Thursday, July 30, 2009

Tax Office Humor

I talked with another professional in the tax industry today and he shared two stories that cracked me up.

Story 1.) Said tax professional hired a young accountant straight out of college. The newbie decided after three years on the job that improving her skills through continuing education classes is really brainwashing and that she will not participate in this sort of behavior. Of course, it was her last day working there.

Story 2.) Tax offices are always hungry for experienced tax preparers February to April. First day on the job, newbie is given a practice return to get familiar with the tax program. Every time the boss walks by the office, newbie is moving papers furiously on his desk. After three hours, the boss asks newbie what is taking so long. His response, "Where in the 'on' button on this thing?" He couldn't turn on the computer. For some reason, newbie never made four hours on the payroll.

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Hope this brightened your day. I sure laughed when told these stories.

Wednesday, July 29, 2009

Evil Financial Companies

Financial institutions needed public funds to survive. Now, to pay for their sinful ways, they punish the communities they serve with excessive fees and deceptive practices. The ink on the government check isn't dry and large bonuses are planned for the folks that brought us the current crisis.

I prefer an open, free, environment for business. But considering the seriousness of the financial mess and the continued bad behavior, massive regulation of the financial industry is nearly certain.

We will hear crying and lobbying to let banks and insurance companies manage themselves, but trillion in bailout money will overrule the whining. Some regulation is certain no matter what. And there should be. If you and I are asked to foot the bill for poor business practices, said practices will be made illegal.

What irritates me the most is banks and insurance companies beating on their good client to pay for their ineptitude.

The financial services industry will be significantly different in five years. Banks and insurance companies are based on trust. Once trust is destroyed, it is hard to regain.

The real question is: What can you do to protect yourself?

First, pay down debt. The banks abuse borrowers more than any other class. Interest rate changes can destroy a family's finances. Small banks and credit unions offer services for less in many areas. So, consider giving the local guy business.

Second, shop your insurance, especially if your rate jumps. Your insurance agent may have ideas to keep your insurance bill reasonable. It is better than losing you as a client.

Third, dump the credit cards and use debit cards sparingly. Credit card companies lead the list in spearing clients. Plastic also has fees that the merchant must pass along to you in higher prices to stay in business. This applies to debit cards as well.

Fourth, consider low cost mutual funds. If you need an investment advisor, you can avoid fees with a few simple tricks. The biggest fee is the sales charge on load mutual funds. You can avoid the up-front load, or high fee, back-end loaded-funds, by depositing your funds into the money market and then moving to the fund of choice. Investment reps hate this because it avoids a big commission for them. They still get paid each quarter to manage your funds so they will not go broke. The investment rep works to keep you happy, rather than sell and run.

Once your money is deposited with a fund family, you can move between funds fee free. Since there is no sales fee to deposit in the money market, you can switch to other funds in the family without charge.

Remember, you are the first line of defense in your financial life. Take the responsibility seriously. No one has your interest more at heart than you. Let the good financial services firms help you by taking a proactive role in your finances.

Tuesday, July 28, 2009

Tax Increases

I'm as scared as hell, and you should be, too. I reviewed the package of tax increases passed and proposed today and know a lot of clients will suffer.

Many people will suffer income tax rates above 50% federal and state combined. And the government needs more money to stay solvent. Your money.

Even though the marginal tax rates may not reach 50%, when combined with phase-outs, the tax burden will increase by more than half for a large number of people. The higher your income, the deeper the bite.

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All the money the government pumped into the economy over the last several years will turn to inflation unless removed. There are only two ways to remove the money: higher taxes or higher interest rates.

At one time I felt inflation would accelerate. I still do, but with less conviction. The tax increases will mute the push-pressure on prices.

To put tax increases in perspective, consider this: If your taxes are 30% and rise to 35%, your tax burden has not increased 5%, but over 16%. The 5% increase is against your total income. Five divided by thirty is 16.6%, the real increase in taxes coming out of your pocket. This is money that could be used to buy goods and services, creating jobs. Now, it will go to the government for public spending and debt servicing.

My gut feeling is that the economy has seen the worst this round. Even if the economy improves, it will not translate to a higher standard of living. And if you have debt it will be worse yet. You pay debt off with after tax dollars.

It is in your best interest to reduce debt and prepare for a major transition in our economy, and I'm not just talking about alternative energy.

On a brighter note: Weather has sure been nice.

Don't throw anything at the nice accountant. Congress made the rules, we are just the messengers.

Monday, July 27, 2009

Work Flow

Work flow, or paper madness, drives accountants nuts. Sure, I have days where little new work comes in, usually in late November. Most days, a steady stream of work flows in the door, requiring immediate attention. At a later date I actually do the work.

Getting the work done is the hard part. After eight hours of phone calls, visiting with clients, and answering questions, I need to get the work done. All to often this requires working long into the night and weekends.

So why the blog post? I want you to understand how an accounting office works so we can serve you better. If Jeff or I are unavailable, we are not dissing you. Sometimes we close the door and get real work done. This serves you, too. For us to complete your work, we need time to do it. And every once in a while I like to see my wife and kids. I know that is selfish, but true.

Points to consider: 1.) Allow Jeff and I to give a reasonable completion date and let us work toward it, 2.) Provide us with requested materials as soon as possible, 3.) Have your papers in order. In other words: No shoebox filing cabinet.

If we are not able to meet a deadline, I promise to inform you as soon as I am aware it. Jeff and I share a common goal; to serve you as quickly as possible without sacrificing quality. No one wants to over-pay taxes just so they can get in and out a day sooner.

This post is not a complaint either. I want you to understand work flow in my office so you don't feel forgotten on important tax and financial issues.

Friday, July 24, 2009

Cut Your Gas Bill 30% Without Giving Anything Up

With the new energy credits in the tax code, it makes sense to take advantage of low hanging fruit. This subject will require several posts and I will add the the subject on a regular basis.

Today, I want to grab the lowest of all hanging fruit, gasoline consumption. What I propose below costs you nothing and there isn't a tax credit for it. You can cut your fuel costs by 30% or more by following the habits outlined below.

* Keep your tires properly inflated.
* Do not neglect regular maintenance.
* Coast into stops.
* Accelerate modestly.
* Drive the speed limit.
* When replacing tires, buy low rolling resistance tries.
* Use synthetic oil.
* Use air conditioner sparingly.
* Do not accelerate up hills unless no other choice is available.

If you are real serious, use a ScanGuage II to get real-time feedback on efficiency. Following common sense and the law can be a real benefit personally in savings and to our society by using less imported energy.

I should not have to print this blog, but I get blown off the road every day and know how much gas is being thrown away braking and from aggressive driving.

My Honda Accord has over 100,000 miles on it and gets nearly 40 mpg. This, from a non-hybrid. Just think where energy prices would be if we all practiced better driving habits.

Check out for in-depth articles on improving your fuel efficiency. And a tax credit is not needed to get the advantage. In future posts, I will discus how to use the tax code to help pay for improving your home's energy efficiency.

Drive safe.

Thursday, July 23, 2009

Tax School

Tax professionals, CPA's and enrolled agents (EA), are required to take continuing education every year to retain their designation. CPA's need forty credit hours and EA's twenty four.

The difference between a CPA and EA is that CPA's are accounting professionals that may focus on taxes; an EA is a tax professional only. Each designation requires an initial examination that about 30% pass to get licensed.

In my office all CPA's and EA's take more than the minimum required continuing education. We deal with clients entire income and our experience can save said client thousands per year.

Mistakes, even with our high level of commitment, still happen. Sometimes it is a tax law change or interpretation of a section of code. Regardless, our commitment is daily, our research unending, and education ongoing.

I just thought you would like to know.

Wednesday, July 22, 2009


Want to save a bundle in taxes? Keep your tax papers in order. That means no shoebox filing cabinet.

Too many small businesses throw everything in a shoebox or similar storage system and hand it to me at tax time. I charge more for this practice and you pay more in taxes as things probably get lost during the year or went unrecorded. No matter how small the business, you should record your income and expenses no less than once per week. If you have a number of transactions a day, you need to record every day.

QuickBooks is the easiest way to manage your companies financials; Excel works nice for very small businesses.

By keeping your books in order, you will miss fewer deductions. In the case of an IRS audit, the IRS finds income by reviewing bank deposits, but will be reluctant to grant any deduction without receipt or recording of expense at the time of transaction. If you keep good books, you have an advantage in an audit. If a receipt is lost, but recorded it in your financials, the IRS will almost always grant the deduction if it is reasonable. If the IRS plays hardball, appeals also will consider granting the deduction.

So, help your friendly tax preparer, save on taxes, and get a small amount of audit protection. What do you say? Do we have a deal?

Tuesday, July 21, 2009

Writers Overpay On Taxes--Part II

Yesterday I talked about reducing taxes for writers earning less than $30,000. Today I will discuss a tax reducing strategy for writers, any business for that matter, with profits into the six figures.

There is a reason accountants and attorneys love LLCs. They were created with service businesses in mind. The beauty of the LLC is with how taxes are handled. An LLC can be treated as a sole proprietor (single member), partnership, corporation, or S-corporation with a simple form submitted to the IRS, Form 8832, sometimes call check-in-the-box. You default to a single member LLC with one member and a partnership (LLP) if there are multiple members.

Once your profits rise to $30,000 and up, it usually makes sense to elect to be treated as an S corporation. Once you elect as an S corp, you are an employee of the company with all required payroll and payroll taxes required. However, what you get paid by the company is determined by you. As long as it is reasonable, a fluid term used by the IRS and the tax court on this matter, it is acceptable. All remaining profit flows to your personal income tax return as ordinary income without FICA or self employment taxes. Taxes saved can exceed $10,000 per year. The goal is to have the lowest reasonable wage allowed.

Always check with a tax professional before taking any action. Your personal situation determines how well any tax strategy works.

Monday, July 20, 2009

Writers Overpay On Taxes--Part I

A large number of writers and artists overpay their taxes. Over the years I have seen these clients pay as much as double the amount they should have. As a writer myself, I am dismayed when a new client comes in that has overpaid for years. Writers work hard to turn a dollar and overpaying taxes can devastate a career.

For writers making $5,000 to $30,000 in profit a year, the easiest way to to reduce the tax burden is with a triple-net lease back of your home office. The simplest way to facilitate this tax advantage is to form an LLC as a single member. Then you rent your office from yourself, turning earned income into unearned income and avoiding the 15% self-employment tax.

This works for all small businesses that work out of the home. This low hanging fruit can return over $4,000 per year in tax savings, depending on your personal tax situation.

If you have any questions on setting this up, contact me. My website is:

Tomorrow I will discuss another tax saving strategy for writers with a larger income.

Friday, July 17, 2009

Get Out of Tax Free Card: Abatement

To start: What is abatement?

The IRS offers to eliminate penalties in many situations. If you are assessed a penalty, you should always file for abatement. The IRS will eliminate the penalty if you have a good excuse why you were delinquent with your taxes. Certain abatement requests are automatic, such as relying on IRS advice. The IRS abates over 90% of the abatement requests submitted by my office.

Form 943 is a single page and is easy to fill out. One trick to getting accepted: keep your explaination to three sentences or less.

I have other accounting firms ask me to file their abatements. I see many more firm not file them ever. This is low hanging fruit, folks. If you have paid a tax penalty, ask you accountant to file for abatement or contact my office.

The one downfall to abatement is that you must pay the penalty first and have it refunded. Still, you have to pay the IRS anyway, so you may as well file for a little back.

Have a good weekend.

Thursday, July 16, 2009

Health Care and Taxes

Health care reform is all the rage in Washington. Don't get your hopes up (or down) based on news reports. Everything is still in committee and most ideas will be shot down and new ones supplanted. Don't count on universal health care just yet or a tax increase to pay for it.

Health care reform seems less certain to me now than a few months ago. Cost is the major issue. The size of the spending will make reform difficult at best.

My fondest hope is for a reform bill that costs little. Creative accounting? No. Here me out. If the cost saving in insurance premiums is significant, it can offset the total cost toward society. Any reform that doesn't contain cost controls will end up a runaway spending program. People must have a high deductible so they are invested in their own health care. Basic medical needs should be covered regardless.

The added benefits will cost something. One trillion dollars is a bit steep. If taxes are raised to cover that much spending it could dampen economic growth.

Comments welcome.

Wednesday, July 15, 2009

IRS, tax humor

The IRS is more than frustrating. Today, Jeff and I had a phone conference with Revenue. The call had two of their attorneys, our client's attorney, Jeff, and me.

We spent a half hour debating what would be the best time to schedule another phone conference. Zero issues were covered or even mentioned. Let me be clear: The IRS needed a conference call, attorneys and all, to set another phone conference. Got it.

I know how to balance the federal budget. Just stop all the stupidity. We could all get a nice tax cut and balance the budget if this kind of waste was ended.

Don't count on it. It has been this way as long as I've been in the field and I started in the mid-80's.

Considering IRS foolishness, I had a productive day (outside the conference call). I can see a sliver on glass poking through my desk top.

Go figure.

Tuesday, July 14, 2009

What Not to Say In a Tax Office

I will start series on a variety of topics of interest to taxpayers. Today is the start of a humorous thread.

First, as an update. I have all phone calls I can answer returned as of tonight. WDOR Voice Access issues are moving to the front burner as reconciles and other write up work is getting done. Jeff will be at the Appleton IRS office tomorrow morning and I'll man the shop solo. I plan on finishing payroll for an LLC and pay vendors for an FLP. Then I will hunt up the missing docs to finish up the Wisconsin issues.

Now, off to some tax humor.

Recently, a new client wanted us to solve all her tax woes with the snap of the fingers. In other words, she wanted to pay me $100 and force the IRS to drop the $65,000 she owes. If it were that easy I'd have a new car.

Jeff worked hard with said client to develop a realistic game plan for handling her tax situation. With the client present, Jeff calls the IRS to hammer out the details. This is where the client tells the IRS she will kill herself because of all the taxes owed.

Yes, you can see it now, can't you? Police and ambulance race to my office at the IRS request to save the taxpayer's life (to keep her alive to pay all those back taxes, lovely, aren't they?). We realized the IRS response and called the IRS and police to let them know we had things under control and that the client was just upset.

The moral: Don't threaten to harm or kill yourself or anyone else in my tax office. I am required to report this kind of activity. And if required, I'll order Jeff to do mouth-to-mouth. Ownership hath its privileges.

Later that day she calls my office back to complain she didn't get her moneys worth. Have you ever noticed the crumbling plaster in the far corner of my office? Now you know why.

Monday, July 13, 2009


What a Monday. It is normal to face higher call volume on Mondays and today is no different.

I took work home over the weekend and finished a few projects. Too bad I left my brief case on the kitchen table. I'll print them up tomorrow.

My mail carrier decided she would like my mailbox set up differently. I like extra make-work projects.

I am happy with the work I did get done today. Monday can be a day that stakes up extra work and nothing getting finished. I finished two projects on my desk today. Give me a high five.

On a sad note: I learned Charles Brown died recently. He is the editor-in-chief at Locus magazine, a trade publication for the science fiction and fantasy field. I find a lot of good reading from Locus. I never met Mr. Brown, but I respect him immensely. SF&F lost a good friend.

I set up a Twitter account and need to decide if I want to utilize the tool. I want to use the social networking tools to build my practice and help clients touch base with me. The extra time required must be effective or out it goes.

Hope your Monday went well.

Friday, July 10, 2009

WDOR New Computer

The Wisconsin Department of Revenue (WDOR) installed a new computer system a while back. This new system brings them solid into the Twentieth Century. Yes, you read that right.

Here is the problem: The IRS shares information with WDOR. Things that have been laying around at WDOR from the IRS are now first getting entered and the information is incomplete. It should come as no surprise the errors favor WDOR in every case I've seen in the last few months.

The workload to find the missing number from tax return filed six or seven years ago is daunting and time consuming. I have six of these dogs begging for my attention behind my desk.

The good news: I have job security in any economic environment.

What about statute of limitations you ask. WDOR considers the information in stat if they receive it prior to the four year limitation. I guess we just have to trust the government at their word. They have no incentive to lie, do they?

Until then, I have work to do. I have six files that WDOR screwed up and I must fund the missing number.

On a pleasant note: It is Friday. Have a good weekend. I've been invited to a garden walk tomorrow and my parents are hosting a family reunion Sunday. I'll show up if I know what is good for me. I know somebody that will be working the evening shift Saturday.

Thursday, July 9, 2009

A Day in the Life of a Tax Professional

What does a tax professional do after April 15th? Gauging by my clients, not much. Let me explain.

Once tax season is over I get deluged with phone calls and emails. More than half my work hours are consumed by the phone and email. Today alone I received 67 emails and 17 phone calls. This doesn’t include spam email or sales calls. If each phone call takes fifteen minutes and each email 3 minutes, I am over seven and a half hours into my day before I get any work done.

I answer every email and phone call. Sometimes it takes a while as the numbers above are for a normal day. Mondays are heavier with weekend requests thrown in.

How to approach me on a tax issue: with patience. I handle the small items first to clean by desk off as much as possible and slow down the repeat phone calls. Then I dig into the larger questions and issues I am able to complete immediately. Then I focus on research to answer the remaining emails and phone calls. This can take a few days, depending on the amount of work on my desk. I take work home every night and over the weekend. This is a seven day a week job.

After six to seven hours of phone and email a day, I need to complete real work. To get the work done requires 75-85 hours per week. And I do have a family I like to be with a few hours a week while they are awake.

What not to do: I had a client call Jeff recently and inform me he would keep calling every ten minutes until I took his call. Needless to say he is no longer a client and he will get nothing from me. Rudeness never works.

Am I ranting? Yes. I want the work done as bad as you. I plan my day to complete the most amount of work possible. I hate it when work piles up and nothing gets done.

A New Beginning

Welcome everyone to the Tax Prep & Accounting Services blog. On a regular basis I will provide tidbits of advice to help reduce taxes and simplify your financial life. You can leave comments or ask questions after each post. If time permits, I will answer question or refer you to someone who can. Answers will be provided as a future post so everyone can benefit from the guidance.

Please, do not include personal information. This blog is public; anyone can see what you post.

This blog is for informational purposes only and your personal tax situation may not be affected as I outline. Always consult a tax professional before considering any information on this blog.