Tax Guru – Ker$tetter Letter

Helping real people win the tax game.

Archive for February, 2002

Posted by taxguru on February 27, 2002

Women Are Actresses

I admit that I have my biases and frequently judge people based on how they describe things. Any time I hear some idiot refer to a woman as an Actor, it makes me sick. It’s not the same neutering of our language as substituting “Flight Attendant” for “Stewardess.” I have finally found someone else who shares my belief that our language has specific words for a purpose.

KMK

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Posted by taxguru on February 21, 2002

Tax Simplification – Not

Every year around this time, our rulers in DC promise to simplify the tax system, as in this comment by Treasury Secretary Paul O’Neill. As always, the result will be more of the same, much more work for those of us in the tax profession.

I really can’t add much to what I wrote years ago about the scam promises to simplify the tax system.

KMK

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Posted by taxguru on February 17, 2002

My Question Boards

I have to cease my participation in the discussion boards on The Motley Fool site because they are now charging for that privilege. As I have described before, I had already been phasing myself out of that site because of the nasty criticism I had received from other users who didn’t like my philosophy of trying to help people pay less taxes. The fact that the main moderators are former IRS employees, who obviously still share Big Brother’s viewpoint that all money belongs to the imperial Federal government and that anyone who tries to reduce their payments is an evil greedy person, explains this.

While I gladly pay to subscribe to dozens of websites that I feel are worth their costs, I can’t justify paying the Fool for their pay more taxes attitude.

I am still answering questions on one other main site:

AskMe.com is my favorite and the one I use most often, including getting answers to other topics I need help with.

KMK

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Posted by taxguru on February 17, 2002

Evil Rich

Some people are missing my sarcasm when I use the term Evil Rich.

I am a 100% pure capitalist and do not consider anyone to be evil just because of their wealth. However, I have long blasted our rulers in Washington for picking on what Dick Gephardt describes as “the winners of life’s lottery.” There are literally dozens of tax rules that penalize those people that our rulers consider to be the Evil Rich. The taxation of Social Security benefits is one of the worst. Congress considers anyone who has AGI of more than $25,000 to be an evil rich target.

People accept this persecution of the better off because there is a pervasive tone in this country to hate anyone who has more than you have, regardless of how that money was obtained. I think this attitude is disgusting and one way I am trying to remedy it is to expose and ridicule it. If one says nothing, it will continue to grow.

I hope that clears this up.

KMK

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Posted by taxguru on February 15, 2002

Robin Hood

Last week’s tirade between Senator Robert Byrd & Treasury Secretary Paul O’Neill as to who had the more impoverished childhood was hilarious. Fox News had the best take on it by running part of the Monty Python skit that was almost identical. Actually, the members of National Review’s Corner discussion blog had mentioned the similarity to Monty Python right after the actual event.

Senator Byrd has long been the epitome of what is so wrong with the ever increasing size of the Imperial Federal Government. He has long held the title of Top Pork Provider by taking huge sums of money from working Americans and sending it to his cronies in his home state of West Virginia. On a more relevant and serious note, Ann Coulter addresses the contrast between Byrd & O’Neill and the fact that while O’Neill’s wealth came from his own hard work and wise investments, Byrd’s billions have come directly out of the pockets of taxpayers.

Whether you consider Robin Hood to be a good person or not depends on whether you are the “evil rich” taxpayer being plundered or the “poor” person receiving the loot. As another old quote goes: “When you rob Peter to pay Paul, you can always count on the full support of Paul.

KMK

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Posted by taxguru on February 8, 2002

Distraction Strategy

The showboating hypocrites in Congress who are proclaiming that the Enron melt-down was the biggest & most earth shattering financial scam in history are just using their standard strategy of distracting the public’s attention from the real financial criminals, themselves. With the eager assistance of their allies in the liberal press, that is the message that most people are exposed to.

Luckily, we are no longer forced to obtain all of our news from the liberal press. Roger Hedgecock, while substituting for Rush Limbaugh today, explained that the financial crimes committed by our rulers in Washington make the Enron misdeeds pale in comparison. So true.

This piece by Mark Levin on National Review makes a similar point. As powerful as Kenneth Lay may have been, he couldn’t stick a gun in your face and take everything you own. Congress does that very thing every day via their henchmen, IRS.

KMK

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Posted by taxguru on February 7, 2002

Beware of Bogus Tax Protests

There are plenty of legal ways to reduce or eliminate income taxes. There are also plenty of people promoting illegal strategies. There is a current ad campaign being waged by a group called We The People that they call “Wait to file until the trial.” They are supposedly putting the entire US income tax system on trial by having IRS head honchos respond formally to their idiotic tax protestor arguments. They claim to believe that the IRS will admit defeat and cancel the entire income tax system; so filing a tax return would be an unwise move.

After earlier agreeing to a public confrontation on these issues, IRS has announced that they have changed their mind and will not appear at the “trial.” They are instead taking the very misguided approach of ignoring this tax protestor group and assuming that they will just go away. I have explained on too many occasions why this approach by IRS has the exact opposite effect. To tax protestors and their gullible followers, silence equals assent.

Whatever IRS does about this group, I just want to make one more warning about the dangers of following the lead of tax protestors. That can result in some serious penalties, including the loss of everything you own. If you are serious about reducing your taxes, there are plenty of legal methods to do that.

While I have long been a big fan of filing tax returns well after April 15, my reasons are very different from what We the People is promising. The biggest difference is that we do eventually file tax returns. I have never advocated not filing tax returns. In fact, I often encourage filing tax returns even when none is legally required as a self defense measure against charges of tax fraud, which are possible forever if no tax return is submitted to IRS. But delaying your tax return with the hope that it will never be required is just plain stupid and very dangerous.

KMK

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Posted by taxguru on February 7, 2002

Response From CBA

I received the following response from the Calif. Board of Accountancy. Having worked on audits with some of the Big 8 (what it used to be), I know that audits of organizations in multiple states utilize local auditors whenever possible. Does this mean that Enron had no offices in California?

What is surprising to me is the lack of a proactive approach to this problem. Arthur Andersen’s defense to their conflict of interest will be that “everyone else is doing it.” While this is very true, that does not make it proper. I can still recall my college auditing class (taught by a recently retired Arthur Andersen partner), where we discussed the very issue of independence. Owning stock in the client and being involved in the management decisions were both considered big No-Nos.

KMK

X-Lotus-FromDomain: BOARDOFACCOUNTANCY

From: msantaga@cba.ca.gov

To: Kerry Kerstetter

Date: Thu, 7 Feb 2002 12:39:15 -0800

Subject: Re: How did AA get away with its conflict of interest?

X-RCPT-TO:

In response to your February 5, 2002 email, please note that Mr. Morgan did not provide consulting services. He provided bookkeeping services that impaired his independence under AICPA Rule 101-3.

With regard to Enron, to date the California Board of Accountancy has not identified that any California licensees are involved; however, the Board is monitoring the Enron matter.

Sincerely,

Michele Santaga

Enforcement Analyst

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Posted by taxguru on February 5, 2002

Who Is Policing the CPAs?

As a CPA licensed in both California and Arkansas, I have long been aware that many of the things that Arthur Andersen did with its services for Enron are grounds for professional discipline. Following is an email I just sent to the California Board of Accountancy on this matter. Perhaps if more people (CPAs and general public) were to contact them (and their equivalents in other states), they would become a little more active in this area.

KMK

Date: Tue, 05 Feb 2002 13:20:14 -0600

To: enforcementinfo@cba.ca.gov

From: Kerry Kerstetter

Subject: How did AA get away with its conflict of interest?

Dear CBA:

As Stephen DeRose mentioned in his article in the latest issue of your Update newsletter, the report of disciplinary actions is a popular section. You show a case with Dennis Morgan who was disciplined for violating the independence rules by auditing a company for which he had provided consulting services.

With the growing media firestorm over the Enron collapse, I’m sure I’m not the only CPA who is wondering how Arthur Andersen and the other Big 5 firms are allowed to do what appears to be the exact same thing as Mr. Morgan did.

With the spreading lack of confidence in the work of CPAs, I hope you are planning to feature this topic in your upcoming pronouncements, both for the public’s benefit, as well as for that of the CPA community.

Kerry M. Kerstetter

CA License 28695

Harrison, AR

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Posted by taxguru on February 4, 2002

Recovering Lost Passwords

In spite of the huge mass of info available online, I still subscribe to several dead-tree periodicals. While reading the latest issue of PC Magazine, I came across this article on passwords.

While the main focus of this article is how easy it is for people to crack passwords, what intrigued me was the open availability of software to do this. I have no desire to break into files uninvited. What I have long found frustrating is trying to work with clients’ QuickBooks data when they have lost or forgotten the passwords they used to set up their data files.

On a number of occasions we had no option but to use Intuit’s password stripping service. At $65 for each case, this isn’t really that expensive, but it is a hassle to send & retrieve the data files. The biggest limitation of Intuit’s service is the fact that they don’t actually give you the password. What they do is remove that portion of the file containing the password and send it back. I have already had occasion to have Intuit strip out the password more than once from the same client’s file. Knowing what the password was would have allowed us to avoid the duplication.

The PC Mag article tipped me off to a company that makes a program called Passware that comes in variations for dozens of software programs, including Quicken and QuickBooks. At just $45, it’s less expensive and much less hassle than Intuit’s service. The big bonus is that Passware actually reveals what the password is rather than keeping it a secret as Intuit does.

KMK

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