Saturday, February 28, 2009

My career as a Tax Accountant and Weekend Assignment #256

Since I am one of the members of the ABA (Association of Blogging Accountants) which Florinda recently made up, I decided to participate in Karen’s weekend assignment #256.

Weekend Assignment #256:
Tax time for individuals in this country starts in late January when the tax forms arrive, and runs through April 15th or so when the tax return is due. Do you file your taxes as soon as possible, at the last minute, or somewhere in between? Is there a particular reason for this?

Before I start I am going to give a little background on my career as a tax accountant.

Corporate Tax Accountant –
In the early 90’s, I worked full-time as an accountant for a small engineering firm while taking accounting courses at the local university in the evenings. The semester I was enrolled in Corporate Income Tax my boss came up with the brilliant idea he could recoup his investment in my education (he was paying half my tuition) if I prepared our company’s corporate income tax return; thus saving the company money on accounting fees. Our outside accounting firm would still review and sign the return. The first year, I propped up my accounting text book next to my computer to use as a reference and created the schedules for the return in excel. It was a lot of work and even though I felt like a fish out of water, the schedules balanced and life was good. The second year, I again prepared the schedules in this manner and again felt I was unqualified to do so, but it went okay. The third year, which was an incredibly stressful time in my life; I was taking the Becker CPA review course in preparation for the exam, I was unable to get those darned schedules to balance. Finally one of the accountants from the accounting firm in attempt to help my out me said, “You know Savvy, why don’t you just let us finish them, we enter the data from your financials into our tax prep software anyway and the returns including the schedules are completed in about 15 minutes.” I couldn’t believe it; after all that work they didn't need or even use my schedules; they were just placating my boss. After this experience, I vowed to never again work with corporate income tax.

Personal Income Tax Accountant -
After I passed the CPA exam, a family member asked if I’d prepare their income tax returns. Because of my inexperience (the only returns I had ever prepared other than in the classroom were my own); I decided to help them out for a nominal fee. I used TurboTax; the return was simple and went well. The second year, I went with TaxCutbecause it was cheaper. From the get go this return didn’t go well. First, it was more complicated; they had purchased mutual funds in their kids names which had incurred huge capital gains that year plus one of them had worked as a consultant on the side (of course they didn't track their mileage or save their business expense receipts). The extra income disallowed credits they were used to receiving, in an attempt to minimize their taxes I played around with separate returns for their kids and ended up losing half their data in TaxCut and had to reenter it. Then while printing the returns my old ink jet printer which literally printed the forms all afternoon ran out of ink. Concluding, I was upside down in both time and money on this return I advised the couple to consult a professional tax preparer in the future thus ending my career as a personal income tax accountant.

My current exposure to personal income tax-
In my current position, working as a Finance Manager in industry; the only exposure I have to income tax is the "Income Tax Update" I take each year as part of my continuing education. This doesn't stop me from being asked personal income tax questions on a regular basis. I used to attempt to look up answers to these questions, but now my standard line is I don’t work with tax, I work in private industry. If I can answer their question I do so, but usually I cannot.

Now for the assignment:
When do you file your return?
I work a lot of hours each year in January and early February; afterwards I give myself a couple of weeks to regroup before filing our taxes. This year I filed both our Federal and State returns yesterday. We are getting a small refund back on both, which is typical.

Who actually does your taxes, and with what software or other resources, if any?
I always prepare our taxes and do so manually. As I mentioned above, I have experience with both TurboTax and TaxCut, for me it is just easier and cheaper to file manually. It took me an hour and twenty minutes to complete both returns. I did use the amt calculator on the web site to make sure I didn’t owe AMT. Wisconsin is offering free electronic tax filing this year, but I didn't take advantage of it. Adobe Reader 9.0 was required which I don't have. Also, I needed to include my federal income tax return in an electronic format which I also didn’t have. They do offer a couple of options for submitting the form electronically, but I decided to keep it simple and just file manually.

Sunday, February 22, 2009

Getting my Ducks in a Row

Ever since I heard Jane Pauley's presentation on “Practical Inspiration”, I can’t stop thinking I need to “Get my ducks in a Row” or at least break out of my comfort zone.

In the January 2009 issue of Oprah Magazine, Dr. Phil states the term comfort zone is used inaccurately. He says:

A comfort zone is actually a stagnation zone. You’re stuck because you’re afraid to take a risk. People often tell me the scariest risk is admitting that what they have isn’t what they want. They’re afraid to acknowledge that it’s time for a change because they’re scared to death about making it happen. Quit pretending what you have is okay if that’s not the case.

So here is the new plan for the rest of 2009 – I am going to do one thing each week to push myself out of my stagnation zone with the intent of “Getting my Ducks in a Row”.

Here are a few examples of what I will be working on:

1. I have to actually network when I attend networking events. Last week, I went to an event in which a speaker was presenting a topic I was interested in. I arrived late, sat at the student table in the back of the room, and left immediately after the presentation. I didn’t talk to a single member of the organization. Though it wasn't a total waste; I did enjoy talking with the students, this behavior is no longer acceptable. I have to push myself to make at least one professional contact when I attend these events.

2. I have to actually pick a book when it’s my turn to make the book selection for my new book club, rather than suggest someone else make the selection. This club (or book gathering as my fellow members like to call it) is different from book clubs I’ve joined in the past. The members are well read, actually read the books and discuss them at the gatherings; Oprah book selections are frowned upon. It is a little intimidating, since I typically read non-fiction; I am having a hard time coming up with an adequate fiction selection. I thought of choosing Steven Millhauser's Dangerous Laughter: Thirteen Stories which is one of Citizen Reader’s current selections for her Book Menage. It would make a great selection, but I’d feel as if I were cheating if I also selected it. Kate Atkinson's Behind the Scenes at the Museum is another possibility, except doesn’t the title alone sound a little too Oprah. I’d really like to introduce them to my favorite genre, non-fiction, especially one that reads like a novel, but I'm having trouble coming up with a good one. Does anyone have a suggestion; if so leave it in the comments.

3. I need to update my resume with quantifiable accomplishments. Both of the recruiters I work with have been encouraging me to do this for quite some time. They want me to add things like “Implemented blah, blah, blah which saved the company mucho bucks over the past five years."

4. I can no longer just send out my resume; I have to actually go to the interview if invited as well. I have been known to decline or cancel an interview at the last minute in the past.

So there you have it ~ my new focus for 2009 "Get my Ducks in a Row".

Saturday, February 21, 2009

Scraping my New Years Resolutions

I've decided to scrap my New Year’s Resolutions; I wasn't making much progress anyway. Here is an update –

1. To be a better employee - This one went to the wayside shortly after my company's HR manager attacked my management skills. In the days following, it was all could do to concentrate on my work, let alone try to think like an owner.

2. To become a better blogger, this is something I still strive to do, but I’m not going to participate in the blog improvement project. I still think it’s a great idea and enjoy reading the project assignments. It's just that my blog posts are too infrequent to spend time blogging about my blog.

3. I am going to eat a healthier diet. I have made a small effort to eat better which has resulted in a one pound weight loss. Small effort = small results. Enough said about this one.

If I put my mind to it, I am sure I can come up with a better focus for the rest of 2009 than this.

Sunday, February 15, 2009

AIG quote is cheaper: Should he switch?

Jim asks:
I received an insurance quote from AIG for both my homeowners and my auto insurance policies. The savings over my current policy is substantial; 30% for auto and 50% for homeowners. Is there a risk to switching to AIG? How can their rates be so low? What is the catch?

First, it is important to insure with a company that is financially solvent.
There are three companies that perform in depth investigations to determine an insurance company's financial strength—A.M. Best, Fitch, Moody’s and Standard & Poor’s. The most reliable, financially-stable insurance companies are rated AAA or triple-A. Most of the major insurance companies are A-rated. It is recommended that you go with an insurer that has at least a B rating.

To check AIG’s rating I went to the A.M. Best Website. AIG was rated A. This means only 1 in 500 companies in this category can be expected to go out of business and these companies are 3.3 times more likely to fail than those in the most secure ratings.

What are the consequences if AIG were to fail?
The chances of this happening are pretty slim, since AIG just received an influx of cash from the government. But if they were to fail, not only would you lose any premiums you had paid in, but you could liable for claims incurred if AIG was deemed insolvent. This could be substantial in the event of a liability claim. You would also need to shop for a new insurance policy; most likely one that will cost you more in premiums.

The greater problem may be slow processing of claims.
The InsuranceUSA Website is a marketplace where visitors can learn about insurance products and services and compare competitive offerings. AIG received 29 reviews; scoring 2/5 on customer service and 2.12/5 on claims. Saving money on insurance is great, but if customer service is poor and your claims are not processed on a timely basis you could be setting yourself up for frustrations down the road.

Make sure you are comparing apples to apples.
Really delve into both policies to make sure your AIG quote is not providing less coverage. Compare:
Policy Limits
Perils Covered
Valuation Clause: Actual cash (depreciated) value or replacement cost.

What is the Catch?
AIG lost a lot of business when it almost collapsed and is most likely aggressively trying to win back market share. If this is true and they are low-balling you this year, be prepared for a substantial increase in premiums next year.

Get multiple quotes.
The only way to know for sure if AIG is giving you a good deal it to get multiple quotes; maybe your current insurance company has been overcharging you.

Strategy Recommendation
Before switching, I’m recommending a strategy I’ve learned from the insurance agent I use at work: Go back to your current carrier, inform them you received a lower quote from another carrier (or several if you have multiple competitive quotes) and will switch carriers unless they can lower or better yet match your quoted premiums. If they want to keep your business, they may offer to revise your current policy's premiums. If they refuse, you will have to decide, based on your comfort level with the above information, if you want to make the switch.

The Decision
Jim switched to AIG. In performing his due diligence, he found his current carrier, Allstate, scored just as bad if not worse in financial stability, customer service and claims processing. He was comfortable that he received an apples to apples quote. Based on this information, he did not take my advice and go back to Allstate and ask if they would match his quote.

Sunday, February 08, 2009

Jane Pauley gives “Practical Inspiration”

I heard Jane Pauley speak last month at Milwaukee's "Smart Talk Event." Along with a group of co-workers, I received a complementary ticket from an event sponsor. Due to the weak economy, ticket sales are down for this year’s "Smart Talk Series" which was evident by the number of seats that remained empty.

Prior to the event, I read Tim Cuprisin’s column in the Milwaukee Journal Sentinel where he introduces what Pauley calls “practical inspiration”:

It centers on a baby boom generation dealing with a longer life than preceding generations. To illustrate her point, she cites her Aunt Martha, who was forced to reinvent herself when she was widowed at 50, and worked 25 more years. Her aunt remained active until she was 90 and died at 94. She personifies what an awful lot of baby boomers are going to look forward to, and that is a long period of good health with frailty in old age and health issues compressed at the end of life. “I’m 58 years old, and the prospect of retiring now when I might have 20 or 30 healthy years ahead of me – one could get really bored.”

A little "practical inspiration" is exactly what I need right now. Even though I’m 15 – 20 years away from retirement, I feel as if I need to begin pursuing a change in my career now, but I have no idea how or where to begin. According to Pauley, "practical inspiration" is where ideas come from. Inspiration is everywhere, but you have to look for it. On change she says, “Going forward isn’t easy. Visualizing it is easy. Actualizing it is hard.” People handle change differently:

-Her friend Meg eagerly looks forward to what’s next.

-Ann, another friend, does not embrace change. She spends all of her time getting her ducks in a row. The point is not to get your ducks in a row. The point is to get your ducks in the water.

- Pauley describes herself as a butterfly, one who flits in an indirect path to a specific goal. All of her ducks are in the water she just doesn't know what to do with them.

I relate the most to Ann, who is afraid to step out of her comfort zone. To combat this fear, Pauley suggests instead of jumping into the water to take baby steps. This is practical advice for someone in my situation. I have a secure job, but everything about my career including my networking group feels stale. With more workers losing their job every day, it’s not exactly a good time to begin a job search or to even think about making a career change, but I can start by getting my ducks in a row. If I take one baby step each week, eventually I will be in the water.

After her speech, Jane was joined by Kathy Mykleby for a question-and-answer session. A follow-up point I found interesting is that Pauley’s 40's were not the best time of her life; her fifties are so much better. She says all over the world the 40's are the worst. Menopause and teenagers both of which appeared in her 40’s were not a good mix.

To date my 40’s (I am 46) have been sort of blah, I really like the idea of my 50’s being better. On the way home, I asked two of my co-workers, who are both in their 50’s, if Pauley’s statement rang true for them. It did not; both felt the quality of their life is worse in their fifties than it was in their 40’s. They based this on job satisfaction, financial well-being and their health. I think enjoying one particular decade over another is more dependent on career satisfaction, the quality of your relationships and your health rather than on your age. I have four more years 'til I’m fifty, I don't want to wait that long to have a more fulfilling life. Perhaps, I need a little "practical inspiration".

I know when its time to leave even if I don’t know where I’m going.
Jane Pauley - Skywriting

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