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Accountant Can’t Bear the Thought of Serving Clients on the 100th Anniversary of the Titanic Sinking

Posted on by Caleb Newquist

As CPAs and capital market servants, you are all acutely aware that that serving clients to the best of your ability is priority numero uno. Forget your family and friends. Forget your pets. Forget your beloveds.  Clients complete you in ways that those other people/animals can't possibly understand.

Sure, there is the occasional event that wouldn't allow you to cater immediately to a client's need but it'd better be a damn good reason. While attending the birth of children and funerals of loved ones are typically allowed, and a nuclear attack or Diet Coke break are also in the realm of serious matters, some CPAs out there have more obscure life-altering events that will cause them to give clients the "I need a minute" finger. Enter Howard Owens, an accountant near Riverside, California who has had a "Titanic fascination since childhood," reports the New York Times:

On the evening of April 14, the Balmoral cruise ship will arrive at the spot where the Titanic sank 100 years ago. A memorial service will be held there at 2:20 a.m. on April 15, when the Titanic went down. Mr. Owens, 56, and his wife, Terry, spent close to $11,000 each for the 12-night crossing, which will also require him to shut down his office at the worst possible time.
 
“A client of mine said, ‘Why would you close at the middle of the tax season?’ I said, ‘I didn’t pick the day the Titanic sank,’ ” Mr. Owens said. “I have to be there. I just have to.”
Sure, this seems a little bizarre. A grown man obsessed with the Titanic, leaving his livelihood behind so that he can be on a boat in the middle of the Atlantic in the middle of night to remember a bunch of people that he didn't know but from the sounds of it, you don't want to get in the way of this CPA and his dream. The wife is probably lucky that she's even going.
 

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Doing Penance for John Edwards’ Sins: Provision Could Hit “Skilled” S Corp Owners

Long before John Edwards became known as a well-coiffed skirt-chasing weasel, he was a well-coiffed successful trial lawyer. He was successful enough to afford good tax advice, so he conducted his law practice in an S corporation.

Back in the old days, professional practices were conducted as sole proprietorships or general partnerships, reportable as self-employment income, subject to the 15.3% self-employment tax up to the FICA base (currently $106,800), and to the 2.9% Medicare portion of the tax to infinity.


When state laws allowed professionals to incorporate, attorneys and accountants quickly noticed that income on S corporation K-1s is not subject to self-employment tax. This makes S corporations a popular way to run a professional practice. The professionals take a “reasonable” salary out of the business (subject to employer and employee FICA and Medicare tax) – enough to not raise IRS eyebrows – and take the rest out as S corporation distributions with no employment tax.

John Edwards did well by this. His law practice generated millions dollars of K-1 earnings in excess of his salary, saving him hundreds of thousands of dollars in payroll and self-employment tax.

Now that he has been reduced to a wealthy target of mockery, Congress is ready to crack down on the John Edwards S corporation tax shelter. The annual “extenders” bill has a provision – almost as absurd as Edwards love life – that will hit professional S corporation K-1 income with self-employment tax. The SE tax will apply when the “principal asset” of the S corporation is the “reputation and skill” of three or fewer professionals – defined for this purpose as “services in the fields of health, law, lobbying, engineering, architecture, accounting, actuarial science, performing arts, consulting, athletics, investment advice or management, or brokerage services.”

Congress doesn’t muss its hair worrying about how taxpayers in multi-owner S corporations are supposed to figure out whether its “principal asset” is the “reputation and skill” of three or fewer owners. However it works, this provision is too late to hurt John Edwards — his reputation isn’t much of an asset anymore.

Joe Kristan is a shareholder of Roth & Company, P.C. in Des Moines, Iowa, author of the Tax Update Blog and Going Concern contributor. You can see all of his posts for GC here.