you get.



Countdown Clocks

Countdown clocks abound. The most ominous is the doomsday clock counting down to Armageddon. With 26 days to the tax due date here in the States tax professionals are counting down to a less tragic event.

Early retirement was something I dreamed of from high school on. I was attracted to the seasonal nature of the tax profession. The ease at which tax offices can be sold also held my interest. The original goal was to build the business, save like crazy, invest said monies and take an early bow. I decided I should at least enjoy my profession if I’m going to give it my all. The unintended consequence was that I couldn’t unplug as planned.

By the time the birthday cake reached 40 candles I was ready to retire to a quiet and secluded life. Pulling off the Band-Aid fast was tried to no avail so I started a countdown clock. I published it on an old blog. The countdown clock listed the years, months, days, hours, seconds and even tenths of a second. That baby really had a lot of action on the right side.

So I could adequately plan my transition to Easy Street I set the clock at three years. I started an active search for buyers. Serious investors showed up. As the clock ticked down I started to visualize my life in retirement. I hated what I saw and chickened out.




Time Counts and Keeps Counting

When I was a young man I tagged along with my dad as he went to meet the owner of a restaurant in a small town near where I live. The restaurateur was in the final stages of selling his baby. He put 15 years into the venture and did rather well. I was perplexed over why he would quit at a time when he was at the top of his game. Now I realize how often professional athletes make the same mistake I did back then. He then gave a nugget of wisdom that has never left me. “If you can’t make enough to retire from a business in 15 years you never will.”

As the conversation went on he expanded his philosophy. He said the first five years you work like crazy to get the thing off the ground. The second five year period you start making real money. The final five years you should turn obscene amounts of money and if you save and invest there should never be a demand to work again for you.

Wisdom shows up from unlikely sources. An afternoon ride with dad turned into a learning experience. Learning experiences are everywhere when you are open to the knowledge.

In a way the restaurateur had a countdown clock he started the day he opened the doors. In a way I did too. The difference is I didn’t follow through.

Life is too short to waste on things you don’t enjoy. Part of the excitement of life is the feeling we had as kids on Christmas morning. Wanting is far more pleasurable—and memorable—than having. Once the gifts are opened the excitement is over!

Countdown clocks provide adults with the same opportunity. It’s common for people to have a countdown to vacation or retirement. Expecting parents countdown to the expected delivery date. Now if baby would just adhere to the schedule mom and dad would be grateful. (Baby will provide many more disappointments after messing up the delivery day. And a diaper or two hundred.)




Should Everything Have an Expiration Date?

We’re all familiar with countdown clocks in all their manifestations. The real question is: Should we embrace the countdown clock?

I personally think the countdown clock is one of the most powerful tools we have if used properly. As much as I love tax work I’m still feeling the burn as we approach the deadline. I don’t start the countdown clock in February. I’m still fresh and full of lust for another tax project. Now, with a couple months of endless sitting and pounding out returns, I’m ready for the expiration date to arrive. (Twenty-six days and counting as I write, but accountant’s already know that.)

Life should be exciting and filled with anticipation. Expecting a child is awesome (I’ve done it twice so I know), but as Mrs. Accountant can attest, there comes a time when you want that creature cut out of the womb!

Anticipation only works if there is a release at the end. My business exit countdown clock lost its punch when I removed any chance of an expiration date. It also lost meaning.

There will still come a day when I no longer can walk the mile. It would be a dirty shame if I continued on my current path until I was unable to perform in an acceptable manner. There is a sad story behind that.

When I started my practice I hired an extraordinary tax professional. Her name is Bev. For decades she lived the dream of seasonal labor with plenty of time the rest of the year to pursue additional dreams. Bev’s husband worked for my dad’s business. Bev handled books for another business of my dad’s. She also had experience working in other tax offices. She was good at what she did.

Then that thief we call time left his mark. Bev grew older and I sometimes like to say she lost a step as she approached 70, but that isn’t the reason I didn’t call her back one year. The last few years she worked for me the weather of NE Wisconsin made life miserable on Bev. When the temperatures dipped below zero as it does every winter, Bev struggled getting from her vehicle to the door of the office. It wasn’t a long slog either. The cold just took her breath away and it started to scare the hell out of me.

If anything ever happened to Bev because I kept inviting her back for one more year I could never forgive myself. I planned the exit for the last few years she worked for me. Eventually there was no question. She had to take a knee.

Bev is now a client. She is due any day now. I am grateful for all the years she gave to my firm.

If only I could garner the courage to treat myself with the same respect.




Expiration Isn’t the End!

Only one expiration is the end and we all get that one right the first time.

A countdown clock can create anticipation for a vacation, wedding day, retirement party or any other event. Letting go is really hard for some people. Remember who you’re reading.

A countdown clock, an expiration, doesn’t mean the end; it should signal the beginning of a new adventure. Bev was hurt when I told her my concerns for her health. She knew I was cutting her loose. Bev is a lot like me. She would have died running the obstacle course for my company. As her employer I had an obligation to make sure she didn’t die for the cause. Bev deserved an awesome retirement and is enjoying one. Another tax return isn’t worth risking your life over.

There are countdown clocks I have adhered to. When this blog came around I had a difficult choice to make. I have a farm, a tax practice and a new blog. One had to go. I farmed most of my life so I decided it was time to take a different path. There might be a day when I return to my roots. (You can count on it.)

I started a countdown clock to liquidate the farming obligations. Now I have a few chickens for personal consumption. Breakfast is on my ladies.

One end was also a new beginning. You can do anything, just not everything. Choices must be made. Everything should reach an expiration point.

Expiration opens opportunities. I can set a countdown clock in my office without walking away from the profession! I can hire more qualified tax professionals and train them. I still get the thrill of tax season without the pain of endless hours in a chair. (For the record, that sounds mighty nice about now.) Clients sometimes hate I don’t take every last stinking step myself. They don’t know what they are asking for. Most men (and I say men because we are weak compared to the more civilized gender) run until they break. Clients will not like that either.

Now that we have the farm sold (okay, I still own the farm; it’s just devoid of animals at the moment) and the tax practice has an expiration date, what about this blog? Oh-oh! Did I strike a nerve?

I haven’t started a countdown clock for my practice though it is for sale at the right price. (Note: It’s cheaper now than latter in the year.) Realistically I’ll be around for the foreseeable future. But I may not pound as many numbers as I once did.

A flashback to the days when Bev and Jeff haunted the halls of Tax Prep & Accounting Services, Inc.

I’ll let you in on a secret. I spend more time reviewing tax returns than preparing them. Keep it quiet though. Clients don’t have a clue. If clients ever find out they’ll be glad to hear I reviewed every return this year. (So far.) That will change as the calendar rolls a few more years into the future. It’ll be gradual. New and old employees will do more of the work and the world will never know.

The countdown clock has begun.

And as for this blog? I’ve been writing since high school. Finished my first novel my senior year. (Or was it my junior year? I always forget. Age.)

I’ve written other blogs, published books, sold magazine articles and short stories. I even published on content farms. (Notice I didn’t provide any links. Not all material is worth reading. Even your favorite accountant needed a growing and maturation phase.) There is no doubt I will write until the day I die.

But I also wrote what I now call my skanky blogs in the flash fiction TG community. I did it for four years and the traffic was seven to eight times more than this blog. I had my reasons for writing the material. One reason was I always wanted to learn to write flash fiction people would read. I worked that out of my system. Next!

All good things must end. Today isn’t that day for this blog or my practice even, regardless what I say while in a sleep deprived coma. Tax work, consulting and this blog are here to say for at least a few more years.

But if I did start a countdown clock and place it front and center on the home page it might bring back some of that excitement and anticipation.



Why I’m Retiring the Day I Graduate from High School

Today we have a special guest. My youngest daughter, Brooke, is 18 today. I have two daughters and I managed to keep them alive until adulthood. In my mind I’ve done my job. There is some trepidation, however, which will become clear in a moment. I raised my girls to the best of my ability. They’re fine young ladies. But their path to financial independence is a unique one.

Brooke is finishing up her senior year of high school and has some pretty big plans. I asked her to share her story. She listened to me talk around the house for years. She can repeat my financial rules with perfection. I think you’ll hear a bit of dad in her voice. Enjoy.

 

Why I’m Retiring the Day I Graduate from High School

By: Brooke Schroeder

I’m different. I’ve always been different. I was born with a big disadvantage. Before I was a year old I had more surgeries than most people in a lifetime. At twelve I started taking over a dozen medications. Pill after pill is cut and placed in a dispenser like that of a 90 year old man.

I’m on the right standing with my sister, mom and dad. We had our picture taken in Kentucky a few minutes before the total solar eclipse.

Dad picks on me that all the pills I take are a meal in itself. My parents are supportive, but they have no idea how much of a pain it is to be sick all the time.

I’m also different from my family in other ways. My sister wants to travel the world and teach English (more on that later). My dad hates traveling past the mailbox at the end of the driveway. He says he wants to build a wall around the farm. When Trump came out with his wall on the Mexican border dad said he needs to talk to Trump and see if he could get a section built around the farm.

Everybody in the family reads a lot except me. It’s not that I don’t read, I just don’t want to do it twenty hours a day!

My mom stopped working a normal job when she was around 30. My dad is a workaholic. He gets crazy ideas and can’t help himself.  He has the farm and his tax office. Then he writes his blog. He is always starting a business or doing something. And he reads more than my teachers at school. He reads everything. You would think it would get boring after a while.

There is one trait I share with my family: frugality. My dad is tight with money; I mean real tight. I’ve seen my dad pass on an ice cream cone just to say he didn’t touch the money in his pocket for the entire month. Like I said: tight.

I try not to spend too much money either. I certainly spend less than my friends. Every dime I earn goes into an index fund. My first money when I was a baby was invested. It wasn’t much, but it got the account opened.

After the eclipse we visited a botanical garden. It was research for me.

While everyone else is reading I head outside. When not working with my hands I play with computers. I’m not 100% sure yet, but I might go to college someday to learn more about IT. Too be honest, I’m in no hurry to go to college. I like school and get good grades. My friends are there too. As graduation approaches I already miss them.

My friends all have plans. A few plan on getting married. Many are going to college. I guess some will buy a home and car and all the other stuff that messes with your happiness in life. The kids at school don’t share my frugal ways as much as I do.

I started working for my grandparents when I was like eight or nine. My dad has an accounting business and I help out over the holidays getting organizers ready to mail, but my heart is outside an office. My grandparents (dad’s parents) have a landscaping business. Digging in the dirt doesn’t bother me and once I learned a few tricks of the trade there can be real money in it.

When I was younger I worked summers and weekends landscaping. Winter was either a few hours at dad’s office or homework. The money was slow during the school year back then.

I’m milking Bess for all she’s worth. Free is better than any car I could buy.

My dad was adamant I save most of my income. I stuffed my Roth IRA and regular Vanguard account every year. After all these years I have amassed $487,916.12. (My dad made me look it up because he says it’s impressive.) The stock market had a lot to do with it too.

The last few years my income exploded while my expenses stayed near zero. I use my dad’s old 2000 Honda Accord with duct tape holding on the spoiler in back. My plan is to milk that car until it dies. Dad picks on me he is kicking me out on my 18th birthday, but I’m staying. Free rent is good.

The income part has grown nicely over the years. I discovered I could find plants and supplies and sell them in projects for a lot more. We also have a 10 acre farm where I grow trees, flowers and other landscaping plants.

My sister is going to China this summer to teach English and is staying with a host family. I decided to not go to college, at least not right away. After graduation I plan on visiting my sister in China for two weeks. After that I have a few landscaping gigs I need to get back to.

Here is one of the first trees I planted. Dad isn’t taking care of it as you can see weeds and the need for mulch. It’s hard raising good parents.

When summer winds down here in Wisconsin I hope to live someplace warmer in the winter. (Dad keeps the house 60 so I have plenty of motivation.) I’ll probably travel the southern U.S. mostly this winter and the Mediterranean the next winter. It is hard finding people my age to travel with, however. They all have to work jobs.

So that is the plan my dad wanted me to share. I saved and invested. My investments are now big enough so that I don’t have to work after I graduate from high school. Like my sister, I like to travel and see stuff. I give my parents credit for teaching me how money works. I’ll probably always do some landscaping work on the side. If you know what you are doing you can make a year of income in a few summer months. Just finding one big rock a rich person wants in their yard can bring over a thousand dollars!

My dad isn’t kicking me out no matter what he says. If he does I’m still not leaving. My health is reasonably good right now, but with all the medical stuff I deal with it is no guarantee. People with my condition usually live to their 40s at most. Medical technology will probably let me live a long, normal life. But just in case, I saved so I didn’t have to waste time with a demanding career. There might not be enough time for me to do it the normal way so I’m making the most of the time I have.

 

This is where dad swallows hard. I’m so proud of my girls on one hand and sad they are living their own life of which some will be without Mrs. Accountant and me. Brooke is 18 today. She has a plan. I taught her all I know. I hope it is enough.

 



 

The Power to Do Evil: The Ethical Dilemma

Over 2,000 years ago Plato, Socrates, Aristotle and the Stoics were debating ethics. Fast forward to our modern day and we find our moral compass challenged daily and on a much deeper level.

Less than two months ago I faced the second largest ethical dilemma of my career. About eight years ago I faced my biggest ethical challenge. I will share both stories here today and the outcome. My struggles should prove fertile ground for contemplation of your own moral judgment.

As a society we think of certain people as more prone to ethical lapses. This might be the result of the professions involved. Police officers make repeated ethical decisions every day. Judges, prosecutors and even jury members must deal with their personal ethics and that of others. But law enforcement or military personnel aren’t the only ones thrust into serious choices. Attorneys and doctors are forced into making decisions that might not seem ethical at first, but they are often forced to make a choice and fast. No choice is an ethical choice all too often with serious consequences.

Your favorite accountant also faces ethical issues. I’m enrolled to practice before the IRS (EA) and that means I have an ethical code of conduct forced upon me (Treasury Circular 230). But it isn’t enough! Every decision I make in my office has some level of ethical consideration involved. The bare-bones guidelines governing EAs is only a framework. Many decisions must be made quickly in the gaps.

Non-professionals also deal with ethics. The demand to choose the most ethical route might be less rapid-fire, but everyone still faces tough choices from time to time. By revealing my two most difficult decisions of my career I hope to get you thinking about choices you make in life and the moral and ethical issues involved. There is no doubt the comment section will be lively with this one as opinions vary widely when ethical choices are discussed.




I Did it Right and Paid Hush Money

This one happened less than two months ago and is still a festering thorn in my tail.

In Wisconsin we have a personal property tax for businesses only. In January a form comes in the mail to list all the business assets outside the building. Computers are exempt from the tax, but desks, phone systems, copiers and faxes do count. The value of the property is decreased each year for depreciation in estimated value. The value is then taxed at the rate real property rate.

My client received his personal property tax forms in January two years ago. The report is due March 1st. This is a serious issue. Most business clients don’t have their financials in to me by the time I need to file the personal property tax report. When most clients are quizzed on new purchases they generally draw a blank until they need a deduction on their income tax return. By then it’s too late for the personal property report.

As preparer I’m required to sign the return attesting the report is true and accurate to the best of my knowledge under threat of perjury. Even though the return might be wrong, I don’t know this until after the fact and usually after the due date.

The client in question purchased a large piece of equipment two years ago. It was missed on the first return for the reason listed above. Then, last January, we added the new equipment to his disclosure. This added close to $100,000 to his business’s personal property. His bill from the municipality would jump from a few hundred dollars to $2,000.

Last December the bill came in and he flipped. We did everything right, but he was mad we didn’t cheat on his personal property tax report. After several rounds of debate he demanded I pay him half the tax owed.

Here is where the ethical dilemma turns ugly. His business and personal return alone isn’t enough for me to even consider such an outrageous demand. But he’s connected to one of my five largest clients. Losing all that business will be noticeable. I paid the $1,000.

You can grill my tail in the comments. You are 100% right. I was wrong to pay half his tax bill in the name of saving a client.

Of course, you know what happened next, right? Well, in December he got his personal property tax bill and in January he got the forms to report this year’s information. My office manager filled it out last year and filled it out the way the client wanted this year and put my name on it to sign. I refused. I made it abundantly clear this office will neither prepare nor sign another personal property tax report for this client ever again! If he wants to cheat I will have no part of it.

My office manager hand delivered the personal property tax forms back to the client with my response. She pointed out the offending machine and he made it clear he will not report it.

Things have been frosty since. I did the right thing except for writing a check. In the end it is almost a certainty I will lose one of my biggest clients and all work connected to them. It probably would have been better if I cut ties immediately.




Ethical Discussion

The ethical dilemma above is clear to see in hindsight. I did a lot right and also committed what I consider a grievance error.

Every option available creates an ethical problem. If I comply I’m an accomplice to fraud. If I do what I did I only pushed the unethical act back on the client. And if I fire the client I push the ethical issues to the next tax professional. As you can see, even no choice, standing like a deer in the headlights, is still a clear choice with ethical implications.

What would you have done? Do you think I was wrong? Would you have written a check to keep a client? Paying a client’s tax isn’t illegal. I committed no crime. I was only asked to prepare a false return and refused. Morally the ground I stand on is higher. But we are talking ethics, kind readers. The decision isn’t always so clear cut in such cases.

My Greatest Ethical Challenge Ever

I have a reputation for handling very difficult cases against the IRS. I have a tax attorney in D.C. on speed dial. Her rate starts at $1,000 per hour. For the dirtiest cases we call her in.

The case in discussion here didn’t involve outside help. I did this one all on my own.

Sometimes when an accounting or tax firm gets into tax trouble I’m called in. It makes for a unique situation, for sure. The IRS usually laughs when they see me defending the competition. When I was done with Revenue on this case the laughing had stopped.

The tax firm involved had about $800,000 of profits annually. They are a slightly larger firm than mine. An audit revealed some irregularities and the IRS assessed them with $1.2 million in back taxes, penalties and interest. It was rightfully owed.

The auditor made a few errors in assessing tax. When I pushed back I was threatened with preparer penalties. I was called into the IRS office. I brought the only paperwork I would need. The agent made it clear I was in serious trouble. This is when I pulled out the federal court paperwork already filled out. You see if you want to attack a tax professional you don’t do so in Tax Court where you need to prove your innocence. You go to federal court where you are presumed innocent until proven guilty. I finished my argument with, “You file any penalties against me and I file this in federal court. I want to see the prosecutor dumb enough to get his butt chewed by a federal judge over preparer penalties against an individual who DIDN’T PREPARE THE RETURN!”

The auditor swallowed her tongue. I remember her words clearly, “I’m glad you told me this.” I’m sure she did. Of course she could have looked at her paperwork before she levied the threat to back me off a case. As I left I turned back and very quietly said, “You’re going to regret doing this.” I was pissed.

Six months later the IRS couldn’t collect a penny and the auditor was gone.

Through a series of procedural maneuvers I backed the IRS into a corner. Eventually they sent a guy from the appeals office in Dallas. That’s a long trip for little ol’ me.

The meeting with the appeals officer, client and me happened in my conference room. My client was grilled for assets. He kept professing he had few assets. Most of the client’s income was off the table. (That story would be a long post in and of itself.) At one point the agent asked the client if he had any expensive jewelry. My client said no.

But that was a lie! He just bought his wife a $25,000 ring. I saw the receipt. That was one nice rock!

When the inquisition was finished I filed the coup de grace and had my client deemed uncollectable. Not bad for a guy who owed over a million and pulled in close to a million annually.

One of my CPAs at the time asked me if what I did was ethical. I defended myself by saying it would have been unethical of me NOT to defend the client to the nth degree. After all these years I’m no longer certain.

As happens all too often, the client dodged a bullet and went right back to the well. This time he brought a bigger shovel. I took a pass. He was no longer a client. But there is no doubt in my mind I enabled his behavior.




Ethical Discussion

I take a big chance sharing these stories. I kept the details vague for a reason. All information that would lead to identifying the client has been removed.

Tax professionals are a large part of this blog’s readership. IRS agents and state revenue departments also drop in unannounced. By sharing my ethical standards I expose myself to risk of sanction or retaliation. However, these issues are too important to ignore. Hiding from the truth doesn’t make my profession better. Only by sharing my experiences and choices can the demographic grow.

When over a million dollars are on the line we are starting to talk serious money. The ethical implications are huge.

I never said a word when the agent asked my client about jewelry. If I were asked I would have told the truth. But I wasn’t asked and the IRS agent had no reason to believe I had additional information.

What are the ethical implications? If I spoke up I would have betrayed the client I was representing. Can you imagine an attorney throwing his client under the bus? I felt it was the same thing. Now I’m not so certain.

Enrolled agents have virtually no privilege with clients. People need to understand licensed tax professionals (CPAs and EAs) have to comply with most IRS requests for information or face penalties and/or sanction. Only attorneys have privilege with clients.

This final story bothers me on two levels. First, the size of the amount due was large. This wasn’t a minor issue. Once you cross into seven figures the gloves come off. The second problem for me was my actions enabled the client. He went back to digging a new hole.

The worst part of this ethical dilemma was why I did it. An IRS agent pissed me off by her low level of professionalism. I used my 30 years of experience to gut her just because I could. It sounds like smart talk, but because I won the game I actually walked the talk. And when the dust settled I had to contemplate my CPA employee’s comment: Was what I did ethical?

The real questions should be: Why don’t I fight at that level all the time? For one I don’t have the energy. And second, most cases don’t have the facts to accomplish what I did.




Time for a Debate

This is where you can tell me how wrong I am.  The second ethical issue above is a large number while the first issue above is highly questionable.

What would you have done? If you hire a tax pro would you expect that kind of defense? When it comes to taxes is it anything goes? I hope not. I think my moral compass is better aligned than that.

In each instance every action I took was an ethical choice. “No decision” was also an ethical choice! Firing the client only kicks the can to the next tax professional.

Treasury Circular 230 is clear on the matter. Section 10.21 states tax professionals governed by the rules of Treasury Circular 230 must inform the client of errors and the consequences. In other words I have to tell you if you are cheating when you probably already know you are cheating! I also have to tell you the potential penalties. There is nothing in there saying I have to fire the client! However, I think it’s clear I’m not allowed to sign a return attesting its accurate when I know it isn’t. But I can still keep representing the client. Talk about a conflict of interest (which is covered in the circular, too).

I hope we can get a lively debate in the comment section. The personal property report issue is what triggered this post. I’m very interested in how you would handle the situations I had.

My goal is to get you to think about the ethical implications of your decisions. Many times life gives us all bad options and not much time to make said choice. Doctors make life and death decisions in a heartbeat. The police, prosecutors and judge can destroy an innocent life with one bad decision.

And tax professionals can make or break the personal finance issues of clients. Retirement, early or not, is affected by tax choices. The answers are rarely crystal clear.

This isn’t about right or wrong. It’s about making a choice when all the answers are wrong. About making the most ethic choice of those available.