Sunday, June 20, 2010

Why CPA? Why Not?

Why did you become a CPA?

I have been asked several times over the past few weeks why I became a CPA.

Now some would say that it must be my love of the Tax Code! That is so far from the truth.

When I went to college (by the way I was really, really good in math) I majored in pre-med. Pre-med to Accounting?

Oh my, what a difference. One day while hanging out on campus, I thought, “Do I really want to spend the next 8 to 10 years in school of some sort while I work to become a doctor?”

The answer came back, “NO!” But what could I do to help people?

I thought about finance but wasn’t attracted to it (or should I say to the students that were in that major?). So, accounting drew me in.

To say it’s not about taxes isn’t entirely true. I do enjoy that aspect, but really it is about helping people and businesses grow. Even in this economy there are ways to help, from maximizing tax savings to helping restructure business operations.

Restructuring makes them more profitable and puts them in a position to take advantage of the market when the economy does turn.

This week I explained to a client, who is self employed, that we could take advantage of a SEP for his business and not only save taxes, but also put money away for retirement. I was able to show him that by investing approx. $18,000 in a SEP (which, by the way, he has until he files his tax return to fund), that he would save approx. $7,000 in taxes, at 39% return on his investment. I don’t know about you but I don’t

know where else can somebody get a 39% return immediately an investment.
His reaction was total amazement. None of his other tax professionals had ever explained about saving on taxes while getting the return on investment. His next question was how can he do more this next year? The answer is by planning earlier in the year--like now!

The first thing he did was schedule a meeting next week to start year-end planning for 2010. This is why I help people to save money on taxes and for retirement.

I love the people side of the business as a CPA, and I’m not one of those greenshade, nerdy types that are always depicted on TV. I like to call it the way I see it and advise my clients accordingly.

My new motto is Cool People hang with Cool People

There you go! CPA it is!

Wednesday, June 9, 2010

Foreclosures and Credit Scores

I had a client in this week that is getting ready to retire and owns a home which is severely upside down and had no way of being able to afford the home once retirement sets in.

Through the process of working with them, we talked about strategic foreclosures and the impact on them and their credit. I suggested they check out the 60 Minutes piece a couple of weeks ago on strategic foreclosures.

As everyone knows by now, of course any type of foreclosure is going to have an impact on one’s credit, but maybe there are ways to reduce the hit.

I gave this person an example of one my clients, for which we were monitoring their credit scores, that had a rental property go into foreclosure. At the time of foreclosure, last August, their score dropped by approximately 80 points from the reporting of the foreclosure.

But by the end of the year their score had actually increased to a point that was greater than where they started just before the foreclosure. By analyzing this we were able to determine that the money they were saving on the house payments which had been redirected to credit card debt, they were actually able to reduce their debt faster thus causing their scores to increase.

So if this could happen to one client why couldn’t the same thing happen to other people?

As I talked about in a past blog my personal belief is that the FICO system is antiquated and needs to be redefined, if people are going to be able to buy on credit again.

But in the meantime if we can all work on our credit the way this other client did then the credit hit may not be so bad.

I’ve been monitoring my own credit on a monthly basis and I have adopted a dispute strategy.

If at I anytime something appears on my credit that I didn’t authorize I am on attack mode and disputing the item. This week along I found that one of my lenders, did an inquiry on my credit. Bullshit to that and I disputed the action.

I am also doing this on my credit card, last week I noticed for the past several months, during tax season, which I usually don’t take the time to watch my credit card very closely, I was being charged approx. $35 per month from 2 recurring transactions.

You know from those online sites where you buy something then they automatically charge your account. I immediately thru my on-line credit card account disputed the items. And low and behold within 48 hours all the charges were reversed. And being the good PFC that I am, I immediately transferred the savings to my Frap Fund. Found money right!

But if we don’t watch our stuff this is the type of thing that can happen.

So keep on top of your account and save!!

Wednesday, June 2, 2010

Like KFC except without the secret spices

This week one of my clients came up with a new name for me. And no, it’s not bad. #shocker

I’ve been working with several clients on personal finance issues, from loan modifications, to credit card restructuring, to developing savings plans.

The name was Personal Finance Coach.

I kind of like that, it’s certainly different than being a soccer coach for one of my kids teams, which I don’t do nor do I want to do.

This Personal Finance Coach (“PFC”) resonates with me.

Unlike financial planners I don’t sell products nor do I profess that I am a certified financial planner.

What I do is take a look at real life circumstances and apply sound logic. My goal is to get my clients to develop their strategies on their own, thereby making them accountable and feel like the plan they come up with is theirs and not an edict from above.

I’ve taken my skills from the corporate world and applied them to individuals.

For me being a PFC is take my client’s overall picture and apply tax savings strategies, savings ideas and credit card debt reduction techniques. And right now in this stressful economic period to work with people who are having a difficult time trying to decide what to do with their home.

I enjoy being there for my clients. It feels like people more than ever need someone with not just a financial background, but someone who can empathize as well. Someone who understands how deeply emotional personal finance truly is.

If you aren’t satisfied with your current accounting firm, please don’t hesitate to check out our website or if you live local to Palm Springs and the Coachella Valley, call our office at 760-969-6499.

Wednesday, May 19, 2010

The Boat - A Symbol of Our Philosophy

Over the past several weeks I have talked about my Frap Fund. You know the one where I don’t go to Starbuck and put the money away. Or the money we save with coupons goes into a savings account.

I kind of fell off the wagon this week and was only able to save a little bit but @TheDeeView and I had a realization which will amount to a tremendous savings.

As summer is approaching, faster than I thought, I started the search for a boat for us to use over the summer in our mountain escape. I even took the 10yr old boat shopping one Saturday a couple of weeks ago, only for the 2 of us to be overwhelmed.

The onto Craig’s List and Boattrader.

I was determined to find the best boat and a great deal (you know, being a great saver that I am).

Then @TheDeeView and I started talking about the money to own a boat and get it in the water this summer. What started out as a boat in the $9,000 range quickly became double that by the time we added servicing, dock fees, equipment, skis, wakeboards etc. Oh my God. It became crazy.

Halt! Slam on the breaks, stop this crazy nonsense and smell the roses. We both decided at that moment a boat was not the great idea it had been!

We decided to save the money, get rid of one of our credit cards and find different ways to enjoy the summer in the mountains.

At the end of the day, I ended up buying a portable tetherball set for kids, which I can play and guess what we will get more enjoyment out of that by playing together and getting exercise. We’ve added biking to the mountains and walking hiking and just hanging out.

My god we’ve saved $17,000 just by doing this one thing!!!

Now that’s a FRAP FUND contribution!!!

Oh and by the way we were able to find a great sleep away camp for the kids for one week and we are still ahead.

What the boat purchase made us do was to stop and really consider our own lives, spending habits and ways for which we can spend money more efficiently and save money.

We are now assessing other strategic cuts in our lifestyle that will actually give us a better quality of life and at the same time boost our savings.

Now that is not to say we won’t buy the boat next year, but for now we are about filing our Frap Fund.

Work this in with my other #BudgetBuddy tips and have fun saving.

Saving money should be about fun and not a chore. I love seeing my Frap Fund grow.

When I am done with this blog I will actually be transferring money to the Frap Fund because we decided not to go out to dinner this weekend which would have cost us, family of 4 an easy $120, instead we BBQed and saved an excess of $80 for the Frap Fund baby!

That’s what I’m talking about!

Tuesday, May 11, 2010

Frap Fund - The Sequel!

Frap Fund #2

Well a few weeks ago I started to talk about savings and how we opened a Frap Fund to transfer all of our savings into.

SO to start this blog off I thought I would just state that since I am blogging about it I should also report my results for the last week.

This last week we saved $281 by not going out to dinner twice, store coupons, store clubs and wait for it, I only went to Starbucks once during the week, I must be going thru coffee withdrawal by now.

But alas my coffee was free from the office and yes its Starbucks.

This week I also took time out of my day to go to 7 year olds first grade class and talk to them about savings and why it is so important. I delivered to the classroom 22 piggy banks and the kids were in love with them and they couldn’t stop talking about both savings and other ways to save money.

We also had the teacher fully engaged and she introduced the concept of the kids filling their piggy banks then transferring the money to a savings account at the bank, thus allowing for the addition of interest.

Meeting with these kids opened my eyes to how we, meaning us everyday consumers, have not done a good job with savings. We have been a spend-it society even above our means.

But these kids don’t have any of those preset conditions to spend yet! I think it is our job as adults to teach these kids about savings.

I mentioned to the kids that I felt money was an emotion and some of the kids understood and even gave me other emotions. These kids had it down now if we can just keep them on the growth path, happy days.

Since starting to talk about the Frap Fund lon my blog I am now finding people who I now have read it and we have started talking about savings and credit card debt again.

And speaking of savings there was a great little article in the LA times that talked about if you had bought $5,700 worth of Apple stock when the MAC came out, approx. 1997, instead of the MAC, it would now be worth more than $330,000!

Wow is what I said.

In addition, if you had purchased one share of Apple stock instead of the ipad when it came out you would have made an additional $70 on that one share in the past several weeks. But hey at least I have my iphone; I don’t want to even see what the stock has done in that period of time.

I may regret buying it!

Nah never!!!

Friday, May 7, 2010

The End Of FICO As We Know It

Okay let’s follow along with a recent blog and talk about credit cards and credit scores.

I think it’s about time we all revolt against the so-called FICO system.

I don’t know about the rest of you, but this week, I have had my fill of the credit card industry as a whole.

One of my clients shows up with a letter from Wells Fargo saying they will reduce the interest rate on the credit card if a payment of 10% would be made.

Sounds great right?

But when you go on to read the fine print “Wells Fargo will reduce your credit limit by the amount of the payment”. Are you F*%#&ing kidding me!

These banks take TARP funds, oh ya, that was taxpayer money, then they turn around and screw all of us.

The reduction in interest rate is great; however reducing the credit limit will negatively impact your FICO score!

Come on Congress when are you going to grow some balls and deal with these institutions?

I thought part of the bailout was to help them (the banks) so they could turn around and help the individuals. Well if the way they are helping people is to damage their credit scores, then I ask; how that helping?

We need real financial reform; the credit card reform was a joke. It allowed the banks several months to screw us and they are still doing it. When is the Federal Government going to step up???

Whatever happened to the day when banks would work with their customers and reach across the desk and shake the hands and say we can do that?

Let’s start by getting rid of this lame ass FICO system which is now terminally antiquated due to the recession.

Wells Fargo you should be ashamed of yourself (and Goldman too!)


Sunday, April 25, 2010

Your Frap Fund & You

Throwing money away. We can all agree that’s a bad thing, right?

But how do we make sure we aren’t doing it ourselves? Everyday?

Money has a very emotional component for just about everyone I know.

Like me. I never just throw money into my wallet; I always put the bills in order and facing the right way.

So yes, money is an emotion and the use of it should be as well.

I coach my clients to understand the emotional impact money can have and use that to their advantage.

An example? My so-called “Frappuccino Fund” (Frap Fund for short) is such a way.

First I always recommend that a client trying to pay off debt set up a separate bank account fund.

And we call it their “Frap Fund.”

Each time they are out and about and ready to spend money, I ask them to think about it first. Is it really worth the money?

If they decide no, they note how much they just saved. They do this each and every time they would have spent on a coffee, a dinner out, breakfast, etc you get the picture.

For each time you resist the urge to splurge, transfer that amount of money from your regular checking account and put it into your “Frap Fund” account. Which should NOT have an ATM card or any kind of easy access to get the funds. The point is to SAVE money, not use it as your ‘paint the town red’ money (that is in a completely different account if you are anything like my wife!!!)

Several years ago my wife and I decided to practice what I preach.

We set up our very own “Frap Fund” and we began to transfer money into that fund every time we saved money by NOT doing something on impluse.

We went as far as to even save the money from store coupons and those store clubs.

Let’s say I was on my way to Starbucks, which was a daily occurrence for a Frap and then of course a muffin, I would instead go to the office where the coffee is free and transfer the $5 or $6 straight way from my bank account to my online account.

After one year we were able to save over $8,000 doing this!

To me that was real money saved!!!. And, of course, @TheDeeView had to something to spend on shoes from @Zappo's. But wait that is another blog!

The beauty about doing this technique is that it creates a win for you and helps build savings, which is a vital factor in financial planning.

I think as we all move forward from this last recession we really need to focus on savings while reducing our debt load.

Plus, as you might notice, one of the components in the word Fund is Fun!

I find this method of savings, that can involve the whole family is actually fun!

Try it for a week and let me know in the comments below how it went and how much you saved!

Debt & Taxes - One Might Be Avoidable!

Debt and Taxes

I know it is supposed to be death, but somebody else can talk about that. I am more interested in Debt. It is as unavoidable as we seem to think?

I’ve been reading a lot lately from financial planners, after years of hearing about it, payoff your credit card debt!

I totally agree with the philosophy of being out of credit card debt especially today as rates rise and the credit card companies are harder to deal with.

But for me the question always arises which do I payoff first?

A high balance card or a low balance card with a lower interest rate?

Conventional wisdom always says to get rid of the high rate card first and then go after the lower interest rates. While I agree with this on principle, I find that the never works that way! Mainly because my clients never feel like they are getting ahead!

To me the credit card debt is not only financial it is also very much emotional. I want my clients to have a win!

Hell I want a win too!

So my approach is a little different.

I advise my clients to get rid of one debt as fast as they can, even if it means paying off a low balance low interest rate card first. Then move to the next one that is easiest to pay off and so on.

With this plan in place, my clients start to feel the emotional side of having a win.

Remember money is emotional. Treat your money well and it will be there for you.

Another technique I use to get people in the habit of paying down their credit cards (and not using them in the future unless it is an emergency) is to pay off each new charge. The day you make it!

Get in the habit of each and every time you put a purchase on a credit card, that you go home, and now it is so easy with the internet, and pay off that exact amount (or hey, maybe 10 bucks more!) on your credit card account.

This way, you are really using cash and not increasing your credit card debt.

This is a discipline and I know that is seems tough to follow. But I am telling you if you practice the techniques I have outlined, you can and will have a win!

Sunday, April 4, 2010

Zappos! My Role Model! #Seriously

Hula Hoops? An accappella singing group? A core value of Create Fun and a Little Weirdness? This is all in a business plan? For a real business? A successful business?

What ever you may think of Zappos (and to tell you more about the shoe experience of Zappos, check out my wife’s blog at the company is actually the business model we use to run our business. Now we are accountants, with a rather serious selection of financial services to offer. How the could we possibly have anything in common with the retail SHOE Giant of the World?

Well, for one thing, Zappos has the Zappettes. (We are too small to have the Greg Ettes, but I’m sure that is coming). This is a group of staff that may spontaneously serenade visitors. The receptionists have Hula Hoops, which they may use on a regular basis. (Okay, we don’t have Hula Hoops yet, but we are in the market for a Gong.) The Customer Service Department (the Loyalty Team) have no limits on the amount of time they will take on the phone with each customer (never gonna happen in our office, but hey?)

But the most amazing thing, is that they have a really committed and caring take on customer service for their clients. We do that (though not as well without the Hula Hoops I fear).

They have values like: Create Fun and a Little Weirdness (@TheDeeView makes our staff dance during retreats. They hate it when they see her lugging the Boom Box into a conference room), Deliver Wow through Service (Hey, some of our clients are saying “WOW, the IRS hates me”, but hey, they are saying WOW People!) Embrace and Drive Change (it is an accounting firm, but we are all about making it great for our clients), No snobs (I made that up. I just hate snobs.)

Staff at Zappos have to be prepared to do the wave at any moment. And they have crowns you can wear if you are having a particularly bad day. (We don’t offer crowns, but you do get a free piggy bank.)

They go through 160 hours of Customer Loyalty Training. (Can we send our staff there?) And they love to have their staff Tweet about their experience working at Zappos. (Oddly, though we encourage our staff to do the same, they keep asking for extra money to stay late and Twitter. I don’t understand this myself.)

The point of studying the Zappos business model, is to see if we are giving the ultimate in customer service at our firm, making the most money for everyone and doing it in an efficient manner (cuz time is GOLD, isn’t it?).

So while we may not have Hula Hoops, Greg Ettes, or our Giant Gong yet, that doesn't mean we don't want our office to make people feel as good about paying their taxes as my wife does about her shoes!

Sunday, March 28, 2010

March Madness.... And not the good kind!

Just 19 more days to go in this tax season.

And yep, the crazy has hit the fan!

People who don't want to pay any taxes whatsoever, yet they have not made investments in their business, nor any charitable contributions and don't travel for work.

Hmmm... I'm good, but...

Plus the reality is, if you are paying taxes, you've made money. To grow your business, you are going to pay some taxes! #clearlyanovelconcept

Then there are the people trying to save their homes or even commercial properties. You have to love their verve and pioneering spirit but some are getting a little 'creative' #possiblynotwithinlegalboundsthough

On the good news front, B of A announced some new plans of their own to help homeowners (I like to think it was in direct response to my post a few weeks back #delusional)

We are also on a big push to have our clients fully fund their IRAs to the max. One of my client saved $2,000 in taxes. That was a 33% return right out of the shoot.

We're also fielding a ton of questions from clients about what can be considered deductible for business travel ( the Sunday LATimes article 'Is my Latte Deductible" didn't help anything!)

Then there's the small businesses that can qualify for SEP.

Whew, I'm tired just writing about the week, let alone facing another one!

Next blog will be only 12 days from April 15th (just to warn you it might be 3 lines repeated over and over Get me out of here! Please! I'm serious!)

'Til then be happy and keep your darned receipts organized!

Sunday, March 21, 2010

Is Your Business Bank Account Protected From Internet Fraud?

You would be surprised that it isn't!

As detailed by the LA times article (,0,456329.column) with the new banking laws, only personal checking accounts are protected from internet fraud. Commercial accounts are not given the same protection.

The article's recommendation? Small business owners (the article wasn't clear, but I can only assume they meant those that are self-employed since corporations cannot have personal accounts) have 2 PERSONAL checking accounts.

I found the article to be illuminating. Having practiced for years, (which is remarkable since I am only 30 yro! LOL),I still learn something new every day.

I have long recommended that anyone self-employed should have 2 accounts, however 1 was personal and 1 was business.

This 2 account system is extremely topical given that I have heard the I.R.S is going to be targeting small businesses, with losses for examinations. Doesn’t make much sense considering small business have been getting hammered in this economy, lack of lending a from the banks, and loss of customers to name a few.

Oh wait I just mentioned banks again in my blog. I have had clients this week refer to banks as the “evil Empire”. They take from the us (the government) pay us back, then screw the taxpayers with higher fees, no loans and limited if any loan modifications.

And Loan modification is still a hot topic in our practice with several people still trying to seek them out. I love it when a highly educated and at one time highly compensated, taxpayer tells me that their loan is being reviewed by a clerk in the Midwest probably making $12 per hour. Hell my gardener makes more than that, and he doesn’t control my financial future! Or maybe he does!

But I digress. The article brought up a good point. All of that money in your business account is not protected under the new banking laws governing internet fraud. A hacker could drain the entire thing and the bank is completely off the hook!

So my new advice to clients is to still have 2 accounts, but both PERSONAL (at least according to the bank). One they use for truly personal transactions, the other is for business use.

This way you still are protected from internet fraud and keep your accounts separate so in the case of an audit the Federal Government isn't racking through your personal life!

Have a good week everybody . Remember April 15 is just around the corner and don’t forget an extension of time to file your taxes, is just an extension of time, not an extension of the taxes that may be due. Those are still owed on April 15th!

Good luck and Happy Tax Season.

Sunday, March 7, 2010

Can Our National Debt Be Fixed?

This week I read Fareed Zacharia’s article entitled “Defusing the Debt Bomb” where he proposes fixes to resolve our debt.

It was an amazing read (find it here @ It made me think about his comments and the potential fixes as well.

Now I’m not an economist but I would like to offer up some thoughts on this (because you know, that’s how I roll).

If we were to add a value added tax (VAT) nationwide (as Fareed suggests), yes, we would all then be paying into the system based on our spending habits. That’s great right? EVERYONE contributes (hear that owners of the LA Dodgers?)

The only problem? Lower and middle income earners would need to have some sort of remedy in the tax code to balance out their overpaying into the system. That could work.

However, if we limit the deduction on mortgage interest, as proposed by Fareed, what will happen to the housing market in this country?

It’s already been hit hard and if mortgage interest payments aren’t a tax deduction, how will that affect the housing market. Would it force banks to write everybody’s mortgage down to the prime rate? And fix them for 30 years?

Wouldn’t that give people much lower monthly payments, freeing up disposable income for savings and buying all the crap that us Americans like to buy and need to buy to jump start the economy?

After review, I’ve come to the conclusion that implementing Fareed’s ‘Fixes” (along with tweaks to the overall tax system) we really could make our debt go away and put the American people back on a firm financial footing.

No matter what certain leading politicos and economists are saying about the housing market making a ‘recovery,’ I am down in the trenches witnessing homeowners going into foreclosure because the banks simply won’t work with them.

They don’t care someone lost their job and their wife’s hours have been cut back. They better pay that ‘balloon payment’ or else.

So my advice to our elected officials? Get off the stick and force the banks to deal with this enormous mortgage problem in one fell swoop. Then we can deal with the VAT issues or whatever else we need later.

Of course this will never happen since we need to remember our politicians always look out for themselves and getting reelected.

Screw the people.

Okay, end of rant. You can go back to Fareed’s much more articulate treatise on the issue! ☺

Sex, Death or Taxes… Which one am I writing about this week…

Hmm, I know which one would get the biggest audience. Which one would become so morose it would turn everyone off, then there’s the subject of death. LOL

Everyone hates taxes. They suck.

You see that paycheck stub and think of everything you could be doing with that money that’s withheld. Or as an independent contractor you resent the money you have to put aside from each job to cover your quarterlies.

Sure, I could talk about the roads and the schools, and you know, the whole national defense thing that your tax dollars go to, but frankly in those moments that doesn’t matter.

It’s your money! Why are they taking my money?

Let’s stop for a moment, because unless you want to become an anarchist those thoughts are only going to bog you down.

The government, whether we like it or not, is forcing us to budget. Sure we get paid a certain amount, but a portion of that can’t be used.

Hmmm… What about if we put into place a budget for our hopes and dreams that held that kind of weight?

Want to buy a house? Withhold from your paycheck just like the I.R.S. Don’t let that money even hit your main account. Open up a savings account and deposit into it just as surely as the FTB withholds your taxes.

Want to expand your business? Create a ‘withholdings’ account and put money into it as consistently and vigorously as if you were going to be audited if you didn’t.

We could learn a thing or two from Uncle Sam. Vague promises and wishes don’t get the bills paid. Hard, cold cash in the bank account does!

And do I really have to mention that your CPA or Accountant is the best person to set up this system? The best person to help you determine what rate and frequency you should be saving?

I guess next week I should write about a cherrier subject, death, since I’m sure not a whole lot of people read this one! :-)

Sunday, February 28, 2010

Avoid the rush aka You can stop freaking out!

Now if you are reading this blog you probably fall into 2 categories. People panicked about getting their taxes done, or your CPA who is panicked about you panicked about getting your taxes done.

To both groups I say this… Take a breath.

You are going to figure this out. Yes, taxes can be complicated, but that doesn’t mean you have to have a minor cardiac event thinking about them.

I know you can feel it in your marrow, April 15th looming ahead.

But instead of sticking your head in the sand (besides avoiding that hot kind of mess), let’s figure out what you can do to get those taxes DONE and over with (then you can go into denial for another year).

And do you know who your best friend in this time of crisis is?

Your CPA (they may need oxygen of course to get through it themselves, but that’s another blog).

No matter where you are in the process of organizing your files, call and make your appointment.

Yes, in a perfect world do all CPA dream a little dream of our clients coming in with collated receipts and perfect documents? Of course we do.

But beyond that, we want to help you not only pay the correct (which isn’t always least, however that’s another blog) amount of taxes, but also give you peace of mind.

So no matter if you’ve got a shoe-box filled with a jumble of ketchup-stained receipts and torn W-2’s, make your appointment.

It may feel overwhelming, but imagine how much better you will feel once it is over with.

And then you can make sure to be organized for next year!

Yah, yah, yah, I know that’s another dreaming the impossible dream (and another blog as well!) moment.

Call your CPA
Find W-2s
Gather Receipts (and your wits)

You’ll thank me in the morning :-)

Sunday, February 21, 2010

Love your Kindle? Prepared to pay more taxes to use it?

This week, the LA times ran a story about California seeking to require sales tax on Amazon purchases, despite the fact you are in California but Amazon is not based in the state. Why? So that California can generate sales from the site on all purchases made by residents.

This may seem like quite a stretch but California already has a Use Tax (you ‘use’ – read buy – it, you pay taxes) on the books. Just with the current fiscal conditions, the state is looking to enforce it.

But how are they going to do it? Let’s take a look at the excerpt from the Franchise tax Board on Use Tax:

""You may owe use tax on purchases you made from out-of-state or Internet sellers. Use tax is similar to the sales tax paid on purchases you make in California. You may report use tax on your income tax return instead of filing a use tax return with the State Board of Equalization. To report use tax on your income tax return, use the Use Tax Worksheet in the tax booklet.""

I don’t know about you, but I have no idea how to interpret that code, so I’m not surprised no one at the FTB knows either.

In my practice we have been inquiring the FTB about whether a taxpayer actually incurred some use tax or not in 2009 and are required to report same in their tax returns.

To add fuel to fire I have recently read that the FTB may look at the USE TAX as an audit area.

So it’s a damned if you do and damned if you don’t situation.

Let’s break it down: If you don’t report your purchases (and associated taxes) you could be audited. If you do report your purchases this could trigger a red flag and the FTB audit for not declaring enough. Go figure.

Here’s another problem. What about if I live in California, but am vacationing in Arizona and I download a book and read it while in Arizona. Do I have Use Tax on this?

How is the FTB going to rule on that?

And lastly, who is going to enforce this new tax? The FTB, who are already overworked and over burdened, or some other agency?

Good luck and welcome to sunny, beautiful, yet aggressively taxed, California.

Sunday, February 14, 2010

So is this Hire An Employee Tax Credit all that it’s cracked up to be?

Short answer? No.

Longer answer? Probably not. I’m getting a lot of feedback from my business clients that they are starting to feel the benefit from the stimulus package, but new hires are still a ways off.

So this tax credit is almost a non-starter.

One client broke it down beautifully (as a matter of fact I’m totally going to start taking credit for this analysis!)…

By the time he pays for a new employee’s health insurance, payroll taxes, and CA worker’s comp insurance, this tax credit wouldn’t even begin to chip away at the cost of a new employee.

The government needs to understand that an employee’s salary is just the tip of the financial outlay for an employer.

And I can believe it!

In our office our health care costs went up again this year from 11% to 12%. That’s real money.

Real money I must pay out on my current employees that I can’t spend on hiring a new one.

What’s the answer?

I’m not sure, but this new tax credit was no bull's eye!

Upside down? Underwater? Drowning?

This week I’ve been inundated (it’s tax season so when I say inundated, I mean all seven lines ringing off the hook) with clients distraught they are completely underwater in their homes, that no matter how much they tighten their belts, they simply cannot pay their mortgage anymore.

Know you are not alone. People who would never dream of walking away from their house are packing their bags.

Making it even harder to make this heart-breaking decision is the implication from numerous, national articles discussing the fact that walking away from a toxic mortgage is somehow immoral.

Wait a minute. The banks are reaming millions of Americans while making record profits and one of my clients who lost his job and can’t pay his exorbitant, interest-inflated mortgage is somehow the villain in this scenario?

And just when we need some actual action from the Feds, they want out of the rocky mortgage business because it’s so rough and tumble.

Just think about it for a minute. If the banks were forced to lower everyone’s interest rate down to 3% or even 3.5%?

How would that change my client’s life let alone the American economy as a whole?

First off, the vast majority of mortgages jeopardized would be brought current. Not only would it resolve the looming 2.4 million foreclosure disaster, it would help people that haven’t defaulted yet.

Those people barely keeping their heads above water to make their payments would have more discretionary income to buy things. And isn’t that exactly what all the economists keep saying will jump start the economy?

We need to buy more. We as Americans need to invest again. But how can we as a society when every penny goes to the bank in 7% interest payments?

It seems the government stepped in and dictated (well, at least to a certain degree) to the credit card companies what is fair and accepted interest rates.

Why aren’t they demanding the same of the home loan industry?

If you lose your credit card, there are of course consequences.

But if you lose your house? Families are destroyed.

Wouldn’t an overhaul of the ARM interest rates be a win/win for everyone? The homeowner, the local businesses, the stock market.

Well, for everyone but the banks.

But you know what? We bailed them out once.

I think it is about time for them to return the favor!

Tuesday, February 9, 2010

You’ve just received an IRS audit notice. Wait, don’t faint, you haven’t actually gotten one, this is just a blog in case you do!

Okay, let’s PRETEND (you can put your asthma inhaler away, we are only pretending) you’ve gotten an IRS notice in the mail.

There’s basically two ways to handle this. One is the ‘headache’ client way, the other is the ‘Gold Star’ client way. I’ll let you figure out which is which! ☺

1. Clean up pee on floor.
2. Panic (or did that happen just before #1?)
3. Call everyone you know, except your accountant
4. Listen to your friends who tell you to call the IRS immediately or you
will go to jail…
5. Call the IRS yourself
6. Curl up into the fetal position wishing you had instead…

1. Faxed your notice to your accountant (now that you are BFFs and everything)
2. You write a mild to moderately panicked cover letter
3. You wait patiently for your CPA to call you back (alright, fine go
ahead and pace)
4. You do NOT call the IRS yourself like everyone else is urging you to do
5. You remind yourself you do not need to panic because your CPA rocks
and will handle this on your behalf.

Okay, so pretty obviously the second scenario is the Gold Star client.

And do you know why they held it together so well (maybe so well is an over-statement, but at least they didn’t call the IRS) is their CPA had told them from the get-go that 85-90% of these letters can be resolved with a simple letter or phone call from your CPA.

Minimal fuss, muss, or bother.

Pick a good accountant and they will be good to you (and forgive you for the fourteen messages you leave that day)!

Monday, February 8, 2010

How to prepare for your appointment with the CPA, or a.k.a. how to be your account’s BFF

Alright, you’ve found a CPA you can hopefully bond with for a lifetime (or at least this tax season, you don’t want to be easy or anything), and you’ve got an appointment.

Actually let’s call it a first date, because that’s what it is.

You are checking them out to see if they’re a keeper while she is trying to see if you are going to be a pain in their booty. You know, usual date stuff.

And just like a first date, you want to put your best foot forward. Unlike a romantic date, instead of turning attention to your make-up or wardrobe, on this first date it matters what you bring to the table.

I mean, literally to the table. The quality of items you hand over to your CPA is going to put you squarely either in the pain in the booty or Gold Star category.

Bring your W-2s. Your receipts. Your interest statements.

Basically if you spent your hard-earned money on something and you want to deduct it, you need to, ya know, give that info to your CPA.

I can’t tell you how many people want to deduct their gas and mileage for work related travel.

“Great,” I say, “Let’s total up your expenses.”

The Pain in Booty Client answers, “Um, my bro was with me in the car, he’ll vouch for me.”

I say… (well after a slight pause) “Um… the I.R.S. doesn’t operate on the buddy system. We kind of need proof.”

The Gold Star Client answers, “Here are my receipts and thank you, CPA for helping me so kindly and efficiently.” (Okay, that last part never really happens, but hey, it’s my role-playing scenario so let me have my props! :-)

Now that was my side of the equation. What should you be looking for in this first date to know if this CPA is your CPA?

For me, the most important indicator is if the accountant asks you forward thinking questions. Because, honestly, the taxes are the easy part (I know, you can whack me later for being so cavalier). It is making the tax code WORK for you that is the more challenging part.

Are you starting an at-home business? How will the deductions you take this year affect your returns next year?

Are you investing enough in your retirement?

This is YOUR money. This is how you decide your life-style.

How much taxes, and even type of taxes, you pay directly affects every aspect of your life, nearly every day.

Why would you want an accountant that doesn’t care about that? That doesn’t ask you about your spending patterns or your plans for the next year?

These are the questions that will decide whether you can fund your hopes and dreams or not. We might want to spend a few minutes in this meeting talking about them, right?

Alright, now that you are prepared, head out to that first date with confidence (and lots and lots of receipts).

And if you find “The One,” be sure to thank them for being so kind and efficient!

Hehe Even an accountant can dream!

Wednesday, February 3, 2010

I need a CPA Stat!

But tax consultants aren’t one size fits all.

T-Day, April 15th is fast approaching. Your family is doing it. Your friends are doing it. Your mother is even doing it.

Making the dreaded appointment with an accountant to get their taxes done. Only the cringe-worthy dentist appointment strikes as much fear into the hearts of good men and women alike.

But does it have to be that bad?

CPAs don’t steal children or eat puppies (well, at least the ones I know).

For the most part they are just hard working folks like you, using their skills to help their clients.

Oh, and deal with I.R.S. on a daily basis. We’re the middleman between real people and those that want to claim your money. For that alone we should maybe rank a few rungs above the spit-in-the-cup doctor, right?

But I digress.

As always a personal reference to a tax specialist is best, from someone who is really, really, happy with their accountant, but even that might not be a good match.

So once you figure out a CPA and get them on the phone, just make sure you two can communicate.

If the guy seems kind of down, like you want to get him a sample pack of Prozac, maybe not the right guy to be planning your financial future.

Or on the other hand is she super cheery and promising you the moon? Slash your taxes in half and save you a bundle?

Sounds great, right? But what about it that screws you over for the business you are starting? Or disqualifies you for an even bigger deduction next year?

You don’t want a wham-bam-thank-you-madam type relationship with the person who is standing between you and an I.R.S. audit, you know what I mean?

You want someone in this for the long haul. Someone who wants to know more about you and your business and your goals and your future before they tell you they can help you. Well that, and doesn’t seem homicidal.

Tuesday, February 2, 2010

Tax Day is Just 70 Days Away!

Ah, I can hear the anguished screams echoing across America.

But it doesn't have to be painful. Okay, maybe a little painful, I mean any money leaving your pocket involuntarily is going to smart, but the more you prepare, the less will be flying out of your account April 15th.

So take a breath. But not too many. I can sense (with my Bond-like observational skills) that many of you are saying to yourself 'hey, it's SEVENTY days away. That's like two months and some change.' We've got plenty of time.

While I do not like to make people hyperventilate, the terms, 'paying taxes' and 'plenty of time' seldom play well together!

The first question you ask might ask yourself is, do I have a professional tax expert I can trust? Not your uncle's best friend's neighbor who got all his money back last year or an unnamed large corporation who cares more about their fees their your deductions.

I mean a well-seasoned, up-to-the-minute CPA who has built their practice on years of saving individuals and corporations millions in taxes.

And no, I'm not talking specifically about me, but someone who has the experience and skills to maximize your refund and protect your ass...ets :-)