Monday, August 31, 2009

Motivation Zig Ziglar Style

If you know Zig Ziglar, you know what I mean when I say motivation. Zig is a powerful speaker with a moving message. Whenever I get a little down, things go wrong, or just need a kick in the pants to get the job done, I pop in a Zig tape from off the shelf.

Everyone gets down once in a while. Many times life hands us the proverbial lemon and we don't want to make lemonade; we want to wallow in our self-pity instead. Of course this all feeds back on itself, grows, and is counter-productive to our needs.

Many years ago I had an employee I hired straight from college. She had the skills and qualifications to be great in the profession. Instead, she chose to stagnate. I require my employees to take continuing education each year at my expense. I play educational and motivational tapes in my office from time to time. Said employee refused to take continuing education or motivation classes, saying "That is all brainwashing."

It isn't brainwashing, it's called education, learning, and building integrity and character. The end result came as no surprise. By not following up on current tax law changes and building skills to serve clients, she was no longer an asset to clients and was let go.

It bothers me that a promising young career ended so fast over something so foolish. When I get down or want a pick-me-up, I pop in a Zig tape. I study taxes daily to maintain and improve my skills. Life is tough enough, why make it worse. Walking life alone is an empty existence; holding hands as a team and growing together is the greatest feeling in the world.

If you feel a little down, as I did lately, find something that picks you up. And by all means, do not walk the mile alone. We are all on this trip together. And what a fantastic voyage it is, filled with wonder and awe.

Sunday, August 30, 2009


Who said accountants have no humor?

Friday, August 28, 2009

Making Work Pay Tax Credit

Most have forgotten about the Making Work Pay tax credit by now. In a few months a nasty surprise may show up on your tax return if you don't check into this credit immediately.

Making Work Pay is a refundable federal tax credit of $400 for individuals and $800 for marrieds filing jointly. I'm not going to go into details on how the credit is calculated, but you need to know how it will affect your tax return next spring.

The credit applies to working people only; if you have no earned income, you don't get the credit. Pensioners, married couples with multiple incomes, individuals with multiple jobs, dependents, Social Security recipients with jobs, and workers without valid Social Security numbers need to pay special attention.

The IRS withholding tables provided employers have some flaws. The table works best for individuals with one job, but may under withhold in multiple job situations and for those working and receiving Social Security and/or a pension. Withholding for pensions is also wrong as it allows the credit when it is disallowed on the tax return.

Check to make sure you have enough withheld. We are early enough in the year to change your withholding without major pain. Review you tax situation and withholding with your tax advisor or look at last year's return and compare it to current withholding. If too little is withheld, file a new W-4 with your employer.

Take care of this now to protect your refund in spring.

Thursday, August 27, 2009

Energy Tax Credit Review

I received several questions on the energy credit this week and now is a good time to review this as the we head into winter.

The tax credits are available at 30% of the cost, up to $1500 for: windows, doors, insulation, roofs, HVAC, non-solar water heaters, and biomass stoves. The credit is available for tax years 2009 and 2010 and applies to existing homes only.

Tax credits for 30% of cost to tax year 2016 with no upper limit applies for: geothermal heat pumps, solar panels, solar water heaters, small wind systems, and fuel cells. These credit are for new and existing homes.

The questions this week focused on the amount of credit for those in lower income brackets. The energy credits are non-refundable, meaning you must have a income tax liability to deduct them. A good starting point is last year's tax return. Review your tax liability with your tax professional and make sure you benefit if taking the credit.

Tuesday, August 25, 2009

Roth IRA Tango

For 2010, regular IRA's can be coverted to a Roth IRA without any income limitation. Currently, taxpayers with an AGI above $100,000 cannot convert to a Roth.

Here are some tax strategies for high incomers to consider:

  • You can set up a regular IRA and make nondeductible contributions and converting to a Roth in 2010. Tax is due on the earnings only.
  • You have the option to report half the income in 2011 and the remaining half in 2012.
  • If you convert to a Roth early in 2010, you start accumulating earnings tax-free sooner.
  • Remember, distributions after attaining age 59 1/2 are tax and penalty free.
  • Roth IRAs have no required minimum distributions for people age 70 1/2 and over.

Review these options with your tax professional before implementing a tax strategy. Additional advantages may be available to you.

Monday, August 24, 2009


Since I have a head cold I am providing an interesting link for today instead of a real blog post. Everything you wanted to know about the federal budget:

Friday, August 21, 2009

Why I Write What I Write

In a dark corner of my home is a room passed by when I remodeled. There are no windows, the carpet is faded and worn, and the lighting dim. I retreat to this room everyday for an hour or so and write on a novel, this blog, or read. An old sofa is tucked tight against the wall and shelves of books line each wall.

I write in this room more than anything else. Which brings up a good question: Why does an accountant write a novel? For those unfamiliar, most novels are written by people with another profession. Writing is a hard way to make a living. So why do I do it?

For me, writing is more than getting a story out and more than a pass time. For me, novel writing is about conflict and conflict-resolution. In my line of work this is a powerful tool. Granted, my characters suffer greater conflicts than I'll ever see, but they still must resolve a serious problem to survive, or at least, return to a normal life.

Everyone has problems in their life and resolving them is difficult, and next to never, prepared for. Most people work to avoid conflict and will even suffer great lose rather than face an issue. The behavior is self-defeating, but done still the same.

Even aspiring novelists frequently avoid conflict in their stories. Of course, this means they don't have a story. Humans by nature are ruled by 'flight or fight'. We choose 'flight', but our heroic fantasies have us 'fight'. Reading novels are a great way to experience conflict and resolution. It is unlikely we will engage the same devices a character in a book uses, but the way the conflict is resolved can be a valuable lesson.

I write to understand conflicts and its life-cycle. Writing also allows me an escape at a deeper level than only reading a book. Writing the story gives me a front row seat in resolving a perplexing and intractable problem.

And that comes in handy when battling the IRS.

Thursday, August 20, 2009

The Professional Thing to Do

It is a good idea to keep your accountant in the loop. A quick follow-up on documents you need to provide, but struggle to acquire, helps the accountant ward off nasty surprises.

The IRS loves to drag its feet when it comes to getting its paperwork out, but gives you 10 days, or else. The 10 day expected response is not hard and fast. You do need to keep the IRS informed of the timeframe for getting documents in. If your accountant knows, he should contact Revenue for you.

When pursuing an Offer in Compromise, I recommend you meet the 10 day window the IRS demands. If you don't, they will likely reject your offer and you will need to start all over again.

I know this is frustrating, especially when an IRS auditor demands documents within 10 days and then sits on them for three months. I never said it was fair; I'm just telling you how it is.

Besides, in most cases, there is no good reason to delay. The faster you get a resolution, the faster you get your life back.

Wednesday, August 19, 2009

Private Information

I am serious here: Don't drop off your credit report at a clothing drop-off site. I shouldn't have to say this, but it happened right outside my office.

This morning I arrived bright and early at work and parked near the clothing drop-off bin set up by a non-profit organization. Boxes of clothes too large to stuff in the bin are stacked neatly outside it with papers on top. I don't pay much attention to this situation as it plays out daily. Except, this time there are papers laying on top. Good accountant that I am, I glance at the papers and notice it is a credit report.

This is dangerous in our society. Identity theft is a real issue and a major headache to clear up once victimized. So, I gather the papers and bring them in the office for shredding. Paging through the papers I see a fine young man dressed in prison garb. This is where I phone the police and get their opinion. They send an officer over and it is decided the papers should be shredded and not taken in as evidence. No crime was committed.

Please, shred all documents before letting them out of your hands. Never set papers with personal information out in the open when they can be stolen. Please do this for me. It will help your friendly neighborhood accountant sleep better at night.

Tuesday, August 18, 2009

I Ain't Got No Money

Behind my desk sits a file with completed documents. The client refuses to pick-up or file the forms with the IRS because she is short the amount due. Of course, you realize, she is only digging the hole deeper.

Friendly advice from your local accountant: Always file on time, even if you can't pay. Why? Because there are several IRS penalties in this world: penalties for not paying on time and penalties for not filing. The last penalty is a self-inflicted wound. File on time and set-up a payment plan, thereby forgoing the late filing penalty.

This is the easy way to reduce your tax burden. It is bad enough you have to pay taxes, why volunteer to pay extra.

Sunday, August 16, 2009

Summer Reading

Since we are enjoying the last leg of summer, I want to share what I've been reading. Feel free to cap your summer with any of these good books.

  • The Genesis Secret by: Tom Knox--Good debut novel heavy in the vulgar. Some scenes are very graphic. Not for the kids.

  • The Sinner by: Tess Gerritsen--Sue convinced me to check Gerritsen's work out. Well written and enjoyable medical crime novel.

  • Body Double by: Tess Gerritsen--See above.

  • Angels & Demons by: Dan Brown--Not as good as The Da Vince Code. Still, okay.

  • Just After Sunset by: Stephen King--Nice short story collection. The Gingerbread Girl, N, A Very Tight Place are notable.

  • Divided In Death by: J.D. Robb--A light sci-fi romance, what can I say, I have varied tastes.

  • Max by: James Patterson--Didn't like it. More for the kids; they should enjoy it.

  • Old Man's War by: John Scalzi--Excellent sci-fi.

  • The White Plague by: Frank Herbert--This has been on my shelf forever and I finally broke down and read it. I was a fool for waiting. If you can find a copy, worth your time.

  • Doomsday Book by: Connie Willis--This title won the Hugo many years ago. I liked it.

  • Gridlinked by: Neal Asher--This book has me on the fence. I enjoyed it and will read sequels, but...

  • Duma Key by: Stephen King--What can I say, the guy can tell a tale.

  • Blaze by: Stephen King--One of his trunk novels never published from before Carrie.

  • Singularity Sky by: Charles Stross--Very nice and I don't know why. I just loved the book.

  • Bendigo Shafter by: Louis L'Amour--Has he written a bad book? No.

I also started reading Stephen King's Dark Tower series: The Gunslinger and Drawing of the Three. These books have a different flavor than traditional King novels.

I started reading Darkness Calls by Marjorie M. Liu this morning, a Wisconsin writer, and a darn good one at that. Paranormal romance, if genre matters.

Yes, I read all these books this summer. No, I don't watch much TV. Did I miss anything?

Feel free to add to the list by commenting.

Friday, August 14, 2009

Thursday, August 13, 2009

A Wise Choice

Choosing a tax preparer is more than shopping price. There are varying levels of competence among tax preparers and it's possible to hang a shingle without any qualifications.

Tracking a tax preparer is difficult, even the IRS has little oversight (accountingToday Vol. 23, No. 12). Since your tax preparer is handling your annual reconciliation (tax return), it is in your interest to find the best.

Can you trust the IRS to weed out bad preparers? No. The IRS tracks paid preparers on 22 different systems and many preparers use different identifying numbers. The IRS admits it cannot follow-up on all preparer complaints. The IRS doesn't even know how many paid preparers exist.

Let me give two examples that highlight the problems finding a competent tax pro.

A few years back I completed an audit where the IRS auditor threatened me with preparer penalties. Her expression was amusing when I showed her two IRS letters providing advice on the complicated tax situation. What happened is that the IRS reversed its position. If this happens, you will owe the tax and interest, but no penalty. Preparer penalties are not in the cards since we trusted the IRS's advice. In reality, it was a rouge agent on an ego trip. She has since left the area.

Next, a new client arrives from a tax preparer that changed his information prior to e-filing. The preparer added credits the taxpayer wasn't entitled to, changed the taxpayer's address, and direct deposited the refund to his own account. We provided the IRS with all the details and they have done nothing. The preparer wasn't shut down. The taxpayer is headed for tax court to get his refund. He is out over $10,000 and pushing higher. The preparer in question had a good prep fee: $60. Any tax pro that charges $60 is pulling a scam, unlicensed, or unqualified. Remember the difference between price and cost. If you save $100 in prep fees and overpay your taxes by $500, is it really a good deal? And if you get lucky and find a crooked preparer, God have mercy on you, you'll need it.

Since the IRS is unable to help you choose a qualified preparer, what can you do? The two real examples above show how the IRS fails to protect you, the taxpayer. The IRS promises more oversight, but I doubt it will be anything more than token.

To increase your chances in finding a real tax pro requires a small amount of research. First, your tax pro should be an enrolled agent (EA), CPA, or attorney. Second, they should have several years of experience.

EA's are the only tax pros. CPAs are accounting pros that might focus on taxation; attorneys, legal pros. Once you find an EA, check to see how long they have been in the field. If they are starting their business, but have worked in a tax office for years, that is real experience.

Finally, ask around. Successful people have a good working relationship with their tax pro.

It is never too early to start looking. Now is the perfect time to cement a relationship with a tax pro. They have time now and are less likely to spend time acquiring new clients when they are working fifteen hours a day. It could be the best time you spend all year with a high return on investment.

Tuesday, August 11, 2009


So, what does an accountant do on vacation? We should drink large quantities of distilled spirits, but a few, me included, don't.

The perfect vacation for me is quiet time with family. I also like time for a good book. This week I'm on vacation and spent the entire day at the office Monday. I promise to stay away the rest of the week. I'll let you know how it turns out.

The girls are camping with my parents. Sue and I are enjoying the rare quiet time together in productive ways. It is so nice to talk without weighing words. Little ears like to listen in or spy. We are visiting them Wednesday.

I don't need to travel far, or at all, to enjoy time off. I hate traveling. Home is where I like to spend free time: working around the pond, feeding the steer, chickens, and fish. There is so much to do around the place.

I'm terrible at taking vacations. I promise to take time off and then keep right on working. Since that is unhealthy, I really am taking time off this week. Honest. Yes, I am writing this from home. Yes, I logged into the office (only once) to check my e-mail. But I did read for several hours today, worked on my novel (yes, I like to write if you haven't noticed yet), pestered my animals, checked out the fruit trees, and have a nice long walk planned with Sue this evening. If I get good at taking vacations, I may never go back. Fat chance at that.

No blog post tomorrow. Like I said, visiting the girls at the campground. Wonder what they have planned for dad?

Monday, August 10, 2009

I Don't Pay Tax on That

A dirty bug-a-boo showed up again today. I thought it was dead, buried for all time, but somebody at the tavern must be spouting tax law after their seventh Bud.

Client calls this morning and wants to verify he didn't need to pay tax if the amount is under $600. After pounding my head into the corner five or six times, I return to the phone and explain that all earned income is reportable. If you do a small side job for $350, you still need to report it.

He didn't believe me. Actually, he thought I was stupid and nearly said so.

How do I convince said client on actual tax law? The light bulb flashes on. I rephrase my advice. "Okay, you got me. You don't have to pay tax on income under $600. That is why I charge so little for my services; haven't paid taxes since Reagan was in the White House."

It took a while for the light to go on over his head.

The $600 rule is for filing Form 1099. If you receive $600 or more from a vendor during the year, they will inform the IRS on Form 1099. Just because you don't get a 1099, doesn't mean it is tax free. And if you get caught, the penalties and interest are usury.

Sunday, August 9, 2009

When a Deal is not a Deal

I went to Subway Sunday and used a coupon from the Entertainment Book, the one kids sell to raise money for school. When the order was rung up, it was way too high. I complained and was told the coupon actually made the cost higher. What a rip-off.

Kids sell the Entertainment Book so they can get money needed for class trips, supplies for sports, etc., and Subway creates a coupon that rips the costumer off. I would be better off handing twenty dollars to the kids and forget Subway.

This brings up a good point in personal finance. Coupons are not always the best deal. Many times a coupon is created to convince consumers to overpay for a product or service. If a company wants us to use their product, a coupon is a nice incentive. But, do they really think we don't notice if the coupon is really a rip-off?

Always check the real value of a coupon. Many times a product can be had cheaper without the coupon. And if the company is running a rip-off, spend your money elsewhere. As for me, I'll chose any other restaurant if there is a choice. Subway is off my list. I can see why Subway advertises weight loss in their ads. It all comes off the wallet.

Friday, August 7, 2009


Except during tax season, I'm usually out of the office on Friday. If I have an appointment I come in, if not, I work from my home office, visit business clients at their site, or spend time with Sue and the girls.

Friday is a day to catch up on work without interruptions. Working from home also saves commute time. As a result, I catch up on paperwork that should have been done a week ago. Nothing feels better than making progress.

Balance in life is essential. Running your own business is challenging and stressful. Maintaining balance between work, family, and personal time is important. I see too many clients working day and night, weekends and holidays, and burn out, leading to business failure.

If you own your own business you work more than most. You must commit to balance or your health and personal life will suffer. Never apologize for taking time off. Enjoy your career, enjoy your family, and most of all, enjoy life.

Yes, I am working from home today. I will have time with my family today and four generations of Schroeder's will sit around the card table in my Sunroom tonight, as they do most Friday nights. Oh, how we love a good game of Sheepshead.

Here's to balance.

Thursday, August 6, 2009

Good Business Advice for Everyone

I commented on a blog last night that I think is solid advice for anyone in business. Give it a look-see.

Wednesday, August 5, 2009

What Will the Accountant Think

Two clients that left me years ago returned to the fold. Both clients own a business and suffered a setback when they terminated our engagement. Business is tough again and they need advice to maintain and grow their company, advice their current accountant could not provide.

I had a long talk with each this week and discovered the reasons they left my firm. First, they were embarrassed to have me see them fail, and, second, they felt it was my fault their business declined. Let me address both issues.

Embarrassment is a poor reason to end a relationship with your accountant, doctor, attorney, or any professional. Let me be clear: I am here to help you with the difficult issues. Every business eventually will hit a wall. The economy, industry, regulation, or other issue will put a company in a difficult position. This is the most important time to talk with your accountant. This rule also applies to personal finance. Accountants work financial issues all day long and frequently have referral resources to fit your specific issue. Avoiding your doctor because of an embarrassing rash is foolish. The doctor can prescribe ointment to solve the problem. Let your accountant apply some ointment to that financial, tax, or business rash.

The second issue is an underlying joke in the accounting profession. When a business fails, blame the accountant; must be his fault. This same theory shows up when people owe taxes on April 15th. Remember, you run/manage your business, not the accountant. I can give advice, but you need to apply it. The buck stops with you. It is counterproductive to blame the accountant. He is your friend, helping you sail the rough waters, with advice and referrals. Your accountant wants you to succeed. We want to keep you as a client. Trust me on this, I want my clients to all be rich and getting richer. Wealthy clients make accountants happy. If only I could force you to work through the issues.

Don't be afraid of your accountant; our job is to help with the tough issues. We've seen most of it before. We enjoy the challenge, want to help. As a group, accountants snap into action mode when a client comes in with issues. We shine brightest at these moments.

Tuesday, August 4, 2009

IRS Failure

The Treasury inspector informs us some big past-due accounts are not actively pursued. The inspector found 448 (as reported in The Kiplinger Tax Letter: Vol. 84, No. 15) overdue accounts over $1 million not actively worked. The IRS argument for failing to collect on these accounts is that some amounts due only surpass $1 million with penalty and interest.

Taxpayers deserve better. When this kind of money is left on the table, you and I pay higher taxes to make up the difference. Some of these accounts may be uncollectable. Still, some of the $1.2 billion due on these 448 accounts is collectable. There is no reason these accounts are not even worked.

Monday, August 3, 2009

The Busy Month

August used to be a busy month at the tax office until they changed the date extensions are due to October, the new busy month. Even still, for the first business day of August, I had no lunch break. People kept coming in the door and the phone kept ringing until I ran errands.

Jeff filed two tax returns today and has two appointments tomorrow for filing.

Why do I wax on about this? Because I am tied and look forward to a few days off. I plan on stepping out a few days over the next two weeks to catch up. I also want to impress upon you that it is okay to file your taxes before your extension runs out. You see, around October 10th, twenty or so people will be very angry at me because I can't finish their return prior to their extension expiring. Of course, they are mad everyone else procrastinated like they did and now they will suffer the consequences in the form of IRS penalties.

Don't blame your accountant if you wait till the last minute. Let me serve you by giving me the time to explore every tax saving angle possible. I am not the fast food of tax preparation and you should expect more than fast food quality. I love my work, and love it most when I get the best deal for you.