EverydayCPA Show | Business Owners | Self-Employed | Households | Tax | Budgeting | Savings

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.

Date:      August 9, 2019

Attendee and Guest:   Kelly Coughlin, CEO, EveryDay CPA – Kirk Chisholm, President – Innovative Wealth &                                                                     InnovativeAdvisory Group  

Good morning everybody, this is Kelly Coughlin, CEO and CPA of EveryDay CPA, providing star services of strategy, tax, accounting and risk management services to businesses and business owners.

 Today I am going to interview the CEO of a very interesting wealth management firm.  He specializes in two primary areas, using alternative investments like real estate to complement a traditional portfolio of stocks, bonds, and cash, and the second is creating a traditional portfolio of stocks, bonds, and cash, but complementing that portfolio with what we call inverse correlated assets.  An inverse correlation, also known as negative correlation, is a contrary relationship between two variables, so they move in opposite directions.  Or, to put it simply, when one bucket of assets goes up in value the other doesn’t go up or doesn’t go down.  And when taken in combination, they together produce a good and reasonable rate of return. The popularity of this type of strategy has been growing substantially in the past four or five years and used by institutional investors for many, many years.  But on T.V. you could see ads like crash proof retirement, which at their core simply used insurance annuities to offload the risk to insurance companies.  But then you will also see guys like Ken Fisher saying, Never ever hold an annuity.   It’s no wonder the people are confused, but in steps, my guess today, Kirk Chisholm, President of Innovative Wealth and Innovative Advisory Group.  Kirk, how are you today?

 Kirk:     I am doing great Kelly.    I am doing awesome on this wonderful Sunday morning.

 Kelly:   Great.  And we already discussed, your kids are going to the water park?

 Kirk:     Yes, yeah.

 Kelly:   I have been to Kirk’s swimming club in the Boston area and - he has to pay a membership for that, and now his kids want to go out and spend another 50 bucks today, right?

 Kirk:     Fifty bucks, Kelly, you don’t live in the Boston area, do you?  That would be nice if it was only 50.  The cost of happy three kids.

 Kelly:   Kirk has a lovely wife that I have met, and I am sure there is, “Can’t we just go to the club, and it is right around the street”, and you lose that argument, right?

 Kirk:     Yeah, every single time.

 Kelly:   Great. Well, I have known Kirk for many years, folks, and his firm.  And in fact, we have liked each other so much we decided to start working together.  You might ask, why would an accounting firm do work with a wealth management firm?  Sometimes people pit the two as arch enemies.  Well, Kirk and I certainly are not.  But here is how it fits into my company, EveryDay CPA, we do four primary things here, we call it our Star services, S T A R, Strategy, namely business strategy, Tax, Accounting and Risk Management.  And this work with Kirk and Innovate Wealth is the key element of the R component, the risk component of the STAR system.  And the reason I am doing this podcast now, today, at this moment is because it is especially important.  There are two things going on. Number one, we are at some point in the continuum of the Trump Rally and two, we have a presidential election coming up next year.

First, the Trump Rally.  The market is up about 37% since Trump’s election.  Now, note that at this point in Obama’s presidency, that is, at this point in the number of days of his presidency the market was up 52%.  And ultimately, by the time he was out of office the market was up 147%.  Now, we all know the reason those numbers are so high for Obama.  By the time Bush, number two left office the market had lost 26%.  So, he was at the very bottom of the market trough that he was able to creep or wade out of.  And of course, Bush suffered such poor performance because 911 occurred shortly after his election, we had wars in Afghanistan and Iraq. So, anytime you have significant increases in the market, you also have an increased perception of risk that the market would give back some of those increases. So, today, up 37%, some of the fears justified, some of it is manufactured by annuity and insurance salespeople trying to use fear as a motivator to sell insurance products. These are the ads you see on T.V. and Kirk and I, he doesn’t know this yet, but we are going to have another podcast in a couple of weeks where we are going to talk about these Crash Proof Retirement Solutions.  Because I will go on record right now, that will be the next shoe to drop in the investment world.  All of this nonsense that has been peddled on Crash Proof, using annuities etcetera, shoe is going to drop.

 And the second factor that’s occurring here is the presidential election. There is no doubt in my mind that business owners, across the board, are fearful and nervous that if the Trump culture of reduced regulation, reduced taxes, pro-business mission and vision for America came to a screeching halt, during election, that nervousness and perception of risk would increase dramatically by business owners.  And nervousness means business slowdown in capital investments, slowdown in new hires, slowdown in new product innovation, and this means decline in markets.  Because the market is always about three-quarters forward-looking.  Now, would this perception of increased risk in the change in leadership at the White House be justified or not?  It’s a whole lot of questions, I personally think it is because I don’t see any of Trump's competitors being pro-business.   In fact, I see nothing but anti-business sentiment.  So, Kirk, that’s the background into which I am going to launch our discussion today.  Kirk Chisholm, President of Innovative Wealth Management and Innovative Advisory Group, I gave you a lot to think about in that intro, and here is where I would like to start out.

 You have been doing this risk-managed portfolio stuff for many, many years, why does your strategy work?  Does it work, and what does the portfolio look like when it does work?  What does it look like when it shines, that is, when the general markets are declining?

 Kirk:       Yeah, I mean, those are some great questions, Kelly, and I want to start by putting a little background for my history because I think that will be helpful.  So, when I started in the industry back in ’99, December of ‘99, which of course, was probably the worst time to start, right?  When you get off two decades of a bull market and then just started going through recession right away, so I learned risk management really quickly.   You know, when I everyone else was thinking the market was going to keep going up and I didn’t have that because I started with pretty much the market going down.  So, I learned real quick on how to manage money and how to manage risk in that kind of condition. For me, that’s why risk management has always been the top priority.  It is rule number one, don’t lose money, and I paraphrased Warren Buffet there.  So, we sailed through 2008 pretty easily, unscathed, because we had some understanding of what was going on, and since then we have built additional strategies to manage it even better.  One of the things that I think people in the industry get caught up on is, they come with a strategy and they feel like, this is it, I am going to do this and this is going to solve all my problems, it’s the best strategy I have ever seen, and it will never change.  The problem is, the market changes all the time. Every day, every second of the day it changes, and the more computerization that comes into the market the more rapidly that’s going to change.  So, if you don’t have the agility, if you don’t have the ability to change on a dime with your strategy then you are going to get run over.  I think this is one of the biggest challenges that we see, because when I got into the industry, you talked about, earlier, Kelly, with inverse correlation or negative correlation, one of the things I found was, initially, you could diversify properly and it would work, and generally speaking, you know, when the markets go up the diversified portfolio works as intended, typically. The market goes up about 66% of the time, when the market is going up diversified strategies work. In 2008, in that period, it stopped working.  It’s fascinating, because we did some research way back, to dig into this, and what we found was, if you look to 2008, almost every single asset class except for cash and gold, went down. When you study and say, how is that even possible?  So we did some digging and what we found was the net result was effectively that the institutions were causing a correlation, because all the big money was flooding into the market and making the same changes at the same time so it caused, effectively, this correlation of assets. So it became really challenging to create a diversified portfolio to reduce risks.  You used to be able to invest in things like timberland and manage futures and hedge funds.  That used to allow you to diversify properly and get inverse correlations.  The problem is because everyone was investing in the same thing it was no longer non-correlated, it became correlated.  Many people thought that they were diversifying and reducing the risk when essentially they weren’t.  And they didn’t realize it because they were just accepting this norm as given by just saying, oh, this is the way things always are, they will always be this way.   And it’s not, things change all the time, and if you are not assessing your assumptions, at any given time, then you are going to get run over in this market because things change so rapidly.  So, that’s kind of how I look at risk management.  That’s my background on it, why I look at things the way I do, which is a really important context, I think, of this conversation.

 Kelly:     I gave a talk in London about one year before the Madoff Hedge Fund nightmare.  I think that was in 2007, I was CEO of a financial technology investment firm.  And the title of my talk was Hedge Fund Needs TLC, Transparency, Liquidity, and Custody.  And I’m not bragging here, but - I guess I kind of am - that talk foreshadowed.  I predicted this, it foreshadowed the issue that was highlighted by Madoff, specifically, and Hedge Funds in general.  I think you would agree that Transparency, Liquidity and the issue with Custody were core and critical to the problems Madoff scandal highlighted.  Do you agree with that?

 Kirk:       Yeah, I do. You weren’t alone in your kind of assessment, I mean, our very own Perry Mecarpolis who was kind of one to find Bernie Madoff.  He wasn’t the only one, there were more, but no one listened because when times are going well no one wants to pay attention to that stuff. They are not worried about it, only when times get bad that people worry.  Well it’s too late, right?  You have to, like you did, like you talked about it before the problem, and that’s you need to have those kind of resources because when times go bad it’s too late, everyone else is running to the door and it’s a lot harder to get out.  

Kelly:     Yeah, this was at a Hedge Fund conference and it was like nobody wanted to talk to me at the cocktail hour after I said this.  It’s like, okay guys, I’m sorry, I didn’t want to ruin the punch bowl but transparency and liquidity and custody,  it’s just I  want to clarify so listeners know why those are critical, because it’s still true now, more than ever, investor on the transparency side. Investors need to see the underlying assets in the portfolio, and that’s why I don’t like annuities, you can’t see anything.  And then number two, investors need to be able to convert those assets that they do see for whatever reason, if they don’t like what they see, they need to be able to convert them to cash or another asset. That’s the liquidity portion.   That’s another reason why I don’t like annuities.  And then the third is custody.  Ultimately, if you see something and you don’t like it you want to be able to access it, and if you have got some custodian that is nonexistent like we had with Madoff where he was just fabricating third party custody, you are going to have a problem. The reason I put custody at the end is because I like the TLC thing but custody in my mind is kind of at the top of the list because you need to be able to see the assets at a qualified bank or broker, not in the file cabinet of some Hedge fund manager that’s acting as custody.  I am assuming you are going to agree with all that stuff.  I know you do because you operate your company with TLC.  Tell me, how would you score you and your portfolio strategy in the TLC paradigm there?

Kirk:       Yeah,  and you raise a great point, Kelly, because I think that each one of those components has an issue attributed to it, in the markets in general and some of that field that we can kind of touch on here.  But, you know, with my portfolio that’s exactly what we designed it around, transparency, liquidity.  Possessions we have, have to be liquid because if something happens and you need to get out, you need to get out right away.   Actually, it should be on custody first because that actually will start us off.  So, we don’t custody assets, we custody at one of the bigger custodians which is TD Ameritrade.   A firm like ours, we don’t want custody. I don’t want that liability.  I would rather find a top-notch firm that does it really, really well and use them, and for us, TD Ameritrade was that good fit. So, the transparency aspect goes along with that custody because we are not custody-ing it, the transparency is, our client can easily go to the custodian.  Like they get statements from the custodian, it doesn’t come from us.  You know, they can always go on their account and see their investments in any given time.  It’s totally transparent, there is nothing hidden whatsoever about it. The liquidity of our possessions is very important too. You look at 2008, for example, and actually, 2015 was another example of this.  So, in 2008 in certain markets there was a lack of liquidity.  In the institutional markets, there were a lot of these vehicles that were created where there was a lack of liquidity at the time when people needed it most.    So if I am managing a portfolio, for example, and let’s say I have 80% of my portfolio in the S&P 500, so a very liquid bunch of investments, let’s say 20% in some sort of an illiquid vehicle, some sort of an institutional vehicle, and I want to liquidate that but there is no liquidity all of a sudden I have to search down in my S & P shares because I need liquidity, I need to free up capital to either pay back investors or whatever it might be. So, instead of selling the thing that I want to sell, I’m selling things I don’t want to sell. But the problem is, it’s not just me, it’s the entire market doing the same thing.  So, if you want to know why the assets correlate, it’s because all these institutions own the same things.  So, look at 2015 as an example, we started to see this idea which I call contagion, which is, effectively, the oil prices started to plummet. Well, if you owned oil assets, you couldn’t sell them because, you know, no one wanted to buy them because they kept going down so in order to have liquidity in your portfolio you sold something that wasn’t oil.  You know, maybe it was Apple stock, maybe it was real estate, maybe it was, in some cases, oil companies.  The challenge is when everyone trying to do the same thing at the same time everything correlates and liquidity dries up.  Now, for us, when we manage money, I mean, we do a lot with alternatives but it’s a very separate part of what we do. The traditional portfolio, which is kind of really what we are talking about here today, the traditional portfolio is fully liquid.  We have set this up specifically for the fact that if people need liquidity they can get it.  Call me up tomorrow and say, hey, I need my money, I can just sell it and it’s done.  Everything that we do is highly liquid.  We only deal with the most liquid securities because of this very issue.  When things go bad liquidity dries up.  You don’t want to be on the other end of that. So that for us is extremely important. 

 Kelly:     Kirk, I know you like to work with CPAs and help them with their clients, just like you are helping me with my clients. Let’s say I have some tax and accounting clients that need what I think is a risk-managed portfolio, and the profile for that type of client is typically this, they have made their money; they have created their wealth; they don’t need to hit any home runs; they don’t even need to hit a triple, maybe a double, a single, they don’t need to strike out, and they sure as hell don’t need to be hit by the pitch,. That’s the typical client that many of us see.  

 Kirk:       I like the analogy, Kelly.

 Kelly:     Thanks.  Number one, preserve what they have, and number two, grow it.  In that order, and what’s the best way for these clients to work with you, whether it be a CPA or one of my clients, how are we going to work together on this?  They are located in say, Minneapolis and Kansas City, how do we work together?

 Kirk:       First of all, a location I don’t find is all that important.  I have been doing this for 20 years, most of my career I thought that I need to see somebody to work with them but in the last three years, I have kind of changed that kind of mindset around myself, because what I realize was, clients don’t want to see me.  They don’t want to drive an hour or a half-hour to my office and then drive an hour or a half an hour back.  Like, it is much more efficient use of their time to just get on a call and talk about these things.  You and I are in different states and we work together just well. But the other part of what you were saying is very important, where you were talking about not hitting home run in triples. There are many types of clients. There are clients who are trying to build and grow their wealth and there are clients who are not, right? They just trying to maintain and to sustain their wealth.  You know, it is funny, no one sends you a letter and says, hey, you are rich, right? There is no letter that the IRS sends you that says, hey you are rich, like, now you are going to start paying the rich person’s taxes.    It doesn’t happen that way.  There is kind of this grey area, depending on the amount of wealth that you have, you have enough but you feel like you don’t have enough.  And it is weird, I have talked to people who are worth couple hundred thousand, tens of millions, I have talked to people who are worth billions, and they all have the same mindset, which is I need another 30% to feel comfortable.  It’s a weird human psyche that people can’t be comfortable with the fact that the money they have is enough. So, whatever we do with our clients is deep conversations, what I call the emotional side of money, which is, you know, it’s really important.  Because let me give you an example, there is a woman I worked with, my entire career, a wonderful woman and she worked really hard, saving and recently she got to a point where she wants to retire.  So, she is going from this aspect of working hard and saving to no longer working and spending.  That is a huge mental shift that people have to make, and it’s really hard, right?  You have spent 40 years working and saving and now you just have to flip the switch and do the opposite. That is very uncomfortable for people.  It’s not an easy transition to make.  So, a lot of what we do is helping people with, I guess, what I would call retirement lifestyle planning, which is helping them make that transition.  So, it’s not just that they’ll have enough money but it is that they are comfortable with the money that they have and they are comfortable spending it.   Because I have worked with a lot of people who have way more than they need and they feel like they don’t have enough.  This woman, for example, she was actually spending less than she was making in social security and she is worth seven figures easy.  There is no way she would ever run out of money at that spend rate.  And what I was helping her to do is to be comfortable with the fact that she had enough money and be comfortable with spending that money.  You spend your whole life saving this money, like, you need to enjoy it.

 Like, retirement is about, we call it phase two of your life because you have got another 30 to 40 years when you retire,  what are you going to do?  Sit around and golf all day and drink beers?  I mean, that’s fun but that’s not the purpose.  And a lot of people need to rediscover that purpose when they retire because they make such big shifts. Getting back to the point, when I work with clients I’ll tell them upfront, our job is not to hit your home runs, our job is not to be BS and T every year, our job is to hit the singles and doubles to get performance but the real key to what we do is not lose when the markets hit a recession.  That’s really the key because if you don’t lose when the big losses come then you are way ahead of the game. In 2008, from the pig to the trough, the markets went down over 50%.  If you didn’t lose 50% in those years and you were in cash you effectively made 100% return on your money because not only did you not lose money but you could have bought everything 50% cheaper.  So, effectively you just made 100% return on your money, and you didn’t have to do anything.  You didn’t have to outperform the index, you just had to sit on the sidelines and not lose money whenever everyone else was losing money. It’s a different perspective than I think most people would make but if you consider where we are in the economy right now, we have had 10 plus years of a bull market plus 11 years of a bull market.  We are getting to a point where a recession could come at some point in time soon.  It could happen next week, it could happen five years from now, right?  No one knows, no one can predict the future.  But I don’t need to predict the future to know how to handle this situation.  What I need to know is that there is a recession coming at some point, we all kind of feel that.  It feels like everything is really expensive, and it is, and at some point we are going to have a recession, that’s inevitable. That’s just the way that market cycles work.  My role is not to know when that’s going to happen.  My role is to predict that the market could continue to go up, and also, the market could easily go down.  So, we have built a strategy around that process that if the markets are going up you make money and if the markets melt down you are not losing money.  That’s really effectively what we have done.  We,  with our approach to investment management we look at the situation that we are in, which is, the markets could go up or they could go down, and we build a strategy around that.

 Kelly:     Kirk, here is how I see it, certainly, correct me if you find it flawed.  Historically, you have the CPA that’s more or less pitted against the financial advisor.  The advisor is always recommending more risk and the CPA is saying, less risk. And the CPA tends to say no to anything that is unpredictable or about which he or she is either not educated or experienced in, the advisor might say, I don’t know, for the last years, I think, many CPAs have decided that they are going to get into the advice business, they are going to open up an advisory practice and become financial advisors, become wealth managers.  I kind of fundamentally disagree with that because the objective supervisory role, to stick with the baseball metaphor, the manager role of the team is now merged with the player or merged as a player.  And I think the CPA is best sticking with the manager role but becoming a better manager so that he or she is a little more educated and experienced in it.  So it’s not no to everything but the CPA should stick with the manager role, the supervisory role, but review the performance of the players.  That could be a large cap player, it could be a wealth management player, it could be a small cap, it could be an alternative or it could be review the performance of a wealth management player, like yourself, who looks at all those underlying asset classes – small cap, large cap, alternatives.  Do you agree with that analysis?  Does that make sense to you?

 Kirk:   It makes total sense Kelly, and you are 100% right.  So, if you look at the traditional CPA role, it is accounting and tax, risk management strategy, tax planning, like, there is a lot of things that the accountants bring to the table.  And you actually pointed out, it seems as though a number of them will try to become wealth managers or financial advisors and they are putting themselves in a very precarious place. Because I have been doing this for 20 years, I am always wanting new things.  This is a profession in and of itself, for an accountant to all of a sudden start providing wealth management services or investment advice, all the things that we do, it would be like me going out and saying, I am going to be an attorney.  It’s a totally different profession and requires a lot of time, effort, study.  Like, it’s not just like, oh, I am just going to make money off mutual funds or provide them to clients. The CPAs are much more into risk management, which I think is a really good position to be because you are one of the most trusted people in the clients’ lives for anything that affects them financially.  You need to have that oversight and guidance.   You need to have that supervisory or managerial control to continue the analogy.  You know, you need to have that oversight because the clients want that, the clients are asking for that, and you would be in a much better place providing that position than actually doing the investments yourself, because you are taking a step back and you are being an unbiased third party and saying, here is what I think we should do.  As you mention, I do work with a number of CPAs, our strategy is more tactical and we have done this specifically because of the nature of what you are saying which is, as a CPA, this is your job to provide oversight and guidance, and you don’t want the clients to lose money.  So, the strategy, in many ways, to develop around that philosophy which happens to coincide with my philosophy anyway which is, rule number one, don’t lose money; rule number two, pay attention to rule number one. Like, making money is the easy part, that’s going to happen, it’s the risk management that’s the hard part.  And that’s the thing, if you don’t get it right you can really screw up your portfolio.  So, it’s really important to get the risk management right, first.  It’s your obligation as the supervisory role it is very important to take care of this for your clients because they look to you, as somebody in this role.  And our society, we are lacking leadership, and our society and I really appreciate the fact that you have taken this role head-on and saying, I am going to do this for my clients because it’s really important to provide this service where all our people are not doing it.                                                      

Kelly:     Yeah, it is kind of like let’s say, CPAs, let’s say tax focus CPAs, we scratch and claw and fight to help clients get an extra $100 refund or minimize their tax by $200, that sort of thing. You know, maybe it is even in the thousands but it’s kind of like when we stay out of the wealth management area where we are not helping on the risk management part of their wealth, what are we doing, I mean, we are winning these tiny little, I wouldn’t even call them battles, I would call them skirmishes.  We are winning those little skirmishes but the entire war is being won and lost and fought and we are not even participating in it.  It’s almost like CPA’s are afraid to get into the arena, afraid to fight, afraid to get shot so they hide in their tent.  I don’t know.  I am mixing a whole bunch of metaphors.

 Kirk:    But yeah, and I think you, I mean, your point is valid because I think, the CPAs we work with, we tend to work with them on a collaborative basis.  And I think one of the challenges is, and this is not just CPAs and advisors this is all service professionals, when we work with our clients, we work with CPAs, we work with attorneys, we work with various different professionals and what I find is common in our industry is that, like, let’s just say, an advisor would say, hey, you should do some estate planning, and, you know, either the client has somebody they work with or the advisor finds them someone, and then they do the work and they put all this package together and they spend a few thousand dollars, and they have this package and their attorney is like, great, you are all set.  And the client is thinking, hey, I am all set and what he really meant is, here is your package you figure out the rest of it.  And the client thinks they are fine so they don’t say anything.  And, you know, they set up a trust or whatever they are doing and they don’t get funded, you know, get set up properly.  So all of a sudden you spend a lot of money for something that isn’t even implemented, and no one knows because it’s just like one hand doesn’t know what the other hand is doing.

 So, what I find is most effective is working with people on a collaborative basis.  So, for instance, you and I, you and I would talk about each client and say, alright, we are going to sit down and work with this client.  Like, we would figure out what kind of tax planning they need, you know, what kind of cash flow management they need.  What about their investments?  What about their estate?   And we look through each of these quadrants of the puzzle and say, what needs to be done, how can we coordinate this?  You know, because we do operate on different playing fields for that because we are doing different things.  So, it’s important that, you know, this kind of collaborative method works well so that the balls don’t get drop, things don’t slip through the cracks, and that everything is getting taken care of.  So, from a client perspective, you are getting a much more holistic perspective of oversight and guidance and you are really getting taken care of from different angles from people who have different expertise.  So, what I find is if people are trying to do everything themselves, it is said the player versus the supervisor, it’s really hard to do everything yourself well. It’s a challenge for any good professional that is collaborative, that want to work together and are not territorial so I think you kind of hit the nail on the head there and that’s one of the reasons why we work together, it’s because, you know, we both see that element of collaboration as being very important for the client, and really doing what’s in the client’s best interest, which I think is the top priority in any relationship.

  Kelly:     Yeah, I think this is a good model, I like it.  Anyway, we can terminate it now so you can get back to the going to the pool or you are using this podcast as an excuse to not have to go to the water park, the urine-filled water park?  

 Kirk:    Lots of chlorine Kelly, lots of chlorine.

 Kelly:   Alright Kirk, I enjoyed it.  Take care of yourself.  How should people get in touch with you if need be?

 Kirk:    Yeah, I’m pretty easy to find, you can find me at InnovativeWealth.com. So, our website InnovativeWealth.com, you can come there, I have written pretty much everything on the website.  I have written myself a lot of the blog post, if you want to get to know about me you can find me on all the social media channels.  I am really pretty easy to find.  And, obviously, you can find me through Kelly because Kelly and I are working together.  So, you know, the path is, contact Kelly and, you know, I can coordinate working with you as well. 

 Kelly:     Okay kirk, enjoy the remainder of the weekend, take care of yourself.

 Kirk:       Alright, thanks.   Thanks a lot, Kelly, thanks for having me on.

Date:                              June 1, 2019??        

Attendee and Guest:   Kelly Coughlin, CEO, EveryDay CPA – William McConnaughy - PART 1

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.  As we head into the end of the year I thought it would be helpful for community and regional bankers to hear from an expert in dealing with the IRS and various state taxing authorities.  We are not going to focus on tax planning, rather, we are going to focus on tax liability resolution.  That is, resolution of a business tax liability, that’s today’s topic, after the IRS has notified you of an amount due.  With that, I have on the line, I hope, William D. McConnaughy, a CPA, he has got 28 years of professional tax experience and he is the twin brother of Matthew McConaughey. No, that’s not true, that’s a big lie.

William:               That’s not true.                                                       

That is not true, but it sounds better.  He is successfully, that is Bill McConnaughy, successfully resolved over 4,000 cases.  He is a former IRS Revenue agent, beware, and has a Masters in taxation and is a CPA.  He has got two children.  His son is in the air force, bravo for that, and his daughter works in the cinema industry.  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.  Bill enjoys automotive racing and collecting, we’ll find out what he likes to collect – money I suppose - mixed martial arts and college football.  So, I think, Bill, you are on the line.

William:               Hi Kelly, good morning.

Kelly:                    How are you doing?

William:               Good, how are you?

Kelly:                    Great, thank you for joining us on It’s Saturday Morning.  Bill, you are out in   Sacramento, I believe, correct?

William:               Correct, yes, Sacramento, California. 

Kelly:                    Great.  Well, other than the fact that you are not related to Matthew McConaughey, did I get everything else right?

William:               Everything else is correct. 

Kelly:                    Great.  Anything else you want to add about your personal situation there so the audience gets a better feel for that?

William:               Oh no, the personal bio is pretty good, right on.

Kelly:                    Okay, great.  Well, let’s dig right into it then.  I am going to start with a question here that, it might be fairly obvious to you, but is it fair to say, we are talking about business tax situations here, is it fair to say that a routine business audit is normally the event that would trigger an unplanned business tax liability?

William:               No, I wouldn’t say that that is usually the reason why there is an unplanned business tax liability. It can be, I mean, it certainly can be but usually, based on my experience, when there is an unplanned business tax liability it’s usually a result of unforeseeable, either business problems that come up with running the business, managing the business, or it could be where there is an unplanned or unexpected personal financial bad worth…the owner of the business needs money to take care of personal matters.  And in both cases, what happens is that the business or the business owner will take money that should be set aside for the IRS and use it for other purposes.  That’s usually why people come up short or businesses come up short, owing the IRS money.  It’s because things come up that nobody can foresee and they take Uncle Sam’s money and put it to other purposes.  But yes, an audit can certainly cause an unplanned tax liability.  But based on my experience it’s usually the other things that come up that nobody can see and they take Uncle Sam’s money, like I said, and put it to other purposes. 

Kelly:                    Oh, so it isn’t the IRS kind of initiating the finding, it’s a tax liability creating event that creates a tax liability and then they have to resolve it.  And this is before the IRS is even involved, I suppose?

William:               Yeah, that can happen, and like I said, things just come up or people take Uncle Sam’s money and apply it to other purposes that need to be taken care of to either stay in business or to keep personal matters in hand.  So, based on my experience that’s what I have seen.

Kelly:                    Okay.   So, you are in the business of helping businesses, and I know you do with individuals too but today we are going to talk about businesses.  You help businesses resolve their tax liability, correct?

William:               Correct.

Kelly:                    Okay, now, what do you call that space, is it accounting, what space is that in?

William:               The catch phrases are Tax Relief Services, Tax Resolution Services, Back Tax Help, there’s a number of different tags that people put on the industry.

Kelly:                    Okay.  Now, let’s talk about the industry then, there are ads and promotions constantly on TV, radio, print media, talking about how to get your tax burden, tax debt, reduced, and this is the space you are in.   Now, I known that you have got an excellent reputation of doing good things for your individual business clients. I know that separately from those and from what you say, but not all your, say, competitors have such illustrious reputation.  Now, why is that, is it fair to say that your industry is kind of fraught with overpromising, under-delivery or in some case, kind of, incompetence or is it mainly, tax payers are unhappy with the outcomes that they get, you know, say challenging set of facts and circumstances and they end up blaming the tax resolution professional or is it a combination of those things? 

William:               It’s a combination of both but I would say it is a problem with the providers themselves.   This industry is full of practitioners that really have no business being in the industry.  There is a lot of hot air, you know, sales puffery, I think you call it, where they do overpromise and under-deliver, and that is a fact. And the reason why that that happens is that the IRS does not adequately regulate the industry.

Kelly:                    Do you think they should?  Should the IRS get more involved in regulating the industry?

William:               Absolutely!  Yeah, they are actually required to by law but like a lot of other things with the federal government, what they are supposed to do and what they really do are two different things.  They are required by law to regulate people that engage in this practice, but in reality, there is very light regulation.   There have been high profile cases of very incompetent and dishonest companies that have been shut down but it has always been state attorney generals that have done it.  I can name a couple of real high profile cases.  Tax Masters, which was running TV ads all the time out of Texas, they were shut down by the state attorney general.  JK Harris out of South Carolina was shut down by the state attorney general.  Roni Deutch in California, Sacramento actually, right up the street from my office, shut down by the state of California Attorney General’s office. So, it is the result of a lot of fraud, overpromising, sales puffery, hot air, that’s what I call it, hot air. 

Kelly:                    Yeah.  How do you distinguish or separate yourself from that?  I mean, I know the industry kind of probably gets tainted and that brings the industry down somewhat but, you know, that can be true with financial services, any industry I suppose, but how do you combat that?

William:               Oh, the way I try to combat it is by having on my website a list of everything that provide credible proof that I am not like these other companies that have been engaging in overpromising or outright fraud. I have on my website proven actual case closure letters from the IRS that shows in black and white, on IRS letterhead, exactly what I did for people. So, there is no possibility of flipping about because it’s right there in black and white - Here’s the letter from the IRS that shows what I did for somebody.  I post those for the most positive proof anybody could see that I do what I say I can do for people.  And then I also have my license up there and you can see that I am a licensed tax practitioner by the State of California and the Board of Accountancy, Certified Public Accountant, and I am held to some high standard of practice and ethical behavior as well.  You can also look to how long somebody has been in business. That’s a pretty good indication of how successful they are going to be working for you.  If they have been around forever that’s probably a pretty good sign that they’ll continue to be there for you as well. And then you can look at a person’s complaint record whether or not there is a long history of complaints, they are either none or very few.  And then you can also look at the fees that the most outrageous companies, the most fraudulent companies, they also typically charge outrageous fees.  It’s a pretty good indication from what they are charging that these people are trying to gouge the public as much as possible and give as little as possible in turn for it. 

Kelly:                   Great.  So, you went through a litany of things here and you kind of jumped the gun on me but I want to be clear and specific, I like lists of things.  I am a CPA, we like things simple and itemized.  So, what are the top five things a tax payer should look for when selecting an advisor? Now, this podcast isn’t intended to be an infomercial for you but we can stipulate that listeners should contact your office.  You can give that contact information here or later on in the podcast and I’ll allow you to make a plug for you and your team.  So, if we stipulated that and someone doesn’t decide to work with you, what are the five things that they should look for? A list of that for us.

William:               Yes, that comes up once in a while where people that are around in the area will ask me, what kind of recommendations I would make if they were going to try to get somebody local.  And the very first thing I would tell them is look for a proven track record. I mean, make the practitioner prove to you that they are able to do what they say they can do.  Get the case closure letters, make them prove that they have accomplished the work that you want them to accomplish for you. And then also look to their licensing.  I mean, the licensing requires either (a) they have got be an attorney or (b) a Certified Public Accountant or an enrolled agent. Those are the three professional licenses that are qualified to represent people before the IRS - an attorney, a certified Public Accountant or CPA or an enrolled agent which is called an EA.  The person should be professionally licensed.  And then the third thing I would say, once again, is how long have they been in business.  If the person you are trying to have represent you have only been professionally licensed for, a year of two,  I would say even five years or less, that’s not long enough, you don’t have a long experience record to really be   adequately qualified to represent people in these matters. They should have at least five years and up experience, at least five years minimum.  And then once again, as I mentioned, check the background, the reputation, do they have a litany of complaints? If they do that’s a pretty good warning sign.  Check the fee schedule.  I mean, if they are going to charge an arm and a leg that’s another warning sign as well, they are charging too much.

Kelly:                    Right, on the complaints and reviews of every provider in just about any industry has negative reviews, and I suspect that in your profession you are always going to get, even if you are a top quality provider, the nature of the business is such that a tax payer that is unhappy with the outcome and with bad facts and circumstances that just weren’t going to produce a good outcome are going to blame the provider even if they had given them a reasonable assessment of the likelihood of success.  So, you are always going to sustain potentially some negative views of people that are going to blame the provider.  Is that an accurate statement you think?

William:               That’s somewhat an accurate statement, I would say.  Yeah, that’s human nature but the way I avoid that is when we have cases  where the client is not really happy about it I explain to him in detail why it is what it is, you know, this is the law, these are the facts and you are just stuck with it, you know.  That is the situation, this is how much money you have to pay the IRS and also they have to be paid ahead of other creditors. And when you explain it to people, even the ones that are very unhappy about it, my experience, once again, they come to grips with it and say, okay, well the guy did the best he could do and it’s just a situation where, yeah, I am going to have to pay this. I’m not happy about it but I can’t blame him for it, it is what it is.  The law says this and the fact says that and this is what I have got to do.   

Kelly:                    Yeah, in your own practice do you have a pretty high success rate in reductions?  I guess that’s the outcome, right, that you are looking for they could reduce it.

William:               Yeah, that’s always the goal, the goal is always to see if I can get my clients off with paying as little as possible and reduction is always the number one goal. It doesn’t always turn out that way sometimes because the facts, circumstances and the law.  They are going to have to pay what they have to pay, but I would say, most of the time, a high percentage most of the time, two thirds, three quarters of the time my clients end up getting a reduction where they don’t have to pay the whole thing.

Kelly:                    Yeah, well I will say your credentials, you have got experience with the IRS and you are a CPA and a Masters in tax at Golden State, that’s a pretty good tax program I knew a couple people that went through that program.  That’s a good tax program, isn’t it?

William:               Oh, it’s one of the top in the country. Yeah, it is well recommended.

Kelly:                    Yeah, I am curious, did you start your career with the IRS and then get into tax or what was the chronology here?

William:               I started my profession fresh out of college with the IRS.  This was during the early 1980s and the country was just coming out of recession and the IRS was the only job I could find.  I had actually wanted to go into financial auditing with a large CPA firm but those jobs were hard to find so I got on with the IRS and the rest is history.   Actually, it turned out I had a knock for it so I stuck with it.

Kelly:                    Yeah, where did you go to undergraduate school, and did you studied accounting there?

William:               Yeah, I graduated from Francisco State University with a bachelor’s degree in accounting.

Kelly:                    Alright, that’s quite a good accounting program.

William:               Yeah, that’s actually a good business school as well.  

Kelly:                    Yeah.  Okay, so then you spent some time with the IRS as a revenue agent and, where would they start you there normally?  They would start you in a kind of individual tax side and then you keep moving up until you are on the small business, medium business and then big corporate stop and then international or…is that kind of the progression?

William:               That is, yeah, they start you out with small individual cases and then work you up to larger more complex individuals and then move you over to corporations and partnerships.

Kelly:                    Okay, and how far did you get into that hierarchy or progression? From there you went out on your own, set up your own practice?

William:               Yes, I stuck with the IRS for four years and I move my way all the way up until the large public companies.  I never worked on those, but everything below that.  If I had stayed with the IRS I could have moved into the large public companies but I wanted to go out on my own.  I didn’t really care for the, how should I say it, way things were being run at the IRS at that time. I would rather be on my own and do work the way I see that I would like to do it. 

Kelly:                    Yeah.  Let’s talk briefly about your thoughts on what’s going on in the IRS today and let’s say the last three or four years. They have been some pretty interesting scandals that have come out and if you don’t want to talk about this that’s fine because I know they are not a client of yours but they are certainly one you don’t want to be crashing, I would imagine, but if you are comfortable, well, I am curious about what your thoughts are about what’s going on with them.  I will say,  as kind of an outsider, seeing that the IRS has been kind of called on the carpet on things, destroying documents and not able to locate emails, it’s been kind of a thrill seeing these guys get a taste of their own medicine a bit.

William:               That’s always been an ongoing problem at the IRS, actually.  When I first got there one of my senior agents there told me that working in this organization it’s so political and there is always something going on where people are always trying to cover up things, and that’s one of the reasons why I couldn’t stay there.  I just didn’t care for the way it was been run, the management, what you call the culture there.  So, that’s one of the reasons why I left. It was too political and it has always had a long history of mismanagement.  I don’t know if you can remember this but back not so long ago there was the so called Barrack hearings in congress where for almost a year they hammered the IRS on the way they did collections, and totally wrote a whole bunch of new laws because the collections were out of hand, so, this is a long running story with the IRS.

Kelly:                    Do you think that it’s really a valid statement that they target certain types of tax exempt organizations because of their contrary political perspectives, I mean, I Just can’t believe that that would happen. 

William:               They took The Fifth Amendment honor so I guess it must have happened.  Yeah, yeah, that can happen, that’s what I was saying about the political aspect of the people there and the culture, political.  It’s something that shouldn’t be, but it is, and they got exposed last year. What was her name?  That Louise Warner woman.

Kelly:                    Yeah, shocking.  Do you think that comes from the top?  I mean, we don’t have to go too political on this  but do you think it comes down from, you know, the head guy, you know, Obama saying, you know what, I don’t like this type of group  let’s go after them? Think it goes to that level?  Is it that pervasive?

William:              We are speculating but in my personal opinion, yeah, I think it actually came straight down from the White House, but that’s one man’s opinion.

Kelly:                    Yeah, interesting.  Well, that’s surprising.

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.

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.

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.                                                                                                                         

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?.

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.

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.