Archive for the ‘accountant’ Tag

Why I am a Tax Accountant?

Originally published in the Cedar Street Times
May 27, 2015

Sometimes people ask me why I am a tax accountant.  This question seems to have different colors to it when asked. Sometimes it is an interest in me – what things I find enjoyable about the profession or how my particular career path led me to where I am.   Sometimes it is an interest in themselves as they are “trying on” my work clothes to see if this field may be of interest to them in some capacity.  And other times it is an interest in the general human condition probing for answers to: “How in the world could anyone in their right mind, voluntarily do what you do?”

Well, I certainly hope I am in my right mind.  Contrary to the stereotypical image of a reclusive, socially awkward bean counter that maybe wears a pocket protector, I actually find most of us do not carry that stigma! Okay, I admit I wear bowties, but these days in a scene where formal business attire inevitably includes a necktie,  I submit to you that a bowtie is more the shtick of a rebel than a conformist.
Let’s see, what else can I tell you to debunk the nerdy, ill-equipped-for-life-but-good-with-numbers typecast. Well, I recently flew across the country to play in a soccer a tournament with a bunch of teammates that I played with in college.  I pretty much built a house with my own two hands (actually four when you count my wife’s) – everything from bending rebar in the foundation to nailing the shingles on the roof.  Oh, and I ride a motorcycle (albeit cautiously).  So you can add sports, construction, and motorcycling to your list of accountant hobbies.
So what part of me is driven to debits, credits and taxes?  Well, there are various skills in my life that I have seen as a recurring pattern ever since I was a child that are applicable.  I have always enjoyed: 1) organizing and classifying information, (like counting coins and bills which was a favorite activity when I first learned to count, or endlessly sorting, organizing and valuing baseball cards in elementary school), 2) solving problems (like figuring out how to turn on all the pull string lightbulbs in our basement in middle school all at once), 3) creating things (like a Christmas light display in high school that soared 35 feet above our rooftop, or writing software code – one of my first jobs out of school).
I was also entrepreneurial growing up.  I can remember when I was in third grade, I located some really neat and colorful mechanical pencils.  I found that I could buy a ten pack for $1 and resell them for 25 cents each making a $1.50 profit on each pack.  I can remember the teacher having to tell everyone to sit down one day because I had a swarm of kids around me buying pencils. I had a few other small retail ventures like that in elementary school and I had a yard and odd job business in middle and high school as well.
Throughout it all, I enjoyed people, and I liked helping people.  That is what really landed me on the tax side of CPA life.  I did financial statement audits about half-time for the first six years or so of my accounting career.  I felt it really used my full skillset as an accountant, which I enjoyed, but I felt more like a necessary evil than someone who was being voluntarily employed to help.  Not many people hire auditors because they want to!  And who likes someone who is basically looking over his shoulder to report any mistakes he is making!
I have enjoyed tax preparation because there is a high degree of interaction with individuals, and I truly feel that I am able to help people, and they are generally very grateful for the help.  Since most everything in our lives (good or bad) has some kind of tax impact at some point, conversations with clients become very personal at times, and there are deep bonds that can form.  I find it is a very honorable and rewarding feeling to be entrusted with an understanding of someone’s personal and financial matters, and to try to help them either save tax or be a general financial (or personal) sounding board.
Plus, while doing this, I get to use the various skills I have enjoyed in my life.  Tax accounting certainly employs organizing and classifying information.  Preparing a tax return or tax plan for an individual, trust, estate or business is almost always a problem solving and creative activity as you try to piece together a mountain of facts and rules to come up with the best scenario you can.
Having my own firm also fulfills my entrepreneurial craving and gives me flexibility of time and the opportunity to do a variety of things, which I also enjoy.  So why am I a tax accountant?  Because I love it!

Prior articles are republished on my website at www.tlongcpa.com/blog .

Travis H. Long, CPA, Inc. is located at 706-B Forest Avenue, PG, 93950 and focuses on trust, estate, individual, and business taxation. Travis can be reached at 831-333-1041. This article is for educational purposes.  Although believed to be accurate in most situations, it does not constitute professional advice or establish a client relationship.

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Confidentiality, Privilege, and Taxes

Originally published in the Cedar Street Times

August 22, 2014

Pretty much anybody that watches crime shows on television knows about attorney-client privilege.  This is how murderers can admit the details of their crimes to their attorneys and the communication is protected from discovery by the courts.

But what about tax related communications with your accountant?  Unfortunately, there are not a lot of television shows featuring taxpayers admitting the gory details to their accountants on how they swindled the IRS.  That said, prime time dramas are probably not the best place to learn about the legal and accounting world anyway!

Misinformed people will sometimes think they can sit down with their CPA and contrive ways to scheme the IRS, or that they can openly discuss all the income they took in under the table and did not report.  Communications with a CPA are confidential due to professional standards, but they usually do not qualify for evidentiary confidentiality privilege in a court of law.  This means the CPA should not disclose the information to other parties without your permission, but if questioned in a court of law, the information would have to be disclosed.  The other problem a CPA would have knowing the skeletons in your closet, is that a CPA (or any preparer) cannot knowingly file a false return.

So you may think you should hire a tax attorney to prepare your returns in order to get privilege.  That actually won’t work either.  One of the main tenets of attorney-client privilege is that if you do not treat the information as confidential and you disclose it to a third-party other than your attorney and his or her associates, then you have lost your privilege.  Since tax returns are inherently a third-party communication for disclosure to the taxing authorities, it has been ruled that tax preparation services are not afforded attorney-client privilege.  In fact, there have been interesting cases where attorneys have lost their attorney-client privilege because they included estate tax preparation as part of their engagement with the client.

Tax advice, however, is a different story.  For engagements that strictly involve tax advice, and not tax preparation, attorney-client and accountant-client privilege is extended.  Accountant-client privilege has more limitations than attorney-client privilege as defined in Internal Revenue Code section 7525.  Most notably is that accountant-client privilege does not extend to criminal matters before the IRS or Federal courts, nor does it apply to tax shelters designed for tax evasion.

As previously discussed, the disclosure of information to a third-party generally waives the attorney-client privilege.  An exception to this rule is if the attorney needs the assistance of another professional (such as an accountant) in order to render legal advice to the client.  A Kovel letter (based on the 1961 case) can be drafted and signed by the accountant and attorney which essentially extends the attorney-client privilege to the accountant.  The accountant is then, in essence, working for the attorney and not the ultimate client.  This does provide additional protections, but it still would not provide protections for tax return preparation.

Prior articles are republished on my website at www.tlongcpa.com/blog.

Travis H. Long, CPA is located at 706-B Forest Avenue, PG, 93950 and focuses on trust, estate, individual, and business taxation. He can be reached at 831-333-1041.

Do You Own Inches of Land in the Yukon?

Originally published in the Cedar Street Times

July 25, 2014

When I was growing up, I remember my Dad once telling me that he owned eight square inches of land in Canada.  He said he got the land as a promotion when buying cereal as a young boy.  At the time, I thought that was kind of cool, and just accepted it at face-value.

As I look back on that now from my perspective as an accountant, dealing with all kinds of financial related issues on a daily basis, a lot more questions come to mind.  For instance, where are the deeds to the property, and how would we find the right recorder’s office to get copies of the deeds if needed? Were the deeds ever even recorded?  Was it a fee simple interest?  Did he have mineral rights?  Eight square  inches may be just enough to drill a very small oil well!  Or maybe there is gold!

How would that impact his retirement planning? What about real estate taxes?  Typically land requires the annual or semi-annual payment of property taxes or the land is taken back or sold to settle the outstanding debt if unpaid.  Are there any laws regarding foreign ownership of land or any new requirements to look into regarding foreign asset holdings?

Could we lease the land, and what would the tax impacts be?  Should my Dad have included it in his estate planning so that loose ends would not pop up at some point which could result in title problems or perhaps probate?  Would there be any liability associated with this land, and should he have carried a general liability or perhaps an umbrella insurance policy in case his eight inches contained a stone on which someone could have tripped?!

What was his cost basis on these inches and how much profit would be recognized if we sold it?  All of these questions and more find their way to my door step for other client issues. As an accountant, we often end up as the independent advisor –  like the hub in a wheel with spokes running out to the financial planner, investment advisor, insurance agent, attorney, banker, etc.  Almost every profession leads back to taxes and tax planning in some way.

In my Dad’s case, I found we did not have any real concerns, but there is a fantastic story to go along with these inches of land which you can read all about at: http://www.yukoninfo.com/dawson-city-yukon/the-klondike-big-inch/.  The gist of the story is that this was a marketing plan in 1955 developed by Bruce Baker to get children to buy Quaker Oats Puffed Rice and Puffed Wheat cereals.

Baker decided to tie-in a popular radio and television show which Quaker Oats sponsored, “Sergeant Preston of the Ukon” by offering children the opportunity to own one square inch of land in the Yukon in Canada if they bought cereal.  The attorneys thought the idea was crazy, but Baker persisted and even flew to the Yukon and secured a 19.11 acre parcel to be divided up into 21 million one-square-inch parcels.  The company eventually agreed to the idea and thus began their most successful campaign ever.  Cereal boxes flew off the shelves as deeds were printed and inserted into each box, and every one inch parcel was given away.  They did a second campaign and Baker had four tons of Yukon riverbed sand sifted and packaged into tiny promotional pieces as well.

As the years rolled on, the inquiries about these hard-earned plots of land kept coming in by owners that wanted to know more about their plot of land, or its worth, and also by estate planning attorneys that were trying to figure out what to do with these deeds!  One child was said to have sent four toothpicks and a string and asked the Quaker Oats company to put a fence up around his property!  One person collected over 10,000 of these from people around the country and asked Quaker Oats to pick out a quiet place for him along a lake or river, if possible!

The reality of what happened is that the company that was created to handle all the deeds – The Klondike Big Inch Land Company, Inc. realized it would be way to expensive to record all the deeds in each child’s name, so with the opinion of a Canadian attorney they decided to send the deeds out and never have them officially registered.  The Klondike Big Inch Company, Inc. did not pay the $37.20 property tax bill in 1965, so the land reverted back to the Canadian government.  The company then shut its doors.

Still, to this day, however, nearly 60 years later, Canada and Quaker Oats receive hundreds of communications each year regarding the land!

Prior articles are republished on my website at www.tlongcpa.com/blog.

Travis H. Long, CPA is located at 706-B Forest Avenue, PG, 93950 and focuses on trust, estate, individual, and business taxation. He can be reached at 831-333-1041.