Tag Archives: Accounting

My Achilles’ Heel

I think I have found that spot in my professional life that I can’t do well or have yet to develop the skills to manage well. Maybe because it is less professional and more personal. Consequently, it is a good thing I have run out of near relatives so I can avoid this particular pitfall in the future. My sore spot is tax issues relevant to an estate and noncollectable debt.

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Now, I must tell you that I have handled the accounting side of several estates, and I did just fine, in some cases exceeding expectations. Way back in the away-time when I was first starting out as a bookkeeper/accountant, I was called on to handle two very sensitive estates. In one case my employer’s son died from a brain tumor. He asked me one afternoon if I would meet him at his son’s office the following weekend and help him with a few things. The day went by in companionable silence and we worked through the files sorting out what had to be paid and arranged information for attorneys and accountants who would close out the estate. I was very close to the family and I genuinely felt the loss. At the end of the day he thanked me. He told me that he knew I had probably figured out that it was not my help he needed so much as he needed the company. He let me know how much he appreciated the professionalism, the help, and the quiet support.

Not too long afterword (memory fails on these dates), my employer was diagnosed with Lew Gehrig’s Disease. His prognosis was not optimistic. I was one of three people that knew that his focus had changed from building and maintaining, to preserving and estate planning. For six months he, his son-in-law, and myself, worked diligently with legal and accounting professionals to work out the best way to preserve his estate for the future. I remember vividly when I took his last tax return to his house to gather his and his wife’s signatures that he looked me directly in the eye and asked me if that was all. I replied that to the best of my knowledge, yes. Within 24 hours he was in the hospital in a coma and we lost him soon after. Again, I spent a quiet afternoon going through a desk and personal files to help the family organize and respond.

I have been involved in other estates. Remainders of pieces of family that were close to people I cared about. Always, I felt the greatest gift I could give was my background and the willingness to find things out, to help make decisions, to make sure nothing fell through the cracks.

Then, I became a primary. Dealing with my husband’s, and now my mother’s estate I have discovered I have zero tolerance when it comes to incompetence. Actually, regardless of the situation I am not overly patient with sloppy work when it comes to other people’s money. I’m lucky, truly. With my husband I did hire an estate attorney to give me the lay of the land so that I knew what was needed and expected. I could then figure out how to handle any outstanding issues knowing I had backup if needed. And still, I found myself wanting to climb through the phone and strangle many of the people I had to deal with. Now, my mum. This time I had a professional I could speak with that is working on a file for a friend/client of mine. I offered to pay, but no, this was one commiserating accountant to another. I shall treasure that conversation for a very long time.

So, what is the issue that so bothers me? When a person dies and there is nothing in their estate to cover debt (such as credit cards when they are the primary debtor) the debt is usually written off. Now, companies to which such money is owed can take their sweet time making sure that there were not large sums of money hidden under grandma’s mattress, or that there isn’t some other asset tucked away to which the estate has a financial claim. But, in the end, the debt is declared noncollectable.

At some point, whenever “they” get around to it, the company might then issue something called a 1099-C, Cancellation of Debt. These things are evil incarnate. First of all, conservative estimates indicate that nearly 70% of them have some type of error. These errors can include such things as using the wrong taxpayer ID (or none), not reporting the interest portion of the debt, using the wrong date for the “identifiable event,” and several other bits of information. Now, cancellation of debt is a taxable event. There are limitations, such as interest that would have been deductible on a business return but was not taken.

The point is, there is a form out there in the IRS databanks assigning some value as income to a taxpayer. If you have access to accounting help (not a drive by shop), you will get assistance on how to address the reported income from your side, or to follow up on a corrected form. If, for instance, you went bankrupt, that date of event can be critical in answering the question of whether taxes are due or not. Let’s say you have recovered financially, and the date is set after the date of bankruptcy. That balance is now taxable unless you can get the financial institution to change the date to the date of insolvency. Anybody have a headache yet?

As mentioned above, I have zero tolerance for incompetency in some areas. I have to think about the number of people out there who do not have access to the things I do, who get these documents and have no clue of what to do with them and end up paying someone something when they don’t owe it. Sometimes at great personal sacrifice. And I really don’t like having to work double time to fix someone else’s lack of focus (lack of knowledge is okay, uncaring incompetence not so much).  I get that we do not want people of means to declare financial ruin and skip fancy free from using other people’s money to support a life style. The problem is that the “fix” does far more damage to those who can least afford a viable and legal defense.

I just have to say that I am blessed with people who bring me back from melt down and offer solid advice. If you know someone who is dealing with an estate that is insolvent with not enough assets to cover the debt, it will help if you find an accountant to walk you through. Some senior centers have access to professionals willing to donate time or provide advice at lower rates. Remember always that you have the right to use reasonable resources to care for last expenses such as burial and legal and accounting services (unless of course it is the final Social Security check). Just don’t panic, find someone who has been there to help you walk through it. I shall go try to take my own advice and be thankful that all the folks left in my life are people that can depend on me to be more level headed.

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When the forecasts talk back.

Few professions seem to be more devoid of all imagination than accounting. The general assumption is that the day to day grind of processing numbers, finding “bottom lines” and figuring out what someone thought they were doing is, well, beyond boring. Accounting, to some folks, ranks somewhere in the neighborhood of watching paint dry. By extension such folks assume that the people whdragono perform these tasks are unimaginative creatures, condemned to watching spreadsheets grow and morph. Well, it isn’t quite that way. At least not for all of us. You see, I’m an accountant and I should know.

Actually, I’m a special kind of accountant, one that spends at least part of her time looking into the fogs of the future and making “educated guesses” on what might happen. This is really pretty important. People spend money on what they think will happen, not on what happened yesterday. Don’t believe me? Give someone a few thousand dollars. Are they going to remember they were broke yesterday and couldn’t find enough to eat? Not very often! So, “looking into the future” becomes a discipline, a way of saying, what might happen. And that is where the possibilities begin.

I will admit that most forecasts, budgets and predictions are just another set of numbers manipulated based on historical information and pushed forward with (ahem) reasonable expectations. But every now and then the practiced forecaster can catch a bit of something special. Something just over the horizon if only. One night, I had a helper.

It was a typical night. Well, a typical nearing midnight, eyes sagging, falling asleep kind of night when I first glimpsed my own tiny dragon. The project I was working on was creative, did require some knowledge of the arts, and also required some background on what makes people want to contribute to a project for the pure pleasure of it; not because it has some promised return. That is not particularly easy.

After writing pages and pages of answers to questions on a tax form, my eyes became quite droopy. The words were blurring and I was positive I had said the same things already, probably had knowing tax forms as I do. Did I miss a question? How can I make this sound like, well, it has meaning and should be supported? “You need a little spark there.” What?

“Yes, just there. It sounds like you’re selling shoes, not music.” I’m talking to myself now? “No, you silly woman, you are not talking to yourself, I’m trying to help you here!” I’m only drinking tea, who is talking to me? “Right here, right on your monitor stand, your own special dragon. I can see what is on the screen and you sound more boring than a tax auditor. You have to pep this up.” I am tired, I had better shut this whole mess down.

Suddenly, a tiny spark flew into the air and there was a faint odor of wood smoke. And I saw him. A tiny blue and green dragon posing near my monitor and pointing with his front paw at a particularly long and dense passage. Well, he was right. It was horrible. Even if no one ever read it, it was horrible. I sighed.

“So what would you suggest, Mr. Oh-so-smart?”

“Go back to the reason you took this thing on to begin with.” (Delivered with tiny puffs of smoke.) “Tell these people, if anyone ever reads this, that this is the most important idea in the whole county. That bringing the passion of Baroque and Classical music to a rural resort in the middle of nowhere is a spark of inspiration, an opportunity that few if any of these people would ever enjoy without this particular program. Tell these people that in a world full of ugly news and terrifying tragedies, that you can still celebrate the beauty that humanity can create. And you can do it in a secluded, mountain valley during a weekend retreat with world class artists and terrific food.”

Well, even if no one ever reads this stuff, I think I’d like to go.

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Time Warps and Other Voyages of the Mind

Courtesy of WANA Commons: Grufnik

Courtesy of WANA Commons: Grufnik

Perhaps those of you who follow me on some fairly regular basis have noticed that postings are a bit erratic of late.  There is a reason for that.  I am what is known as an accountant.

Sounds boring, I know.  However of all the professions in the world we may have the most immediate experience of time warp.  We travel in time every day.  Let me explain.

During the last portion of any year, say from around July or August to around November (or December-January if things aren’t going exactly right) we are working on things called budgets.  That is where we look in a crystal ball, tally up some history, and attempt to predict with reasonable accuracy what should be expected of the next operational year.  We often have a lot of help.  Sometimes this exercise is for a business; sometimes it is for a piece of real estate.  It is always an exercise that requires a little science, a little logic, some number artistry, and a hope and a prayer.  Keep in mind the whole time this is going on our mind is in the next year; not the days and months the rest of the world is living in.

Once we manage to navigate that exercise we get to start the “look back” part of our lives.  Suddenly instead of looking ahead a year, we must turn about and look at the year just past (without suffering whiplash).  This means we have to review the prior year, tally up all of the relevant information, prepare financial statements for all those people who wanted them on January 1 of the current year, and still try to function in something resembling “current time.”  I have been known to date my checks not just a year behind but two (such as 2012 rather than 2014) because my head is still in reverse.  Or is that reverse of reverse? This exercise generally takes until April or May (perhaps a bit longer) of each year.

Ah, you say, so there is a month or two when you live in the present!  Actually, no.  While all of this “What year is it anyway?” is going on we are completely afloat regarding what month it is.  You see, during the first part of any month we are working on financial stuff for the past month and during the end of the month we are working on stuff for the next month and I’m not at all certain that there is anything relevant to the current month except, perhaps, money in the immediate process of coming and going.  A process that demands you actually look at a calendar so that you date such coming and going appropriately.  Deep breath.

In any case, pardon me if I am a bit lax in my musings just now.  I will try to communicate with the world as-it-is from time to time.  Meanwhile, 2013 is calling.

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