Date:     August 28, 2019                              Attendee and Guest:   Kelly Coughlin, CEO, EveryDay CPA – John Brooke, CPA & CEO Taxes Mastered                       Hello, this is Kelly Coughlin, CEO of EveryDay CPA.  “Strategy without tactics is the slowest route to victory.  Tactics without strategy is the noise before defeat.” That was said in the 5th century BC by the famous Sun Tzu.  My guest today is a CPA and CEO of a very interesting company called Taxes Mastered, and they have a sub-title Advanced Tax Strategies.  My guest, John Brooke, is a seasoned educated and experienced professional with over 25 years of experience at Big 6 firms, I suspect they were probably Big 8 back then.  He got a CPA back in 2007.  And what I find interesting about John is he and his firm really focus on tax strategy, and he lets the rest of us focus on tax tactics, and that plays into my Sun Tzu opening, “Strategy without tactics is the slowest route to victory.”  So, John, tell us, is your company on the way to a slow route to victory because you know that tactics or do you have something else in mind? John:   Well, thanks, Kelly, first for letting me be on this program.  I think our company is on the fast track to victory.  And the reason is that, in my opinion, in the tax world victory begins with a good tax strategy.  The tax code for the small business owner is actually their friend.  Taxes are the enemy.  When I started with Peat Marwick and Mitchell in 1975 in their Phoenix office the first thing they taught me is understanding the why of the client,  what the client is trying to accomplish; and then once you know that it makes it easier to make good solid decisions.  And the tax code wants you to start with your vision, what you are trying to accomplish.  And once that is understood then the tax code has a variety of parts that can accomplish that and still be in harmony with your vision.  So my answer, Kelly, is strategy is the fast path to victory for the taxpayer. Kelly:   Interesting. So, John, tell us a little bit about John Brooke, where you live, what you are doing and why you have launched your new great enterprise. John:   Kelly, I graduated from Arizona State University in the honors program in accounting in 1975.  Upon graduation, I went to work for Peat Marwick and Mitchell in their Phoenix office which was the largest of the Big 8 firms.  And I worked for them for 4 years until July 1, 1979, then I opened up my own CPA firm in the Phoenix area.  It expanded to a firm in Nogales, Arizona, there on the border with Mexico, and my practice grew to uncover most of the west coast.  For a while, I had an office in Washington DC but the logistics for that were not good.  When I left Peat Marwick I started in the tax area, and I started building my tax firm predominantly by representing other CPAs and tax attorneys, in appeals, and in tax court.  So I was very much involved with defending other people’s tactical execution on the tax return, meaning, how it was prepared. But an interesting question kept coming up from my clients, and that was, John I think we just pay too much in tax.  And my common response was, yes, it is hot in Phoenix in the summer and there is nothing you are going to do about it.  This is what it is. But I have taken a lot of mathematics classes at the university dealing with collection of data, large data numbers and things like that, and so I started to quantify some of our clients and to see if there was a common pattern that I could discover in that quantitative analysis that would explain why people pay too much in tax.  And over a period of time a conclusion came up, and by now we are into the mid-80s, and that conclusion was that 85% of all small business people pay too much in income tax, and there was a very clear reason for that or at least a very clear primary reason for that.  And the primary reason they pay too much in tax is that their vision, their goals, the things that they were trying to accomplish were not supported by the tax code sections that the tax preparer was using.  You know, Kelly, you are a CPA, I have been a CPA since the late 70s, you and I both know that the fun thing to do, in a cruel sense of way, but the fun thing to do is take a set of facts, give them to five CPAs and then watch them try to explain why they all came up with a different set of facts. And the reason that that happens is that the tax code is an exercise in social engineering. It is not primarily written to raise money for the government.  If it was, why would a single person, all things being equal, why would a single person pay more tax than a married couple?  It was because it was a social engineering purpose pushing people to be married.  And that explains also why there are so many answers in the tax code, it is because they are trying to support a large number, actually, of social engineering purposes.  So what needs to happen, in my opinion, is that the taxpayer look to see what social purpose, social engineering best fits what they are trying to accomplish, jump on the path, receive the tax benefits, accelerate the time they reach their goals, reduce their taxes to improve their cash flow and generally achieve their vision, on time, on budget, and with the highest probability of success.  Once I began to understand that concept then I began to see why people pay too much in tax. Kelly:   I want to touch on, before you move on, the social engineering concept.  You may correct me here, but is not the primary goal of social engineering, I would agree with that, but the primary goal is to redistribute wealth fairly - take from those who have more wealth and income than they need and redistribute it to those that are in need of that?  So on your married taxpayer example, it isn’t so much that they are looking to encourage people to get married, it’s they recognize that it is more expensive to be married and have kids, right, than a single person,  so single people pay higher taxes, do you agree with that? John:   Kelly, you raised a very important concept. In our political system, we have a wide range of opinions on redistribution of wealth, wherever you want to be you are somewhere within that spectrum.  The interesting thing is that a lot of the laws that try to be passed on redistribution of wealth are not proposed to be in the tax code, that’s my first point.  The second is that the primary purpose of the tax code is to help taxpayers succeed.  And however we feel about wealth redistribution there is a tacit assumption, and pretty much by all people on the spectrum, that we need to have wealth generated. How it is distributed is a secondary question.  So the primary focus of the tax code was to help taxpayers, particularly small businesses, to help them generate wealth. Now, the social engineering purpose wants to push us in certain ways.  So, for example, they develop section 125, cafeteria fringe benefit plans, provided a business deduction for the owner and then said, if you will provide health insurance for your employees you get this benefit and they will not be taxed on it.  That is a redistribution of wealth concept but it is very beneficial in the long run for the employer to engage in that social engineering because it will actually produce benefits that help them build wealth.  And so this idea of the tax code generating wealth, the idea of the tax code being used to redistribute wealth, if I had to put a number to it I would say over 75% of the tax code is helping the taxpayer generate wealth and the rest of that percentage, if I had to put a number to it I would say about 75% of the tax code is helping small business generate wealth.  The other approximately 25% of the tax code deals with mechanisms that might result in the redistribution of wealth.  Kelly:   That’s an interesting concept because, and I am not 100% sure I agree with it, I have got to give some more thought to that, but it seems like, to me, the more expansive and inclusive economic policy, monetary policy, federal reserve, all of those components are about wealth creation, and tax code is exclusively about wealth redistribution. I suspect you might be right but I have never looked at it that way, and I am not going to say I agree with that but that could be an interesting podcast in and of itself that I would love to have that discussion, frankly. John:   Well, the first thing I’ll say, Kelly, is that my mother thought I was the smartest person that ever walked on the face of the earth.  My dad’s concept was I couldn’t find my way out of a box if three sides were down, so I don’t always claim to be right in everything.  But here is an interesting point, I write classes for CPAs on their continuing professional education in the area of tax and in my courses, when I am presenting them, I always ask this question, what do you, as CPAs out in the field preparing tax returns engaged in this line of work, what do you as CPAs feel is the primary purpose of the tax code?  The predominant answer of well over 80% is that the primary purpose of the tax code is to raise money for the government.  It’s a war we are engaged in.  The taxes are our enemy. We have got to get it down as low as we can.  The odds are not in the taxpayer’s favor.  The odds are in the government’s favor because they wrote the rules. And it gets deep into that kind of thought.  When I lecture to and write classes for business owners and I ask them, what is the primary purpose of the tax code?  They will say, my CPA tells me it is to raise money for the government, I really don’t know, John.  And then I’ll go through popular business strategies and they’ll say, yes, that’s a lot of merit.  That has a lot of merit, that one too, and then I will point out where those business strategies had their roots, they had their roots in the tax code. And that is a shock to them but what they did recognize before the lecture was over, before the seminar discussion was over, was that a lot of things that they think exist outside of the tax code, that the tax code doesn’t have any bearing on, business strategy as an example, actually has its genesis in the tax code. Every form of financial transaction that is legal in the United States finds its roots and its legality nestled first in the tax code. And a lot of the litigation we have afterward is trying to figure out how that tax code section applies or the rulings, revenue rulings, those kinds of things.  A lot of our financial products are first defined in the tax code before they came out. So, my argument to a small business is if you think you are paying too much in tax, which you are about 85% correct, you are, where are you going to go to find a broadly based safe path for success?  And it is interesting that it is in the tax code. Kelly:    As I see it, you focus on three elements, when a prospective client comes in to you, you assess - are they paying too much and why, and then you develop a strategy, I think, is your next step, what can be done about that? And then the third step, I suppose, is to execute on that. So, let’s start with the assessment part.  Give us the top three reasons taxpayers pay too much in tax that you have seen. John:   Reason number one is that their vision is not properly supported by the tax code sections they used to record their transactions on the tax return.  Number two is that they adopted a strategy that flows all income under the form 1040. That’s a very inefficient, ineffective way to do it.  And that a significant number of beneficial tax strategies are simply not available on the form 1040 when you are using past through entities bringing that in, and the third is that debt payment is not handled according to the way the tax code wants it to be and, therefore, the payment of long term debt whether it is on a truck, a building, equipment, whatever it is, we end up paying far more in interest in principle than we should. And I know there is a lot of popular programs on debt reduction and, you know, don’t go on vacation, eat beans and rice and sacrifice everything to pay off your debt.  That isn’t what the tax code wants, but the end result of what the tax code wants is it doesn’t want you to pay 20, 30 years on a debt, because it realizes that affects the stability of your company, the survival rate of your company.  It takes cash flow out from you using that and building up an internal rate of return on it that’s greater than the interest rate, securing your business, all those wonderful things.  So, if I had to say it, I would say three things, vision not matching, the selection of the tax code not matching the vision, the structure that people use to organize their business, resulting in a severe reduction of tax strategies and the third is the way they pay their debt.     Kelly:   I would imagine you have seen common things with most of your prospects so they all have issue number one and two and perhaps number three, and then you come up with a strategy.  You have given the assessment, you meet with them, here is the assessment, then you sit down and develop a strategy on what can be done so they only pay their fair share of taxes? John:   Yes sir.  If you go to our website, taxesmastered.com, you will see an assessment there and if you take that assessment you will get a good idea of how much you are overpaying your tax.  Because the concepts that we just talked about I put it in some mathematical algorithms and based on large data that’s the conclusion.  It might be different for a specific client but in a large number survey, it’s a pretty accurate number.  What happens then is that at the time that we start to do our strategy, what happens is that our strategy is really divided into two parts,  let’s first identify the problems which is what we just talked about, and then the second is, how can we reorganize the status quo to get a different result?   Because the tax code does not require us to accept the status quo, we might have filed the tax return a certain way for 20 years.  The tax code does not require us to file the 21st year in the same way we file years one through 20. In addition, some of the changes we make to the status quo can be carried back for approximately three years and correct tax returns that have already been filed.  So, after we have identified the problem we identify how to change the status quo, how to eliminate them from the group that is overpaying their tax.  Then we go through the implementation stage making sure that everything is done, I’s are dotted t’s are crossed.  And then we go into the third stage which is the ongoing monitoring to make sure that the design that we put together is still applicable, still occurring, being adjusted to changes in the client’s environment, being adjusted for changes in the tax code or nuances in the tax code so that the client knows it is still being responsive as they move forward and their business hopefully grows and expands.    Kelly:   Describe your perfect sweet spot client prospect. John:   Kelly, in answering that question I will tell you that most CPAs disagree with my definition that I am going to give you because it’s not a numeric classification.  I don’t care how much they have in revenue.  I don’t care how much they have in expenses.  I don’t care how much they have in profit.  I don’t care the business they are in and I don’t care the numbers of employees.  My ideal client is someone that has a reasonably good idea of what they are trying to accomplish so they can articulate their vision, and they want to take responsibility, they want to have ownership over what they do and the performance of their company.  And if they have those two mental attitudes then they have a very very good chance of succeeding. They are thinking about their business, they are evaluating options.  My job is to educate them on options, balance the pros and cons, explain it in a way that they can then make an intelligent decision, because I don’t make the decisions, but they make them, and their business reflects the consequences of those decisions.  But that’s my ideal client, they know what they want to do and they take responsibility to get it done. Other than that, the only other requirement we have is that they are in a lawful business and that the business enriches its customers.  It’s a good product for the customers. Kelly:   Okay, you want business clients, that’s number one. John:   Number one, we work a lot with business clients but we also work a lot with individuals because we end up working with the employees of the company or we end up with W-2 earners that also pay too much in tax.  We talked about the 85% that applies to small business, approximately 65 to 70% of all individuals that file a 1040 and are W-2 employees also pay too much in tax. We talk about businesses but a business is comprised of people and we want to help people regardless of whether they are W-2 or they own their own business. Kelly:    So everybody feels like they pay much in tax, I would say, but I guess when I look at your website and your gateway to a TMI, Taxes Mastered, the best way for people, if you can offer some value to them, is to go to your domain, your website, www.taxesmastered.  That’s m a s t e r e d.com/ assessment, a s s e s s m e n t.  They should go there, fill out the assessment and then from that, you can give them a result that will say we can help you or we can’t.  Is that fair enough? John:   Yes sir. Kelly:   So that’s what people should do? John:   That’s what people should do. Kelly:   If they want to learn more about you, don’t give you a call, don’t send you a tax return, go to the personal assessment, is that how you move people along the path to helping them? John:   Yes, Kelly, even if they call me on the phone or I meet them casually, the first step of the process is to take the assessment because the first thing to do is find out the vision of the client and their attitudes towards certain things.  The only numeric we ask for is a range of how much they pay in tax. But the first place we want to start is understanding our client.  The last place we want to start is numbers.  Kelly:   Well, that sounds interesting.  John, I think that covered what I wanted to today, is there anything else you wanted to add? John:   Just one thing Kelly.   There is two things I would like to add, first, I would like to thank you for the opportunity of appearing on this podcast. I know you have a lot of listeners, I hope there is something here that will be a lot of merit to them.  Second, in your earlier quote about the strategy and tactical, the two fit together, they have to be in balance.  Our firm does not do the tactical which is the preparation of tax returns and related activities.  Kelly:   Okay, that’s it for me, John, thank you for being our guest.  I look forward to talking with you in the future and everybody knows how to get in touch with you.  It’s the best way is taxesmastered.com/assessment.  Thank you for listening, goodbye. 

EverydayCPA Podcast | Strategy | Tax | Accounting | Risk Management

Great Tax Strategy with Effective Tactics

  Date:              August 2, 2019 Attendee and Guest:   Kelly Coughlin, CEO, EveryDay CPA –                                         KC Truby, Founder/Chief                                       Executive, TALK Accounting Good morning business owners, it is early a.m. on a Saturday and I know most of you are up and at them, ready to carpe diem. That is seize the day, if you don’t remember your Latin.   This is Kelly Coughlin, CEO of EveryDay CPA.  One of our tagline themes at EveryDay CPA is “We help business owners use debits and credits as weapons of mass competition.”  Frankly, I really want to say as weapons of mass destruction of their competition but the politically correct police discourage me from saying anything that relates to violence. Even though we use Sun Tzu, a brilliant 5th century B.C. military strategist as the foundation of our business strategy, they are apparently okay with that but not weapons of mass destruction. Regardless, today I am going to interview KC Truby, founder, and chief executive of Talk Accounting, TALK Accounting.  KC and his team have created a new accounting program that connects with QuickBooks, but the transactions, the journal entries, the debits and credits of mass competition, destruction, are entered into your QuickBooks, not by some part-time bookkeeper that comes in twice per month, rather, by you the business owner, in the field, on the job.   In a sense, it’s just like Uber disintermediated the taxi business through their technology that connected a buyer and a seller directly, without the need for a dispatcher. KC’s team has disintermediated the need for a bookkeeper to input many debits and credits of mass destruction.  To be clear, I am going to rephrase that.  KC’s team has disintermediated the need for a bookkeeper to input many debits and credits but, to be clear, it doesn’t completely illuminate the need for an accountant or a bookkeeper, rather, it frankly makes better and more efficient use of their time, and from my perspective, it makes it a more interesting job.     With that, I’ll introduce KC Truby at TALK Accounting.  KC, how are you today?  KC:    Kelly Coughlin, I am doing fine.  I am excited to be here.  It’s summertime out here in Arizona so we are a little toasty today, but let’s tell some people about mass destruction of the competition or about mass prosperity by using debits and credits as weapons. I love that sentence, that was fascinating, Kelly:    Great.  Well, before we get into your background, KC; I have a couple of questions for you on that.  Tell me, what was the need that you saw in the market place and how are you fulfilling that need with your TALK Accounting solution? KC:     So, I owned a little training company out here, and I am talking to one of my new college graduate kids, a little whiz kid that was sitting in there and was helping me do some programming, my wife walked in with the American Express bill, 12 pages long.  She starts going through line by line, what was this for, what was this for?  And we have been through this little song and dance off and on for 40 years and so I just started making stuff up because I couldn’t remember what I spent money on three months ago.  She walks out after a few minutes and my employee sitting there looking at me, says, “Did you just lied to your wife?”  [Laughs] I just made all that up.  And I said, you know what’s really funny, she knew I was lying the whole time. And the whole premise, the whole idea was there that we can’t remember what we did, but it’s a constant problem not to record the business intent at the moment of a transaction.  And this young gentleman said, you know that artificial intelligence, voice recognition, I’ll bet you if you just talk to your phone, this could be wiped out.  And you wouldn’t even have to have that little song and dance with your wife every month. So, it was that moment of going to that uncomfortable what was this for, why did you do that, for the 12th time this year, for the 40th year in a row, that we finally decided, you know, we should do something about this and solve it for everybody. Kelly:    Interesting.  You know I was educated by the Jesuits and your statement about lying, one of these philosophers said, “If a tree falls in the woods, does it makes a sound?” And if nobody is there to hear it, it doesn’t make a sound.  So, I wonder, similarly, if you are lying to somebody and they know you are lying, is it lie anymore?  KC:         It could be a conspiracy.  Kelly:      Alright, well, that sounds kind of interesting.  So, KC, I know we have talked a little bit about this being a great solution for businesses that are mobile, that spends a lot of time in vehicles or on job sites.  I’m thinking truckers, contractors, trades.  Why is it, is that a fair assessment that’s a good solution for those kinds of businesses and why is that?  KC:        Well, the biggest problem is that the realtor, the Uber driver, the trucker, the salesmen on the road, the one person gig economy, employee, self-employed has is that they are always moving, and they don’t record the business in transactions, they all think, well, I’ll get to this later’ well, I’ll save that receipt; I’ll get the work finished, when I have time.  And that never happens.  And as an accountant, you are well aware of what happens when we don’t have good records and how susceptible we are to what’s called the correspondence audit where we get a letter from the internal revenue and they want us to justify, not only with receipts, proof of transactions but business intent for why we went to the hotel in Dubuque, Iowa, last August or why we took somebody to lunch at Applebee’s.  And we can’t do that because we lost the receipt and because we didn’t take the time to write things down, and now the internal revenue service is going to disallow that expense.  And the average correspondence audit, which about 4% of the people are getting hit with right now, every year, the average owner  is coming in with  $3000 and  $5,000  and $7,000 tax bills because we didn’t record the business intent at the moment of the event and that’s what TALK does.  It gives you a simple process to get the business intent, get the receipt and get it into a cash basis profit and loss statement right now that can import to QuickBooks if you are using QuickBooks or other software. Kelly:      Okay, so let’s just go through the process.  Let’s take a trucker, picture a trucker, he gets in his truck at 6:00 a.m., his tank is empty and he hasn’t eaten breakfast yet. How does he use TALK Accounting?  KC:         And so at the beginning of the week, his income, let’s say he is a lease driver, his income came in and it was directly deposited to his TALK Accounting MasterCard - we call it TALK Commercial MasterCard, and that card now holds his weekly income from last week’s mileage.    So he got paid so much per mile and he got a wire transfer like he does every Friday. Okay, so now I get up in the morning and I fire up the truck, in which, you know, I was a truck driver in my early 20s so this scenario was a valuable experience.  So, he fires up the truck and he is going to go into the pilot and get some ham and eggs.  Now, when he comes out or when the bill comes the waiter is going to bring the check and normally he is just going to pay this check and then stick the receipt in his pocket.  Now, what’s going to happen is, he is going to use his TALK MasterCard and as soon as he pays the bill his phone is going to light up. And it’s going to just say, ping! And the trucker will look at this phone and the phone is going to deliver a message.  It will say, Jack, you are at the pilot truck stop, in Topeka, Kansas. You just spent $11.47, what was that all about? And all the trucker has to do is touch the screen, the recording starts and he will say, I am buying breakfast on my way to Denver with a hot load, and that’s it.  Now I have enough information about that transaction and then my artificial intelligence can code it along with capturing the transaction data because we just use the TALK MasterCard.  And that gives me a qualified transaction right into a cash flow spreadsheet that’s part of the online banking.   And if I am a larger company I can have that imported into QuickBooks.  But a lot of people, like truck drivers, don’t even need QuickBooks, if they are recording, temporaneously, the business intent of when they spend money. Kelly:     So where does that spreadsheet go then if they don’t use QuickBooks? Where does it go? KC:        Interestingly enough, the spreadsheet is actually their online banking, and we all know what online banking looks like because we click and log on probably once or twice a day to find out if we can write another check.  So we are looking at it all day long, but now, instead of just having the total amount of money you have in a list of your checks, expenses that you have put money out on, you are also going to see revenue coming in on your online banking and you are going to see all of your expenses coded to the particular category.  So, if I bought a tarp because I have got wood on the back and I can see it’s going to rain up front, 30 miles from here, if we are in a rainstorm, I have got to tarp-this load.  Now I have got a categorize expense for the $300 I paid for the tarp. And if I am buying fuel it is categorized, if it is food it’s categorized. And all those things are treated differently at tax time anyway. So this is going to be a big help to my accountant, my tax prepare, because everything is in this spreadsheet which is my online banking. And it can be exported directly to excel so that it will go right into QuickBooks or right into a tax software. And can you imagine the amount of money and time that’s going to save that trucker to get that tax return done?  Kelly:     Yeah, so at EveryDay CPA, we work with a lot of truckers at tax time and tax resolution issues because they do have a tendency to kind of get into some problems because they are always on the road.  So you are saying that we wouldn’t have to have QuickBooks set up, that the transaction expense categories, that those categories get set up at the online bank or does it?  Do they accept any categories at that point, at the online bank? KC:     Well, the online bank will accept any categories because we are actually an accounting firm that created this software and then we help other accounting firms deliver it to their clients and so it’s modifiable.  So, if you are not using one of our standard 12 categories for a trucker then you can go in and change it. Kelly:     Alright, so we have truckers that listen to this podcast and they say, hey, that sounds cool.  They contact us at EveryDay CPA and we set up the account with you, they have got to sign some things, I’m sure, because we are dealing with banking, but it’s pretty straightforward, correct? KC:     It’s pretty straightforward, and we actually have the staff to walk the trucker right through it, on your behalf so that we are going to show them how the deposits are made into their TALK Commercial MasterCard.  We will show them how to expense money and talk to the phone.  We will show them how to take a picture of the receipt that the waiter has handed to you so that we are lock and loaded so that two years from now or two years from now we get one of those correspondence audit we are not going to be up all night worrying about it.  We are not going to be in tax resolution because we have lock and loaded evidence of exactly why we spent money in Topeka, Kansas. Kelly:      Alright.  And you gave us special pricing at EveryDay CPA so I want to thank you for that, and all our truckers and others, not just truckers, can take advantage of that.  So, thank you for that KC, I appreciate that. KC:      We are excited to work with you, Mr. Coughlin. Kelly:    Great.  So I have one other question for you KC, let’s say you have got a trucker, he is in his hotel room and he needs to pay some other bills that have accumulated while he has been on the road, can he do that on the fly from his hotel room? KC:      Well, the TALK Commercial MasterCard is a business checking account. It’s not your personal account.  So we get out of that co-mingling that you have been warned about that before mister trucker.  And if you are in your hotel and you have got to make a lease payment on your truck, you can either have that set up, so automatically drafts off the card.  You can actually issue a check from your laptop or phone to make the lease payment at your convenience.   And the same thing will hold true when you need to send money home at the end of the week for the rent and the diapers. So at the end of the week, with the leftover money, it can easily be sent to your home checking account so that the personal bills can be paid.  It will operate exactly as if we were a checking camp but we’ll do everything from your phone so that you don’t have to worry about losing a checkbook or keeping the reconciliation of the account balance because you will see your account balance in real-time, right on your mobile phone, all the time, as well as all of your transactions. Kelly:     Well, this just seems like ideal for truckers, maybe Uber drivers, right?  But certainly truckers.  And these guys are always on the road. KC:       For the truck driver, the gas the delivery driver, the Uber person, we are always running around with a glove box full of receipts and as you well know, the average taxpayer pays several thousand dollars a year in excess income tax because they can’t remember where and when they spent money. That problem totally goes away because we are capturing the transaction at the exact moment it happens and shoving it to your phone and asking you to simply answer one question by talking out loud the business intent.  And if you don’t tell us the business intent at that moment, I am going to come back in five minutes and ask you again. I’m going to be back at 5:00 p.m. and ask you again, and I am going to become your mother talking about vegetables. I’m going t become a nag until you tell me why you spent $18 at the pilot truck stop, Kelly:     Right, and if they have cash transactions, what should they do about cash transactions? KC:      Now, we are going to strongly recommend that they s do not have cash transactions, but they can use this to record the transaction in cash and then it will be up to the accountant to reconcile at the end of the year for the tax return because we won’t be able to code the cash transaction.  Kelly:    What about a debit card withdrawal, cash withdrawal, can they put any category to that? KC:        They can do the debit card cash withdrawal.  As soon as they take $200 out of the ATM they are going to get a message on their phone, hey, what was that $200 for? Kelly:    Excellent. KC:        And you will be expected to talk to the phone and explain why you took $200 out and how we are going to code it back at the office so that at the end of the year you are not   looking at 10 or 20 or 50 or 500 ATM withdrawals and trying to figure out what the Lord am I going to do with all of these. Kelly:     See, I think that that pays for that because that’s always a nightmare. KC:        Kelly, a lot of these ATM withdrawals are business-related expenses but you are forced, when you are doing the return, to categorize them as owner drawer income because you don’t have any contemporaneous notes about what the money was intended for.  Kelly:     Well, I know, I mean, like, I go to New York three or four times a year and I always take out cash for taxis and, you know, you are constantly having to keep track of these taxi receipts but what I would rather do is just take $200 out, taxis, transportation, ground transportation.  So those are good things.  Well, I congratulate you KC on what you have designed and built here.  If we have got a trucker or a contractor that wants to get going on it, I know you have got a select few of key and critical accountants, like EveryDay CPA, that’s set up to do this, what’s the best way for people to get going with you if they want to use TALK Accounting? KC:        The very first thing they should do is simply call your office and say we would like to know a little bit more about this.  Then you can send them to a short description video, on the internet of course, at talkaccounting.com, but we would like you to send them to that sight with your link. I’ll send them a link, and then when they tell us that we would like to try this, at that point, our at-home gig economy bookkeepers actually assist that trucker on your behalf, to get that card set up, open the bank account with Sunrise Bank in Minneapolis,  to train the trucker on exactly how to use this so that their tax return bills go down, their bookkeeping costs goes down and they know exactly where they are, financially, all the time.   We don’t just give them stuff and turn them loose we have a bookkeeper who will walk them through, for the first two months, hand by hand by hand to make sure that this is operational.  Kelly:     That sounds terrific.  KC, tell me a little bit about yourself.  Give us your background. KC:        Hey, you know I started accounting in 1969 when I was 16 years old, and so I know a little bit about this.  I have not been a very good accountant, mostly I am a pretty good salesman and a pretty good software engineer so I have tended to float around the accounting industry writing software programs and developing other companies but I have been an entrepreneur, a small business owner for 51 years, since I was 16 years old. And this is something we have worked on in the last four years, here in Tousan with a group of young programmers out of the U of A, and they were specialist in artificial intelligence and voice recognition, to create a methodology to easily convert my spoken voice into a coded accounting transaction, solving so many problems.  And so after all those years of experience, in owning one business to another and solving accounting and tax problems for clients, we finally have been able to come up with a simple way, using that smart phone to get rid of that wallet full of receipts. Kelly:     Great.  Well, KC, thanks for your time and I look forward to working with you with some truckers and contractors and anybody else that’s on the road that needs help classifying their expenses and minimizing the risk of an unfavorable IRS audit. So thanks a lot for your time. KC:         Thank you.    

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William McConnaughy on Tax Resolution (part 1 of 2)

Good morning, this is Kelly Coughlin, CEO of Bank Bosun, hope everybody is doing well. You know, dealing with the IRS for a business or a personal tax resolution can be a challenging endeavor. Today we are going to talk about Business Tax Resolution.  We are going to focus on tax liability resolution, that is, resolution of a business tax liability after the IRS has notified you of an amount due.  With that, I have on the line, William D. McConnaughy. He is a former IRS Revenue agent, beware, and has a Masters in taxation and is a CPA.  So, he has got insider knowledge about how the IRS personnel think, or don’t think, what pressures they are under and how to work with them successfully.   Kelly: So, I think, Bill, you are on the line.  Let’s talk about business liability, tax liability. I like things in threes and fives so let’s talk about the top five tax liability categories that you end up working on for businesses or the events that created it. Is it, you know, the long term capital gains and you get this big tax liability?  Is it an audit?  I assume  that employment tax withholding for compensation, that’s one of those things that you can’t do too much with, I would imagine, because that’s one of the most egregious events, right, that’s created but give me like top five things that you work on like for businesses. William: For businesses, I am not sure if there is five but I’ll list a couple.  First and foremost, far and away, the number one problem is employment taxes, payroll taxes, where the business owner or the business doesn’t turn over withheld payroll taxes to the IRS like they are supposed to, that comes up frequently.   And the reason again is that, there is usually a good reason where the business need that money to take care of unexpected things that come up either within the business or the business owner personally.  It is unpaid payroll taxes that the company withholds from the employees’ wages, they are supposed to turn them over to the government and they don’t, for various reasons.   That’s number one.   Far and away, number two would be the income taxes, company income taxes, but by and large it’s almost always the payroll taxes that’s the troublesome thing, and the reason being is because it is so easy.  I mean, the company is supposed to turn this over every three months because there is a quarterly filing requirement. And it’s very easy because there is nobody there to stop the company or the company owner from just saying to themselves, you know, I need this money right now for other purposes, and that’s what they do with it. So, that’s it, I wouldn’t say there is five but there is certainly the payroll taxes and the income taxes, but payroll, far and away is the bigger problem of the two.    Kelly: Okay, and on the payroll side let’s focus on that one then, many, many companies outsource payroll to like Quick Books, ADP, you know, a handful of companies that do payroll processing, I know, I am the CEO of a company.  We didn’t see the payroll taxes, we outsourced the entire service.  I never wanted to see that money, just make sure it gets deposited.  Then it got me concerned, I think there are a couple cases I had read about where even if you are using an outside service you better make sure that that outside service, it settles withholdings unto the IRS or they are going to come back and look at you. Is that a fair statement? William:               That’s absolutely fair, with the payroll services, and as you are mentioning, there are large ones that are nation-wide, and they do a pretty good job of it. I use Paychex, one of two of the largest, they do a pretty good job of it but even they can make honest mistakes so it’s still your responsibility to make sure that those payroll taxes are going in like they are supposed to.  And then there is smaller payroll processing companies that are not so stable or not so honest where there has been cases where some of the smaller companies will embezzle your payroll taxes and you are thinking you are paying the IRS and what you are actually paying is somebody who plans on running off with your money. That can happen.  That does happen.  So, yeah, as you were saying, it’s incumbent upon the business owner to make sure those taxes are deposited with the IRS because you, the business owner, you are responsible whether you farm it out to somebody else or not that’s not the point with the IRS.  The point with them is that you are the person who is responsible for that, and if it doesn’t happen the IRS is going to make you personally responsible for that. They, the IRS, they will personally assess half of the payroll tax that was not paid by the company against you personally.  So, that’s how that works and it’s, like I said before, it’s one of the biggest problems out there and it brings me a lot of business because this comes up all the time. Kelly:                    So, that personal liability, the corporate vale, so to speak, payroll taxes pierce that for all officers, CEO, CFO, how deep does it go? William:               Anybody who has any sort of responsibility for that for that to happen?  And it can go deeper, I have seen cases where the IRS will even go down to the bookkeeper or account who is not even an owner of the business, they just work there but because they had their hands on the check book they were supposed to write the checks, they didn’t write the checks the IRS can go all the way down on the people who are not even owners, people who just work there. Kelly:                    Yes, because I remember when after I had read this, I was CEO of the company and I am the CPA as well, so I am kind of, you know, sensitive to that kind of stuff and so I remember, I think we were actually using Paychex at the time, and I remember it caused me to do further due diligence on paychecks to make sure that they were in fact sending those funds along, and I think it was kind of a challenge to get that information to prove that the deposits had actually been made.  Is there any ideas that you have on how one can get that? William:               Oh yeah, you would have to contact Paychex and get proof of that.  I have seen on bank statements where they are charging me for the deposit. They, Paychex, they take the money out of my bank account so that’s how I know it’s been done. Kelly:                    Oh, you don’t know that it is going to the treasury though? William:               Well, I will know.  You have got a point there actually.  I will know once the IRS sends me a notice saying that I have unpaid taxes and if that ever comes in I would say that should not be happening. Kelly:                    Yeah, you see, that was my problem, I certainly saw them withhold it but were they depositing it into another account or the treasuries account?  And, they never could, as I recall, and it has been years, but as I recall it was a challenge to get to verify that.  But your point is that it needs to be verified because that’s your number one, whether it’s accidental or intentional, these employment tax liability, the failures to make those deposits is the number one driver of your demand for your business model, correct? William:               Right. That’s the number one thing from businesses that bring me tax liability cases where these payroll taxes don’t get paid like they are supposed to.  Also to follow up on your question about how can you know that they are making those deposits, what you can do is pull up account transcripts from the IRS online for any particular quarter, and you will get a print out to show what happen there whether or not the payroll taxes were deposited.  So, you can verify that, that’s not actually that hard to do.  If you go online at the irs.gov, pull up your account transcript for any particular quarter or a year then you will see what is there.                                               Kelly:                    That’s probably not a bad idea to do then, is it? William:               Yes, if you want to stay on top of it and if you have any reason to believe that it’s not happening like it should that would be the best way to verify it without having to take anybody else’s word for it. Kelly:                    Yeah, at least have a bookkeeper or controller or somebody just once a quarter, or once every six months or at least once a year go in and do that.  So, that’s what drives your business model. Kelly:                    Well, that covers what I had. Anything else you wanted to add to this? William:               In closing, I can’t overemphasize the importance of those payroll taxes again, that is such a big deal on these business taxes that when the IRS, again, goes and asses that the tax is against the owner of the business or the bookkeeper that works there the so called trust fund recovery penalty, that’s what they call it, that is a real big deal. The IRS takes those payroll taxes very seriously, and the way they look at it, they don’t look at it as an unpaid tax liability. The IRS people call that theft because what you have done as a business owner or somebody that works there and didn’t turn those payroll taxes over. Those monies, those taxes, that was not your money that was your employees’ money.  That was money that’s out of your employees’ paycheck, that never belonged to you and you are put in a position of trust to turn it over to the government and if you don’t do it the way the IRS sees it, what you have done is tantamount to theft.  You have taken somebody else’s money that you are supposed to hand over to the government and you didn’t do it.  So, the way they look at it, they call it theft, very thinly disguised theft. And that’s why they come down real hard on unpaid payroll tax liability. So, I cannot re-emphasize just how important that is.  If you are in that situation for whatever reason you will be well advised to get professional representation, because the IRS is going to come down on you like you wouldn’t believe about that.   Kelly:                    Now, does that apply to if the employer is withholding 401K contributions?  Would they treat that the same way to make sure that the funds are being deposited into their, you know, 401K plan? William:               That’s not any of the IRS’s business where that goes to 401K plan, that’s another matter.  The IRS doesn’t monitor all of that, they are looking for the payroll taxes, not the 401K contributions.  Kelly:                    Okay.  So the department of labor, I suppose, would, say, be on top of that if for some reason the employer was withholding the wages for a 401K contribution and it wasn’t going into the 401K plan, and you are saying the IRS wouldn’t be looking at that but another regulator like DOL probably would. Is that right? William:               That’s right, yeah, that’s not for the IRS.  Kelly:                    Okay.  On the issue resolution since it is such a kind of cut and dry fact and circumstance, how can you get a favorable resolution on this?  If it is they stole $10,000 from their employees, how do you add value to that? Just reduction in penalty? William:               I am not sure I understand the question there Kelly, rephrase that, what do you mean? Kelly:                    So the question is, if the equivalent to theft of employees $10,000, the employer doesn’t make the contribution so the IRS says, hey, this is de facto theft, let’s say it’s $10,000, how do you add value to that?  Because if they are just saying, hey, this is theft, how does McConnaughy comes in and says, well, let’s settle on $5,000? William:               That would depend on the company’s ability to repay those taxes.  I get settlements all the time on unpaid payroll taxes in these cases, even though they are quite serious.  I get settlements all the time, there is a misunderstanding out in  the general public that you can’t settle payroll taxes but that would be untrue, I get settlements frequently on unpaid payroll taxes, even though the IRS profoundly frowns on those unpaid payroll taxes.   They can be settled if you can prove to the IRS that the business doesn’t have the means to pay those off, ever, then yes you can get reduce settlements even on payroll taxes, both at the company level and at the responsible person’s level.  I do it, like I said, frequently, it’s not at all the time, it’s not every day but it is frequently.  That’s at least every month I get settlements on those kind of taxes despite the misunderstanding in the public that you can’t settle those.  Those kind of taxes cannot be discharged in a bankruptcy which is where I think the misunderstanding comes in, because you can’t discharge those kind of taxes in a bankruptcy filing they can’t be settled, but that’s not true, they can be settled with the kind of work that I do.  Kelly:                    Yeah, I guess I didn’t realize that, I kind of assume that the payroll tax part was there not much room for negotiation there. William:               No, no, no, that would be untrue, I get settlements, frequently on those taxes.  They can be settled. Kelly:                    That’s terrific. William:               It can’t be discharged in a bankruptcy that’s where a lot of people get the misunderstanding. Kelly:                    Yeah.  Let’s talk about how people can contact you. I think there is no geographical limitation and where you work.  I mean if it’s the state tax issues in California, I suppose, maybe Arizona or is your sweet spot but in terms of Federal Tax issue you can work with anybody anywhere, correct? William:               That’s correct.  I have clients literally world-wide, people that are overseas. Kelly:                    How does one get a hold of you? William:               The best way is either call because I have a toll free number, it is 888-2251272- toll free.  You can call me on my dime, 888-2251272 or they can go through my website taxhelp.pro, taxhelp.pro, and you can get a hold of me through the website, either quick to call,  email we have chat on most of the time, any of those three ways, call, chat, email, whatever works for you.  Kelly:                    Now, do people normally start with you or they start with one of your assistants to kind of do some fact finding first, how does the process begin? William:               The first point of contact is usually…I have a brother that works with me in the business, his name is Donald, he does the initial screening.  So, usually the first contact will be with him to determine whether or not you really have a problem that I can help you out with, but then immediately after that it comes directly to me.  I am the man, I am the point of contact after that.  I will be personally working your case, it will not be shoved down to somebody else with less experience.  Kelly:                    So, the McConnaughy Brothers, the McConnaughy mafia doing tax work for you.                                             Alright, so say your website again.  William:               It’s taxhelp.pro Kelly:                    Taxhelp.pro, okay.  Alright, that’s terrific. Do you want to finish with a quote or a funny historical event or are we done? William:               Let’s see…I think we are done for now.  This has been a great call and I really enjoyed it.  Any other time you want to speak with me about tax stuff please let me know I will be glad to get on the line with you. Kelly:                    Well, let’s do a personal one, a personal tax situation because those are different, because, obviously, you don’t have the wages thing so at least the top critical event would be different. But, we will set that up and try to get that done before the end of the year as people get into the tax season. That would be great. William:               Alright, very good.  I am looking forward to it. Kelly:                    Bill I enjoyed it, take care of yourself. William:               Okay, goodbye Kelly. Kelly:                    Thanks, bye.

McConnaughy on Tax Resolution (part 2 of 2)

Greetings, this is Kelly Coughlin, CPA, and CEO of EveryDay CPA providing tax accounting and revenue solutions to individuals and businesses throughout the U.S. In today’s podcast, I am going to interview a former grizzly bear. Yep! In a former life, for 30 years, he was a grizzly bear who took the shape of an IRS Officer, seizing assets and pursuing DOJ tax lien foreclosures. David Ronquillo began his career as a revenue officer in 1980 in Seattle. He has held positions as Field Collection Group Manager and Senior Collection Policy Analyst. Currently, he is helping tax professionals increase their knowledge and skills representing clients who are dealing with the IRS Collection operations. David, I want to welcome you to the EveryDay CPA Podcast. Kelly: I have a couple more questions on kind of the behind the scenes dynamics of the collection area, one is, what are some of the motivators or behind the scenes incentives that influence an agent that works on these cases, that work in favor of the taxpayer, and certainly which ones don’t work in favor of the taxpayer? I am thinking, you know, there is a pressure to close the case to get it off the table, right? We have heard all that, is that a fair statement, that there is the pressure to gets things closed, right? David: Right. Kelly: Does that pressure help the taxpayer or hurt the taxpayer or is a neutral? David: It can depend, and I can see it go both ways, for example, if it’s an egregious case, you know, the way that they ran the tax up, you know, a trust fund recovery penalty is a classic example. IRS may spend more time on it digging for assets or digging for a way to collect what is owed, simply because of the way the tax was generated or how cooperative - did they do what the revenue officer asks them to do or are they going out to try to refinance their house? So, in those instances, the case may be directly classified as a case that’s over-age. It used to be nine months. If the case was older than nine months in the inventory it was over age so then management starts looking at it a lot closer trying to figure out, what do we need to do to close this case? But if it’s a good enough case where it should not be closed, the IRS is not going to close it. On the other hand, if it’s a simple payment agreement, taxpayers can come in, they can make monthly payments, case is getting old, hey, let’s get the payment agreement written up and let’s get it closed. Let’s move on to something else. So, the pressure on closing the case can work both ways, it just depends on what your circumstances are. In dealing with the revenue officer, I always take the choice, because I hear these advertisements on the radio, oh, yeah, we do battle with the IRS, we fight the IRS, this and that. I don’t fight the IRS because it’s not effective. When people would fight me or fight my revenue officers, it was never effective because I used to tell taxpayers when I was a revenue officer, you don’t want to cooperate, fine, I will clear my desk and I will just have your case on my desk and I will spend all my time on it trying to figure out how I am going to collect from you, okay? So, because you are having an interaction with another individual, another human being, and people like to be treated well, like to be treated nice, the revenue officer is the same way, they go home from work to a family, to a family dog, they are regular people. So, I always advocate, try to solve the case for the revenue officer. If you know what the rules are, the procedures are, what the internal revenue manual calls for with the case within those parameters. If they owe tax you know that the revenue officer is going to want a 433-A, a financial statement or if it’s a business 433-B, you know what the standards are, don’t ask the revenue officer to grant $5,000 expense for mortgage and utilities when the standard for the area is like 2,000 bucks. So, work to resolve the case for the revenue officer, that way they don’t have to spend as much time of concentration on your case. Be cooperative, you have got a deadline, try to meet the deadline. If you can’t meet the deadline, at least call the revenue officer ahead of time and say I can’t meet the deadline and this is why, and generally they will extend the deadline. Don’t argue with them over issues that are not important, okay? In my example, the mortgage and utilities are $5,000, the standard is $2,000, why are you arguing with them over that? You probably won’t get it. I mean, you can put a little bit, but why, “Here is all the utility bills and this is why.” But I would much rather spend my time arguing with the revenue officer over something that they did wrong rather than something that I know my chances of winning are slim to none. Kelly: You keep referring to the revenue officer, what’s the hierarchy of IRS case management, the point of contact, taxpayer? And, parenthetically, I am going to assume that you recommend in most cases that a taxpayer get help from a professional that knows how to navigate these areas, is that a fair statement? David: Yeah, It is. It depends on the case. It depends on how much the taxpayer owes. If the taxpayer owes $5,000 and they can pay $500 a month then I would just tell them, hey, call the IRS or send in a letter to the IRS that you want to make a monthly payment agreement. If they owe $50,000 or $150,000 then that’s a lot different, and then it depends on what they have. Taxpayers, what I have seen, they don’t want to spend their time trying to deal with the IRS. They don’t know how the IRS works; they don’t know how the IRS thinks; they don’t know the IRS language and they don’t know what the IRS can do to them. And I have had taxpayers come to me after they have dealt with the IRS, and generally, they have a deadline put on them and now they want me to fix the problem. And that’s like, well, you’ve got a deadline from the IRS which is in three days and you expect me to do all this work for you, and if the work is not done, financial statement is not submitted, they are going to lobby. I can’t guarantee you that I can do this. My recommendation to taxpayers is, do not contact the IRS. Generally, if you owe enough money and you don’t feel confident in dealing with the IRS, contact a professional that knows what they are doing, knows how to deal with the IRS, because you’ll probably sleep a lot better at nights rather than you trying to deal with the IRS. Kelly: And if you are a tax professional and you don’t know how to navigate through this side of the IRS area, the collection area, then that’s your focus now in your business enterprise, correct? You are helping tax professionals navigate through these waters? David: Yes. I am going to stop representing taxpayers, simply, because I have done it for close to 40 years. And what I would rather do now is just simply act as a consultant to tax professionals. If they have questions, I’ll help them develop strategies on particular cases. You know, I attended the National Association Enrolled Agents conference at Las Vegas every year and those are good conferences but what I see happening is that you have folks coming in and they kind of learn representation to add it on to their practice, which is good, but you sit there in a seminar for an hour to an hour and a half to two hours, for example, on filling out a financial statement, 433-A, that’s really, in my opinion, not enough, because there are implications to what you put down on that 433-A. Anybody can fill it out because you are just putting down numbers. So, if you write down for real estate, three bedrooms, two bath resident, that its fair market value is $500,000, and the mortgage against it is $100,000, for equity of $400,000, you have to know how the IRS is going to look at that $400,000, especially a revenue officer. You just can’t submit that 433-A and say to a revenue officer, here it is, and have yourself wide open or no prepare your client. The revenue officer is going to ask you to go borrow, so let’s get started right now. Kelly: Right, right. David: So, the seminars are good but until you really get out and start working cases, Offers in Compromises is another one, the Acceptance Rates on Offers in Compromise is just under 50 percent. I don’t submit a lot of offers but everyone, I’ve probably submitted maybe about 10, 15, at the most, everyone has been accepted except for one, and that is because she went and got a job, that increased her income which kind of blew the offer up. You know, you have to be really, really careful on what you are doing so that you can achieve success for your clients. So, my plans now going into the future is, do consulting work. People want to call me up, this is what I have got, this is the type of case, I can kind of walk them through it, and try this, this and this, and if that doesn’t work, you know what, let’s try this. And just, you know, basically be a coach is what I want to do. Kelly: Yeah, got it. So, back to that question, hierarchy of case management, you have got the revenue officer, the next level up from that, like his supervisor, what do you call that supervisor? David: That is the group manager, and that group manager is going to supervise anywhere from 10 to 15 revenue officers; above that is the territory manager - that was my last position, it was a territory manager, and they are supervising anywhere, nowadays, because the personnel has shrunken, you know, five to 10 groups. And then above the territory manager is the area director and he or she is supervising…They have States, like here in Texas we are a part of the golf state area, that area director is in Huston. And golf state, they did some reconfiguration, but it used to be Texas, Louisiana, Alabama, Mississippi, Georgia and Tennessee, and, I think, Arkansas. Kelly: Okay. So, back to revenue officer, so, let’s say we have got a revenue officer that says, I want to go after retirement assets, I think earlier you said they have to go up three levels so does that mean it goes to the area director or the territory manager? David: Goes to the group manager, the group manager forwards it to the territory manager who forwards it up to the area director. Kelly: Alright. David: Every area has what’s called a technical analyst and this person will review the case for the area director, looking at the technical aspects of the case - does it meets the requirement for whatever the revenue officer is asking for? And if the technical analyst says, yes, this is good, they will give it to the area director and then he or she will sign off on it and they’ll go and come back tomorrow and open the levy. Kelly: That’s retirement assets and then the personal residence, same thing but it goes up one level above that, did you say? David: Yeah, it will go up through the area director and then it goes over to a special unit called advisory, and these are senior revenue officers that will look at the case again for technical issues. Does it meets the technical, the legal and technical, does it meets the requirements for doing the seizure? The case will then move over to IRS council’s office for review. They will review it for the same thing and they will then forward it over to the Department of Justice Civil Tax Division for the DOJ to take it in to Federal District Court to get an appointment to take it to the Federal District Court. Kelly: Okay, that’s very helpful. I have two final questions, unrelated, where you talked about OIC and some of these other tactics that are used to deal with liabilities. Let’s talk about CNC, Currently Not Collectable, once a tax liability goes into CNC classification that kind of puts everything on hold, there is no more collection activity, when does it get further attention, it won’t stay in there forever? What’s the catalyst to get it out of that, is it a tax return that gets filed and then the IRS notices, oh, this guy is making ten times the income now, is that more or less what happens? David: That is what happens, the IRS when they see a case they will set an income threshold. It’s in the internal revenue manual on how they calculate that. What they are looking at is necessary living expenses, and they set the threshold a little bit higher than what the necessary living expenses are because they don’t want a case that is generating out just because the taxpayer went $5 over what their necessary living expenses were, but they’ll set a threshold and then when subsequently file tax return, the income will be matched up against what the threshold is. And if their income is now greater than what the threshold is the case will then be regenerated out for collection because the assumption is the taxpayer is making more money now they can start paying towards something. If the taxpayer never exceeds that threshold the case will never come out, the statute will expire and that will be the end of it. Kelly: Alright, okay. David: And even, I think, if the taxpayer doesn’t file tax returns it won’t be put out of CNC status but what will happen is the IRS will be asking for the tax returns which is a whole other area to go into. Kelly: Yeah, right, right, okay. Alright, the final question is on internal collection versus external collection. A part of these ads we see on TV is, the IRS has hired a bevy of external collection agents that will really go after you, if you think your life was bad before, it really will be bad now. What are the facts on that? David: Now, there is big controversy over these private debt collections. The National Taxpayer Advocate is definitely opposed to it. IRS management, they tried this a number of years ago because they want to assign the low hanging fruit to cases that they cannot collect, the CNC cases to these private debt collectors. The most that they can do is make a phone call, try to locate the taxpayer and make a phone call but when it comes to actually resolving the case, say for example it’s a CNC case, private debt collector gets in touch with them and the taxpayer says, well, okay, I want to pay $100 a month, that case has to go back to IRS. IRS has to set up the payment agreement. They have no enforcement authority, basically, they are just trying to talk people into paying what they owe, track them down and pay what they owe. Internally, like we said at the beginning, the brown bear can chase them up the tree but the grizzly bear can just rip the tree out, that’s what IRS can do. Kelly: Yeah, right. Well, that is terrific. So, your market now is to help tax professionals help other taxpayers with tax liability issues. How would you like them to get in touch with you, telephone call, email? David: My email is david@dfwtaxhelp. That’s delta foxtrot whiskey tax help, h e l p.com. I have a website dfwtaxhelp.com, phone number is 214.997.4470. Kelly: That’s great. David: Yes, people have questions, you know, and I will tell you, NAEA just came out with this forum where people can post questions, and I look at that sometimes and people will post a question on collection issues, maybe something on an offer, and various people will respond. And I look at that and I think to myself, the person that is asking the question is maybe getting two or three lines of an answer. And in a lot of stuff in collection there is permutations to it, there is different nuances that can occur. You can plan to go down one path and you have to know what’s down that path that can mess things up. So, I see that forum is good for quick short answers but if you really, really want to know how to handle a specific situation you really need to talk to somebody that is familiar with the situation that can give you some good directions, to give you good ideas on strategies of what to do. Kelly: That’s terrific. Well, David, I look forward to having you on my team to help me and my customers deal with this because I think you are a terrific resource to have and I am glad that that former grizzly bear is in my corner and are helping people. I like that. David: I like that. I will have to tell my colleagues that I am still with the IRS. It’s terrific. Well, thank you, Kelly. Kelly: Thanks. David: Alright. Kelly: I enjoy talking to you, great. Bye. David: Alright, bye, bye.

IRS Revenue Hunter: Where is the Easy/Hard Hunting Grounds? (PART 3)

Date:   June 1, 2019            Attendee and Guest:   Kelly Coughlin, CEO, EveryDay CPA -                                           David Ronquillo - PART 2 Greetings, this is Kelly Coughlin, CPA, and CEO of EveryDay CPA providing tax accounting and revenue solutions to individuals and businesses throughout the U.S. In today’s podcast I am going to interview a former grizzly bear.  Yep!  In a former life, for 30 years, he was a grizzly bear who took the shape of an IRS Officer, seizing assets and pursuing DOJ tax lien foreclosures.  David Ronquillo began his career as a revenue officer in 1980 in Seattle.  He has held positions as Field Collection Group Manager and Senior Collection Policy Analyst.  Currently, he is helping tax professionals increase their knowledge and skills representing clients who are dealing with the IRS Collection operations.  David, I want to welcome you to the EveryDay CPA Podcast and want to first ask you: Kelly:    What about access to retirement assets, is that fairly standard operating procedure - Look for retirement assets - grab these, customer pays, taxpayer pays income tax and a penalty on that or are they exempt from the payment? David:   Levying retirement accounts is one of the last things the IRS wants to do.  They will do it in what they call egregious cases.  That’s where you have a taxpayer that’s just really isn’t cooperating, yet, the internal revenue manual gives some examples of how to identify egregious, you know, one of the other things is that they continue to make contributions to their retirement account.  The big thing about retirement accounts is whether the taxpayer has access to it or not.  So, for example, if the taxpayer can take the money out of the retirement account, IRS can levy, if they can borrow against it, IRS can levy.  But in some situations where the taxpayer cannot do anything with that retirement account, you know, the way the plan is set up they have no access, they basically have no interest in that retirement plan, the IRS cannot get it.  To get a retirement account, an IRA, for example, that has to go up to three levels of management for approval.  There has to be a good reason why the revenue officer wants to levy it.  Only revenue officers can levy retirement accounts.  The automated collections system, the telephone call sites cannot, it has to come up to a revenue officer.  So, they have to justify,  you know, write up a memo justifying why they want to levy the retirement account, they send that up the management chain, up to the area director who, if everybody agrees, they sign off on it and then the levy is served on the retirement plan.  So, it’s a lot of work that the revenue officer has to go through.  It’s a last end of the line procedure to do.  The revenue officer knows that his or her stuff is going to get reviewed and so they have to have a good justification as to why they want to do it.  So, it doesn’t happen very often but, yes, it can happen. And it comes down to the manner of cooperation that the taxpayer gives the revenue officer. But IRS changes its procedures last summer where now a taxpayer can ask the IRS to levy their retirement account. I have had two clients that have one of that done because what it does, it avoids that 10 percent early withdrawal penalty, but it’s convincing the revenue officer to do it.  In these particular cases, the individuals had like $200,000 in their retirement accounts that would fully pay the tax.  So, it’s the matter of going to the revenue officer, basically, make the case for them to do the levy, they run it up the line, levy, the tax gets paid. Kelly:    Why are they so hesitant to want to go after retirement assets, for the obvious reason,   don’t want to put retirement in jeopardy? David:    Yeah, exactly.  The national taxpayer advocate has made a big issue over it, IRS going after retirement accounts, because of it jeopardizing an individual’s retirement, and that’s basically it. So, in fact, she is somewhat opposed to the fact that a taxpayer can go in and ask the IRS for a levy. I have read in the last report, or maybe it’s the last two years report where they were hesitant to do that, but as I said, these two clients that I had, that’s what they wanted, that’s how they sort to rid of their tax liability.  And they had the ability to make a lot of money so they weren’t that concerned about them taking the money.   Kelly:    Okay. Would the IRS force taxpayers to sell their home to recover tax liability? David:    They may, it depends.  The first thing you have to look on, on a resident’s personal residence, how much equity is in there.  For IRS to seize an asset generally what they do is take 60 percent of the fair market value and then they will look at any encumbrance against it.  So, for example, with a home, let’s say, for example, it’s worth $100,000, they would start with 60 percent of that which would be $60,000, then the next question is, how much is the mortgage against it? And if the mortgage is more than 60 percent, in this case, more than $60,000, there is no equity for the IRS to seize.  But if it’s less, let’s say, for example, the mortgage was $20,000, you have got a $40,000 difference there between the $60,000 and the $20,000 then they would look at it.  What they would do is ask the taxpayer to go borrow against the equity, go refinance the house.  And sometimes the revenue officer may ask for the taxpayer to go to attempt to borrow from three different lending sources to get, if they are not approved, at least get the denial letters,  the loan denial letters, okay?  In those instances, if they are not approved for a loan the revenue officer may decide, well, you know, they are not approved, we are not going to take the house and we are just going to let it go, and put them on a payment agreement. In other cases, the revenue officer may decide, no, there is sufficient equity in there so we are going to go after the home. If they decide to pursue seizure of the residence, again, they have to go all the way up to the area director, three levels of management, to get approval, then the case goes over to the Department of Justice, Civil Tax Division, who then takes the case before a federal district court judge to get approval.  So, residential seizures have to be approved by a federal district court judge. Once they get the approval then they can go in and seize the residence and put it up for sale. Kelly:   Is it easier for the IRS to get retirement assets or to get personal residence, generally speaking? David:    Oh, retirement assets.  Kelly:     Are easier? David:    Very easier. They are easier to get. Kelly:     Okay. David:    So, you know, it comes down to how egregious the case is.  How much equity are they looking at? What kind of cooperation are they getting from the taxpayer?   Kelly:    Hey, when you say egregious, are you talking about the liability, size of the liability, or the reason for the liability, you know, civil fraud, that sort of thing? David:    It’s the reason for the liability and the level of cooperation that they are getting from the taxpayer.  You know, we have had taxpayers that they don’t cooperate at all.  They don’t contact, they wouldn’t contact us.  You get in touch with them, they are argumentative, you know, they are not going to do what you ask them to do.  And you could be in a situation where really the only thing you can get is their personal residence, and there is sufficient equity in there that’s going to make a significant dent in how much they owe.  And you look at the background and say, well, how did they run up the tax, you know?  It could be a trust fund recovery penalty where they had a company that they ran up, you know, a million dollars’ worth of employment tax.  So, all of the taxes the IRS has to take into consideration. Kelly:     Okay.   How much of the individual IRS representative personality influences the outcome and direction of a case, or, another way of putting it, if you are not getting along well with this particular agent, can you get a different one assigned to it? David:     The simple answer is no. There would have to be some facts and circumstances on how the interaction is going between the taxpayer and, let’s say, the revenue officer for IRS management to move the case.  Simply disagreeing with the decision that the revenue officer made is not going to move it.  The revenue officer would have to be doing something whether violating policies or procedures or they may be harassing the taxpayer or just really totally out of bounds with the taxpayer.  The taxpayer can go to the group manager and ideally they would have documentation to that effect, you know, maybe quotes of what the revenue officer said to them, maybe what they proposed to the revenue officer to resolve the case, and why the revenue officer is rejecting it.  That type of instance, you know, the manager would consider, maybe we should move the case, but generally, it’s very very, very difficult.  Kelly:     Give us some background on how and where cases are assigned. David:     IRS has different stages.  When a tax return is filed and there is tax due on the case it goes through what’s called the notice stream where, issues, on income tax, for example, four notices will be sent out to taxpayer. Kelly:       What notices, form?  F-O-R-M? David:      No, four, F-O-U-R. Kelly:       Okay.  David:      Four notices, and generally, the notices get a little bit stronger as they go down the line.  They generally come out four to six weeks apart, but I have seen instances where a taxpayer would get a second notice and they never get a third notice and never get a fourth notice. The third notice is called a CP504.  If you look in the upper right-hand corner of the letter it will say CP504, saying intent to levy. And the paragraph will state that the IRS can levy basically on state income tax refund. So, in states that don’t have income tax, really the notice is meaningless, nothing can be done.   So, for example, here in Texas we don’t have state income tax when our client gets that notice we just know, well, we are probably going to get the final notice here, another four to six weeks from now, but basically, we can ignore that notice.  In California, for example, with the state income tax, the IRS can levy the state refund if the taxpayer is due one.  The final method can be what they called LP11, and that comes out of ACS or it can be LP1058 which comes from the revenue officer, it will stay on it in big bold letters, final notice of intent to levy.  The taxpayer has appeal rights with that.  They can file what’s called the collection due process request within 30 days of that notice which will stop all enforcement.  The IRS cannot levy unless it’s a jeopardy situation, and those are rare.   And what happens with filing the notice is, you request a hearing with the appeals division and in the meantime you can get your financial statement together, a case resolution proposed, and you are supposed to be able to work still with the revenue officer but what we have seen is a lot of revenue officers just take that and send that up to appeals.  If there is no response then we are talking about going back to the notice stream where an auditor does not have the case, if the case is large enough in dollar-wise, and generally it’s $100,000 or more, it may be assigned out to the field to a field collection group, to the revenue officers group, okay?  IRS has algorithms where they score cases, and they look at, they classify cases, high risk or medium risk or low risk, and they look at the probability of collecting what is owed. Their algorithms can figure this out. The case is scored, it is sent out to a revenue officer group.  When it gets into a revenue officer group, it goes into what’s called a queue, like a holding file.  So, as revenue officers need cases because their inventory is limited to a certain number of cases that didn’t work, as they need cases the group manager would pull the case out of the queue and assign it to the revenue officer to work.  That’s basically how the cases are assigned from the very beginning where the return is filed all the way where it gets out to the revenue officer.   The permutations in-between, you know, different things can happen, but generally, that’s the way it works.   Kelly:   So, you said they are scored, give me some ideas on the algorithm, if you will, some of the calculus that goes into that? Does it get a high score if there are assets to be recovered and it’s more likely to recover those things   and then those get elevated and accelerated and get the attention and then if it gets  a low score, does it go down the path of, currently not collectible, that kind of thing, is that how that works? David:    Yeah.   But say for example we have an individual that earns $200,000 a year in W-2 income or even 1099 income, the IRS knows about that.  Say, for example, they have mortgage interest on their tax returns, the IRS knows about that.  So, based on what’s on the tax return and other data that the IRS will pull they will look at that type of data and generate a score.  Probably, in this case, a high score because there is a source of income and they have assets.  So, conversely, if you have an individual that, let’s say they make, I don’t know, $30,000 a year, and that’s all they got, they file a 1040EZ, they may owe tax, they may have accumulated tax over a number of years, but if you are choosing between who you are going to go after to collect, you go after the individual that’s making $200,000 a year versus the one making $30,000.  There are instances where they can never get to the person that is making $30,000 a year and they may owe, let’s say they owe $100,000 that has accumulated over a number of years, that case will just simply sit in the general IRS, queue and the statue will continue to run and when the 10 year statute is over the tax is wiped out.  So, there is millions of dollars that are written off every year because the IRS simply can’t get to the case, it’s not scored high enough and they don’t have the resources to get to it. Kelly:    Yeah.  Now, in that $30,000 income situation, the IRS would most likely file a lien just in case there were some assets that appeared that they could then sort of collect from that.  Is that a fair statement? David:     Yeah, generally, I think it is a pretty safe statement. Filing the tax lien is automatically generated by the computer system.  The threshold for filing a tax lien is like $10,000, even you have instances, and I have seen them, where the tax lien is filed but then nothing else happens, there is no further collection action.  There is no levies, there is no other notices but the tax lien sits there.   But, notice that several tax liens collect millions and millions of dollars every year without the IRS doing anything, just file the tax lien and then, you know, a few years later after it’s filed, the taxpayer goes and sells a piece of real estate and, boom, that tax lien is there and the sale isn’t going to go through once that tax lien is dealt with. Kelly:     Dude, Is there a statute of limitation on that lien? David:     No, it’s 10 years, ten years to the date of assessment.          Kelly:      Yeah, right.   Because it appears, as you have seen on TV, a lot of these companies are out there Optima Tax and there are others out there that are really aggressively pursuing this tax resolution business.  I assume that they are targeting these tax liens that are on file.  That’s about the only public record of a federal tax lien, correct? David:      Yes, from what I understand, there are other companies out there that would generate lists you can get of people that have tax lien filed against them that they can break it down by counties, cities, state, you know, and they can break it down by dollar amounts and then these companies buy these lists and then do their marketing to them, you know, direct mailing, postcards, letters, things like that.  How effective that is? I don’t know if it’s that effective or not. We have had clients come in and say, yeah, I got all these letters from all these different tax resolution companies, how did they get my name?  And I said, well, the tax lien filed against you, that’s how they get it.                                                                                                                           

IRS Revenue Hunter: Where is the Easy/Hard Hunting Grounds? (PART 2)

   Date:   June 1, 2019            Attendee and Guest:   Kelly Coughlin, CEO, EveryDay CPA -                                           David Ronquillo - PART 1 Greetings, this is Kelly Coughlin, CPA, and CEO of EveryDay CPA providing tax accounting and revenue solutions to individuals and businesses throughout the U.S. In today’s podcast I am going to interview a former grizzly bear.  Yep!  In a former life, for 30 years, he was a grizzly bear who took the shape of an IRS Officer, seizing assets and pursuing DOJ tax lien foreclosures.  If you have done business with this man, that is, if you poked this bear you probably were having a bad day.  He has proved positive to my mantra that the IRS can be either a black bear or a grizzly bear, but regardless, a bear.  And do you know how to tell the difference between the two?  If you climb a tree to escape the black bear climbs up the tree to eat you.  The grizzly bear simply rips the tree out by the roots and eats you.  Regardless, don’t poke the bear.  David Ronquillo, did I say that name correct David? David:   Yeah, Ronquillo. David Ronquillo began his career as a revenue officer in 1980 in Seattle.  He has held positions as Field Collection Group Manager and Senior Collection Policy Analyst.  Currently, he is helping tax professionals increase their knowledge and skills representing clients who are dealing with the IRS Collection operations.  David, I want to welcome you to the EveryDay CPA Podcast and want to first ask you, in your past work, did you prefer climbing the tree or ripping the tree out by the roots? David:     Well, Kelly, I have never had it described that way as that grizzly bear but it’s certainly a lot easier to just simply rip the tree out by its roots because you will bring down the taxpayer out of the tree to do what you need to do. Kelly:    Well done, alright.  So, you prefer the rip the tree out method? David:   Yes, it’s always more effective.  We try to be effective when we are with the IRS. Kelly:     So, is it fair to say, David, that you have done your fair share of ripping the tree out? David:     Very much so because the Austin district was one of the top districts in the country that did seizures and my group happened to do a lot of them.  So, that’s what we were focused on, it was the enforcement and the collections.  So, yeah, there is a lot of trees that I ripped out.     Kelly:    Great!  Alright, let me just ask a handful of questions here David and if you want to go a certain direction, feel free. But I am going to ask some questions that I think are kind of practical real-life issues that taxpayers that have poked the bear, I suppose, that they have to deal with.  Let’s talk about LLCs, for instance, does running your business revenues and expenses through a single-member LLC offer the taxpayer, that single member, any protection from IRS collection? David:    Not really, not to any great degree.  The IRS, they have various procedures for dealing with LLCs and I would always recommend to a tax practitioner, if his client is an LLC, to read the internal revenue manual procedures.  There are a number of pages to it as to how revenue officers should be dealing with the LLC. The single member, it depends on what type of tax that is owed.  Generally, what the IRS sees is that the LLC will have employees and they will run up employment tax.  Back in January of 2009 the IRS council came out with an opinion that effective after January 1, 2009, the trust fund recovery penalty would be used against the single member, against the individual to collect the trust fund portion of the employment tax.  Prior to that the IRS just said that the individual and the LLC were one and the same, whereby, the individual would have to pay the full amount of the employment tax, both the trust fund and the non-trust fund.   Kelly:  Well, that kind of applies to seed corps too, it Is that the executive team, maybe not shareholders but board members, for employment tax they look through to everybody for that, correct? David:    Exactly.  With the seed corporations, they look at the individuals that are responsible for making sure that the employment tax was paid and then who basically did nothing to see that it was paid. On the trust fund recovery penalty there is two standards the IRS has to meet.  One is responsibility and the second is called willfulness. So with the individual responsible for ensuring that the employment tax was paid, and if they weren’t then were they willful?  Did they know about the tax and what did they do or not do to ensure that the tax was paid?  And when you look at a business entity, corporation or an LLC, the IRS is to look to all the individuals that may have had a place in dealing with the employment tax.  So, it doesn’t necessarily have to be a corporate officer, it could be somebody that they just hired, the chief accountant, for example, who is responsible for making payments, paying the employment tax, making the FCDs. They could go after that individual.  I like to use an example in my teaching, it is that if you had two corporate officers, a president, and a vice president, it was a construction company, and one of them spent nearly 100 percent of their time in the field, you know, managing construction projects, even though they may be an officer, if they were not aware of the employment tax or they really had no control over the funds they would not be held liable for the trust fund recovery penalty.    Kelly:    Okay.  Well, the whole topic of employment tax is one of almost a subject of a separate podcast which we could focus on but if we continue on that, let’s say that you have outsourced.  With many small businesses, they outsource to, say, I’ll mention some names, QuickBooks, being the top one, and then Gusto, and a couple of these other ones that are in the payroll tax area, if you have outsourced it to them, how deep do you have to get in to first make processes to get assurance that, let’s just pick on QuickBooks for instance, Turbo Tax or Intuit, I should say, that they actually have made the distributions and payments of employment tax or once we outsource that, is it kind of not in the employer’s risk category at this point? David:     The Corporation or the individuals running the corporation, they cannot outsource the responsibility for making sure the employment tax is paid.  What the IRS would expect them to do is that if the FCD is due on a Wednesday that the officers, whoever is responsible for ensuring the employment tax to be paid, would check their bank statements or get some verification from, QuickBooks for example, that in fact the FCD was made.  And if it’s not made then the expectation is that individual would take some action to contact, QuickBooks, in this example, to find out, well, why didn’t they get paid, you know.  If the company had money in the bank account, well, why wasn’t it paid? So, they can’t outsource their responsibility. Kelly:    Alright, so they should go through one additional kind of review monitoring to make sure that (a) the funds came out of the account, which they most likely did. The question is, where did those funds go, and maybe check online to see if the FCD got paid and if there is any balance too; maybe not every time but maybe the first couple times, every disbursement, but then maybe quarterly. You develop some procedures around that activity.  Is that a fair statement? David:    Exactly right.  Have some procedures developed to verify that if somebody else is making your FCDs, that in fact they are being made.  Kelly:     Okay, so that’s enough on payroll.  But, my initial question was really not on employee tax, it was more about income tax, due.  Because your question was, well, it depends on the type, whether it be LLC, it does appear true.  So, we agree that there really is no protection for anybody on the payroll tax thing.  But on the income tax side, LLC versus not LLC, is there any protection in asset recovery, when you were in that business, if the business activity and the tax liability created was created by an LLC, single-member LLC, versus just a schedule C - sole proprietor?    David:    On an income tax situation where the individual owes this 1040 tax, well, the LLC is considered a separate entity from the individual so any assets owned by the LLC are protected from any type of enforcement action by the IRS. What the individual has is an interest in that LLC, that’s what he owns, so what the IRS would have to look at is, what is the individual’s personal assets?   So, for example, the residence, vehicles, bank accounts - personal, not LLC, but personal, okay? To get at the LLC, they would have to go after his member interest in that LLC, and that’s for income tax.  Kelly:     Right, so if there is no financial assets in that LLC, let’s say there is $10,000 tax due, there is no financial assets in there, there is only property, plant and equipment or let’s just say equipment, but the sole member has $100,000 in cash, can they seek recovery from that $100,000 in cash? David:     If the $100,000 in cash is in the LLC’s bank account… Kelly:      No, it’s in the individual. David:     Yeah, they can go after that.  Yeah, if it’s in their personal account, yes, the IRS can go after that, LLC regardless, they can go after that, the individual’s personal bank account. You’ve got a bank account, a Bank of America, where he writes checks to pay the mortgage and pay for groceries, yeah, the IRS can go after that. Kelly:    What about if it’s a dual member or more than one member LLC? David:    Then here that gets a little bit more tricky and, quite frankly, I would have to go back and read the rules on that.   Kelly:    Okay. David:   It’s almost, you know, they would be filing a 1065, a partnership, and with a partnership, the general partners are equally liable for the debt of the partnership.   But going the other way, the partnership is not liable for the debts of the individual if they owe 1040 tax.  I would have to go back and look at the IRM on that. Kelly:   Okay, but you are saying when you would seek recovery from assets it really didn’t make any difference whether that was an LLC or a single-member LLC or not.  You would order the owner of those assets, regardless, is that what you are saying? David:    Exactly, exactly.  There are ways that the IRS can, you know, if there are the indicators of not everything is being run above board, the IRS can go after the LLC or go after the individual, okay?.   

IRS Revenue Hunter: Where is the Easy/Hard Hunting Grounds? (PART 1)

My name is Kelly Coughlin. I am a CPA and the CEO of EveryDayCPA. And I am a failure. I am a successful accountant…but I am a failure entrepreneur. Today, I could talk to you about my career working for BIG companies…a BIG accounting firm, PWC; a BIG investment firm, Merrill Lynch, and a BIG bank, Lloyds Bank. I’ve had a happy and successful career in Seattle, Minneapolis, New York and London. Or I could talk to you about what we do at EVERYDAYCPA…with our STAR services…I could show you how we use Sun Tzu and Michael Porter from Harvard business school in our business strategy work. And I can show you how we can get the federal and state government to pay about 30% of your costs to start a business. And if you have past tax liabilities and we can get it reduced by over 50%. Or I could show you how we use ACCOUNTING debits and credits as weapons of MASS DESTRUCTION of your competition. And RISK, I could show you how to minimize the risk of contingent loss and risk of audit…I could do all that…But I’m not going to do any of that. What I AM going to do is talk about why I am a failure…or rather why I WAS a failure….in the entrepreneur space. About 15 years ago, I started down the path towards SMALL business startup…how hard could that be…I was educated (CPA and MBA)…I had great BIG company experience. I had some capital. I couldn’t help but succeed. RIGHT? Wrong!!. It was a path to FAILURE!! Eventually, I succeeded. I love the quote from a very successful venture capital guy in Silicon Valley. ”Fail often, so you can succeed sooner.” In 2013, I sold a financial technology company I started in Minneapolis. The financial cost, risk, and rewards were big; but the non-financial costs were even greater and unfortunately VERY difficult to recover. I AM going to talk about why the enormous price that is paid in startups…not financial…but intangible…unhappy shareholders during the failing years…nervous vendors and bankers during lean cash flow quarters…and then the personal stuff…the day to day stuff that causes failed marriages,...poor relationships with children…and unhealthy diet and exercise. These are the true costs. It is helping entrepreneur wann-abe s mitigate these costs that is my sweet spot passion today. It is what I call TNT: Tactics, Need Timing. Based on my experience as a FAILURE, getting TNT right…or wrong…will determine what the true cost will be. Is the cost limited to financial investments and opportunity cost, that is the cost of not doing something else, while you are pursuing this new idea or dream? Or Is the cost fully burdened with the carnage from failed relationships with vendors, spouses, and children coupled with bad health and diet? Tactics Need Timing. What TACTICS will you utilize to implement your plan? How will you incubate your business? Will you outsource to start it or will you do it yourself? Are you going to quit your job or work at night and weekends? Are you going to use your own money or try to get other peoples’ money? NEED assessment is important. Does your market NEED your products or service versus your competitors. Who are your competitors…who are your substitutes? And if you say you don’t have any competitors, you definitely need help. People have millions of places they can spend their money. So, in a sense every product and service on the planet earth is your competition. I referenced Michael Porter earlier. Every business owner and frankly anybody involved in the revenue side of an enterprise should understand Porter’s Five Force Analysis on their business. Porter’s Five Forces are Rivals, Substitutes, Suppliers, Buyers, and New Entrants. These are the five forces that need to be understood before launching a business. And that leads to last one, TIMING. It’s the one most easily controlled and fortunately most important. In 1812 Napoleon had his million-man Grand Armee ready to take on the Russians. Napoleon was a brilliant military strategist…but he made a critical tactical mistake that cost him about 600,000 men’s lives and ultimately some historians say, cost him the war. His TIMING was bad. He launched his march on Moscow way too close to the winter season in Russia and ridiculously cold weather completely harmed his ability to win. Bad timing. In the startup world, it translates into, for example, maybe if your wife is due in six months, don’t leave your job yet to start the deal. Rather, outsource some things and work the deal at night. Tactics Need Timing (TNT) doesn’t NECESSARILY determine whether your path is one of failure or success. Rather, TNT determines how rough the road is…how many people did you hit and hurt along the way…and how happy and healthy you are during the journey and how happy and healthy you are when you finish and arrive. So, today we certainly help all small business owners with STAR services…strategy, tax, accounting and risk management. We have found that many small business owners simply don’t have the financial resources to pay for CFOs, CPAs, and marketing experts…they are expensive…I know this…I sold these expert services while at PWC….and I BOUGHT those services at Lloyds Bank. But WHAT I PERSONALLY REALLY LOVE TO DO is help the entrepreneur family,  with a startup idea they want to monetize; or the entrepreneur who simply wants to STOP working for THE MAN; or the entrepreneur who is retiring and wants to stay in the game, in part frankly because he knows he knows the stats…it is more likely he will die within 24 months if he gets out of the game. Some of you know, I like to box and I like to run 5ks and 10ks. And my performance has waned over the past ten years in these areas. But fortunately, there are a few things that ONLY gets better with age, experience and wisdom. And this is one of them. The clarity that TACTICS NEED TIMING must be considered before launching a business…and getting this right, will determine not only what the easily recoverable financial cost will be…but more importantly, it will determine the personal and relationship cost that no business transaction will ever recover. Thank you for your time.

ENTREPRENEURS: TNT Can Keep Your Family from Exploding!

Hello this is Kelly Coughlin, I’m the CEO and a CPA with EVERYDAYCPA. We work with small business owners on strategy, tax, accounting, and risk management throughout the US. I personally like to work with soon-to-be or wanna-be new business owners. So, I am always on the lookout for innovative and cost-effective solutions to help business owners create, launch and manage a new business…and increase the likelihood of success. And that lead me my guest today, RYAN ASHE, the founder and creator of BIZBOOSTIO. Ryan are you there? Ryan how are you today? Ryan, I sent you an email when I heard about your group and said I would like to interview you and ask you five questions on your vision for BIZBOOSTIO. I gave you in advance the categories…but I did not pull CNN debate moderator trick and give you the questions in advance. Is that correct? Yes… So Ryan, since you are the brains and the idea guy behind BIZBOOSTIO. My first question is: KELLY: WHAT Any new business or new business idea, has to be filling a need or void in the market. Let me just ask it simply, WHAT is the need or void is BIZBOOSTIO filling. That's a great question Kelly. I could not agree with you more that any new business entity that is just starting up needs to fill a void - or in this case a need. A need that I don't feel is being addressed. For instance, in high school you weren't given a class to teach you the basics of personal finance well the same is true for small businesses and start-ups. In this great economy that we are having, there are more small businesses opening than ever before BUT how many of them have the business knowledge or networking connections to maximize their chance of success? That's where we AS A COMMUNITY…step in. We AS A COMMUNITY want to offer the know-how, knowledge, and experience they aren't finding other places…COST EFFECTIVELY. We want to offer this through our community of other business owners and expert advisors. Unlike other groups that focus on small businesses, we want to focus on the business itself and not totally what nonsense is happening in D.C. We are there for the business owners all the way not just when we want more MEMBERSHIP money from them.  KELLY: Is there any company or organization that’s doing this now? Or something similar the groups of business organizations that come to mind are ·        NFIB, ROTARY and LINKEDIN ·        Are these organization in your space, if no why not…if yes, why are you better ·        Lets start with ROTARY ·        NFIB ·        LINKEDIN RYAN: Let's take that one at a time because they may have SOME overlap they are very different in their approach and I would like to point those differences out. A.  Let's start Rotary I think that Rotary does a good job on a LOCAL community level but that is really the extent of it in practical terms. The simple truth is we don't live in the pre-digital world anymore. The world is now flat and we don't have to look at it like Pandora's box has been opened - on the contrary, it is a GREAT opportunity. For example, if you are opening a restaurant for example in Columbia, MO in the Rotary model  you can talk to other local businesses and that's great but how great would it be to be connected to other restaurants owners across the country to be able to innovate and share experience of what has proven to work and what has proven not to work - Your business will greatly be enhanced and you can provide your customer with a vastly better experience. This is true for not just the services but for ALL start-ups and small businesses. B. As for NFIB, they are really large but with an organization, their size and age comes bloat. We at BizBoostio want to stay lean and strong for the business owners and not have a top-heavy structure filled with fat cats eating up the money that should be used to benefit the members. Also, 80-90 of their focus is on legislation and although I will say they have supported good bills throughout the year they pay little to no attention to the business owner COMMUNITY. The most common thing I hear from former members of NFIB is "I only see them when they want more money". I also don't like the outdated high-pressure sales approach they use they have used the same script for over 50 years completely unchanged in a door to door model that is completely outdated and completely misses the modern digital business market completely. C. Linkedin is great in some ways but what it lacks in my eyes is the dedicated community of business owners not being constantly shilled to and having their data sold without their knowledge for profit. Linkedin started as a place to get a job…and has tried morph into a networking deal…but they really don’t want people connecting on the planet earth…they want to connecting virtually….we think nothing replaces human connection. Bizboostio is not primarily a digital marketplace but a vibrant, dedicated COMMUNITY who's sole purpose is to grow and educate business owners. We are kind of the synthesis of NFIB, Rotary, and Linkedin…with a little bit of social meetups and Facebook thrown in…we are taking out the bad elements from all those and leaving the good but adding some great things. KELLY: You mention Facebook…I want to talk a few minutes about FACEBOOK…a lot of business people are disgusted by the noise from the Facebook audience…and the bias and shadow banning going on by FACEBOOK content managers…Is there are an online social media component to this? Do you see this being a replacement to FACEBOOK for business owners? RYAN: That's exactly what it is. Facebook is so out of touch and bloated that it offers very little to help a budding business or any business for that matter. AND you don't want to get me started on the data-stealing issues they have going on at Facebook. Plus who needs all the scammers and trolls that fill the Facebook platform. It's a true shadow of its former self. KELLY: How will people use this…how do they CONNECT with other people. You say a business owner will be able to get help from other business owners…how do they actually go about that RYAN: They begin by listening to our podcast. Then they simply go to www.bizboostio.com where we have additional information. They simply sign up and then we integrate them into the bizbootio culture and give them the networking tools to connect with other business owners and BAM you are on your way to success. As we are still expanding out we are giving early adopter rates and will offer them exclusive specials in the future as we roll out more features. KELLY: My next question has to do with money…I know you are doing these podcasts and these are free, correct? What’s the revenue model for you and BIZBOOSTIO? 5. We expect to charge a reasonable monthly fee of $40 to $50 bucks to access the community. Although I don't see it as a "monetization" model but an instrument to improve the lives of as many small businesses as we can. Because unlike some of those other organizations I spoke about a few moments ago we realize it's not just about numbers on a balance sheet. It's about mothers and fathers, Sons and daughters - family, and at Bizboostio we want to help make your business life succeed because we know when it succeeds your family succeeds and when families succeeds America succeeds. KELLY: Well Ryan that’s sounds interesting…for me personally and professionally, if BIZBOOSTIO could be a noise free, troll free, shadow ban free version of FACEBOOK for business owners that would be great…and I personally thinking charging a membership fee is a start to doing that…free attracts everyboday and I would not be interested in this if it this included EVERYBOY. So, how do people find you…are taking members now…how can they join.

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