Going Concern

Small Business

The New York Times Has Some Helpful Suggestions For Non-Accounting Nerd Business Owners

Adrienne Gonzalez
August 4, 2011

And you guys had the nerve to talk smack about me trying to give inheritance advice yesterday. Pfft.

In a recent article entitled Basics of Accounting Are Vital to Survival for Entrepreneurs, the New York Times tells the tale of Bart Justice, an industrial engineer-turned-business owner who decided to start a mobile document shredding business in 2004 after a rash of new security laws. Justice got a loan from the bank, bought a mobile shredding truck, hired a driver and opened a shop in Huntsville, AL called Secure Destruction Service. Sounds good, no?

In its first year, the company had $70,000 in sales. Within four years, the company had annual revenue of $500,000, six employees and two offices. Again, that sounds great but revenue is not the same as equity or net worth, even a non-accounting nerd like me knows that much.

When he wanted to add another shredding truck, Justice went back to the bank and borrowed more money. The bigger he got, the more money he needed to borrow. Somehow, he didn’t understand that this borrowed money was not actually revenue and was, in fact, a liability as he had to pay it back at some point.

“I knew how to print a financial statement from QuickBooks, but I couldn’t tell you what it meant,” he said.

Fast-forward to 2008, when Justice joined a peer group for Christian business owners. “They would ask me questions about my numbers, and I didn’t know how to answer them,” he said. “They told me my business was going to fail unless I got a handle on paying down my debt.”

No shit, Sherlock, did you need a financial professional to tell you that?

Here’s the gist of the article: if small business owners don’t get number-crunching, put the money out and hire someone who does. What the NYT does not have the balls to suggest is that small business owners should stop saying “I hate accounting” because they think it’s still cute and go out and take an introductory accounting class or two. No one expects business owners to be able to pull analytics out of their asses but it can’t hurt to maybe at least understand that you want liabilities to be less than assets to stay alive.

Former BDO Partner Gets Probation For Cheating on His Taxes

Adrienne Gonzalez
August 4, 2011

Poor BDO, they never get in the news. But hey, they do today!

Former BDO partner George Mark got off easy this week when U.S. District Judge Nora Barry Fischer said he didn’t deserve to go to jail thanks to his “extraordinary” charitable efforts and remorse for his actions. Mark’s tax evasion was uncovered during an investigation into Pennsylvania beverage company Le-Nature’s, who apparently specialized in nepotism, ass water and fraud.

Mark will instead serve two years of probation and pay a fine of $30,000.

A federal jury recently found Le-Nature’s former president Robert B. Lynn guilty of 10 counts of bank fraud, wire fraud and conspiracy. The jury found him not guilty on 10 additional fraud counts and deadlocked on five others, which left Senior U.S. District Judge Alan Bloch Jr. no other choice than to declare a mistrial on the remaining charges. The company’s CEO Gregory Podlucky and other company officers are facing prison for their part of a $37 million fraud.

While investigating Le-Nature’s ugly mess, the IRS found out that Mark declared fake travel expenses on his 2004, 2005 and 2006 tax returns for about $90,000. The IRS determined that Mark was living the gangsta lifestyle out in the Philly ‘burbs, rented an apartment in NYC, traveled a lot and owned a few luxury cars.

The U.S. attorney’s office had hoped the judge would come down with jail time in order to convince would-be tax cheats that this is serious business but the judge felt Mark’s volunteer efforts for Hope International and other charities was sufficient proof that he wasn’t all that bad of a guy, perhaps just a little misguided.

Back in 2008, 74 investors alleged fraud and negligent misrepresentation against Wachovia Capital Markets, Wachovia Securities and two accounting firms, Ernst & Young and BDO Seidman for their respective parts in the Le-Nature’s scam, in which company officers (mostly CEO Podlucky and his kin) would secure loans for business equipment only to turn around and use that money for things like, oh, sapphires and overpriced watches.

E&Y audited Le-Nature’s until BDO took over. “E&Y was aware that Podlucky could single-handedly influence or manipulate the company’s financial results …” charged the lawsuit. The company basically made up $240 million in revenue and BDO auditors declared the company’s financials were free of material misstatements. FAIL.

Anyway, congratulations to the former partner for, uh, being such a model human being. Or something.

KPMG

KPMG Global Plans to Hire 75,000 New Grads Over The Next Three Years, But Not Here

Adrienne Gonzalez
August 4, 2011

And they decided this information was so important that they had to send out a press release telling everyone about it.

KPMG’s member firms will hire approximately 75,000 campus graduates worldwide over the next three years, representing a 25 percent increase in the firm’s historical on-campus resourcing target.

The global member firm network has identified a need to hire approximately 250,000 new hires over the next five years and graduate recruitment plays an essential role in meeting the firm’s long term global growth strategy. New hires will be integrated into all of KPMG’s functional areas – Audit, Tax, and Advisory, and Internal Firm Services.

“While KPMG’s firms plan to hire a large number of new graduate employees, it’s important to note that our focus is about more than simply high volumes – it’s about recruiting top talent to drive our growth now and into the future,” said Alim Dhanji, KPMG’s Global Head of Resourcing, KPMG International. “To attract the best, we offer new graduates the opportunity to work alongside talented professionals in 150 countries, solving complex client issues and making a difference to some of the world’s most prestigious organizations.”

Don’t get all hot and bothered about this one, sophomores and juniors, it looks like a large chunk of KPMG’s new “top talent” pool will be out in the Asian Pacific. They call the region “one of KPMG’s strongest performing regions” and “a pillar within the firm’s global strategy.” Uh huh.

Remember, the economy doesn’t suck everywhere around the world.

“Globally, we are seeing a revitalized labor market, with students seeking international work experience, which we’re able to deliver on,” says Dhanji. “The competition for top talent is fierce. To attract the best, we offer programs that place students at the heart of our business to fully develop their global mindset, which will in turn enable them to realize their full potential and help us to deliver on our business goals.”

Admin

How to Post a Comment on Going Concern: A Helpful Guide

Adrienne Gonzalez
August 4, 2011

If you have successfully posted a comment on our site before (or several times before) without revealing your personal information, congratulations! The comment system isn’t that hard to figure out but we understand some of you are first-timers, multitasking, commenting while looking over your shoulder to make sure partners aren’t hovering around your cube or otherwise confused by the way it works. Therefore, we’ve put together this simple guide that should take the guesswork out of commenting on our site. Those of you who have figured this out may sit this one out, or fast-forward to the comment section to make fun of those who haven’t.

First, if you already have a Disqus account, the easiest thing to do is stay logged in on your machine and ��le heart’s content. Your comment box will look something like this (except with fewer “likes” because you’re not as funny as I am and fewer comments because you hopefully have more of a life than I do):

Where it says “Type your comment here,” you will type your comment. Confirm that the avatar and name shown are actually yours unless you’ve hacked into your editor’s Disqus account to post embarrassing details about his personal life in front of all to see like this:

Anyway. Pretty self-explanatory, and great if you want credit for whatever you are posting but what if you prefer to remain anonymous or are a troll hoping to leave shitty criticism of people’s personal and professional lives without having the balls to sign your name to them? No problem!

Let’s say (theoretically, of course, I would never troll my own website) I wanted to respond to this jerk who called me out but want to make it appear as though I am not actually me so people think I actually have friends. Your comment field should look like this if you are logged out or unregistered:

Now, coming up with a snappy comeback is up to you. But once you’ve figured out what to say about this person’s Mom/dog/grandma/balls/whatever, pop it in the comment field and hit “Post as…”

It’s the window that pops up after that that seems to give people the most “trouble” so read this next part very carefully as we will not repeat it again and are this close to refusing to delete any identifying information since so many of you seem to get this part horribly wrong.

What this means is that if your email address is firstnamemiddleinitiallastname@gmail.com, typing that into Disqus will CHANGE “Guest” to “firstnamemiddleinitiallastname,” meaning if you do not double-check the field before hitting “Post comment,” you have now just exposed yourself to the entire Going Concern audience. This will make your joke unfunny, make you look like a douchebag and annoy the crap out of us when you inevitably email everyone on the Going Concern team demanding we take down your post at 11pm on a Friday night because YOU couldn’t pay attention.

Note: if you use Facebook, Twitter, Yahoo or OpenID to log in, this will link directly to your respective profile on those sites. So don’t use this option if you don’t want the troll you just humiliated to have your personal information. I repeat: do not use this if you don’t want people to know who you are. In fact, I’d advise against using this option altogether.

If you have any questions about our comment removal policy, please review our Terms of Service carefully. The short version is that we will not delete comments because you accidentally used your real name, posted identifying information about yourself such as actual office and cube location and/or Social Security number, made some remark that you now regret because of all the haters who attacked you after you made it or spelled important words wrong and now feel like a douchebag. So think it through and please, for the love of all that is sacred and holy please double-check before you hit “Post comment.” It isn’t that hard and everyone will be happier in the long run. A lot of you seem to have issues with this lately; don’t make us remove the option to comment completely from this site, as we believe the comment section is what makes Going Concern such a great place to waste all those billable hours.

With all my love,

UPDATE: PwC Decides It Doesn’t Want $1.1 Million in Free Money From Tampa After All

Adrienne Gonzalez
August 4, 2011

Contributor note: As can happen when assembling posts for a tabloid publication late at night after too many beers and not enough sleep, we bumbled some simple facts on this one. We appreciate an astute reader reaching out to correct us and will spend the remainder of the day in the punishment corner thinking about what we’ve done.

It wasn’t that long ago so all of you should still have PwC’s recent Tampa “scandal” fresh in your minds but in case you need a refresher: 390 PwC employees in Tampa were impacted by a restructuring which left some out of a job and others ih other companies. ~~PwC fired a little under 500 IT people in Tampa (moving those jobs to an outsourcing firm in India)~~ and that pissed everyone off so to be nice, PwC decided to hire 200 new people and build a new $78 million office smack dab in the middle of Tampa (after hiring 487 employees in Florida for FY 2011). Isn’t that sweet? Well yes, it was, but that wasn’t the problem the press had an issue with. It was the fact that PwC was going to get $2 million (give or take a few pennies) in subsidies for doing it.

That didn’t go over very well (understandably) and as of yesterday, PwC had their Tampa lawyer – one Kenneth Tinkler – shoot a quick “oops, our bad” note to the mayor and city council stating they would no longer seek the $1.1 million “in incentive payments already approved by the City and County.”

Not the kind of firm to be accused of bitching out on a big deal like this, PwC will move forward with the plan to build in Tampa’s Westshore and hopes to have its entire Tampa workforce settled in there by 2013.

“I was very surprised to hear that they were turning down the incentives,” said Tampa City Council member Mary Mulhern, who apparently exercised professional skepticism during the subsidy approval process. “But I am very glad that they have reiterated their intention to stay here.”

See, what happened was apparently the Tampa/Hillsborough County Economic Development Corporation got the facts wrong ~~PwC fudged the facts a bit~~ when it applied for the money on PwC’s behalf (as is standard), saying it needed the incentives to keep 1,633 jobs in Tampa. At the time, Tampa City Council members and Hillsborough County commissioners didn’t actually know the unnamed financial services firm applying for the incentives was PwC. According to the St. Petersburg Times, a written application made on the firm’s behalf said it had competing offers from South Carolina, India, Singapore and Argentina. But PwC denies that it ever planned on moving any jobs out of the area. “We never considered moving those 2,000 jobs out of Tampa,” the firm’s Florida market managing partner Mario de Armas told the St. Petersburg Times.

Update: Mario later corrected his earlier statement by telling the St. Petersburg Times “PwC has openly communicated to the Tampa Hillsborough Economic Development Corp. that when it originally evaluated potential sites for the firm’s new Enterprise Solutions Center, the firm was considering either a short-term lease renewal in the existing building in Tampa or constructing a building in Tampa with a long-term lease commitment. Although we did not contemplate an immediate move of 2,000 jobs out of Tampa, a short-term lease arrangement inherently leaves open the long-term question as to where our Enterprise Solutions Center would be located. Instead, our decision to invest in a new building demonstrates a sustained, long-term commitment to the Tampa area. PwC was forthright and consistent in its communications with Florida’s state and local economic development officials throughout this process, and so now we are very much looking forward to our partnership with the greater Tampa community and to maintaining and potentially increasing our work force in Tampa.”

The entire letter from their lawyer is included here for your reading pleasure:

FInal Tampa Letter 8 3

News

Accounting News Roundup: IASB Threatens to Walk Away From FASB; The Last of the XBRL Stragglers; Yet One More Bankrupt City | 08.04.11

Adrienne Gonzalez
August 4, 2011

Global accounting rules? Don’t tread on me, U.S. says [Globe and Mail]
The United States Securities and Exchange Commission first suggested four years ago that public companies could eventually use the global standards, known as IFRS. Now, however, the agency’s staff has delivered a new working paper describing the idea of “condorsement.” It’s supposed to be a combination of “convergence” and “endorsement,” but it might be better named “rejectstinance,” for obstinately rejecting a global standard.

Attorney With Ties to Goldman and SEC Continues to Cause Controversy [CompliancEX]
An attorney for the Securities and Exchange Commission signed off on Goldman Sachs’ collateralized debt obligation known as Abacus when he worked in the private sector, and he may have to testify in a civil trial on the issue, FINalternatives reports. Adam Glass, who served as an outside attorney to Paulson & Co., approved Abacus-ASC1-2007, worth over a billion dollars. According to FINalternatives, the SEC said the CDO “was structured and marketed by Goldman on behalf of Paulson, which made a mint by shorting the CDO.”

IASB threatens to weaken ties with FASB [GFS]
The International Accounting Standards Board has threatened to stop engaging in new joint projects with its US counterpart, if the US Securities and Exchange Commission does not endorse its IFRS standards. The IASB’s vice chairman, Ian Mackintosh, made the announcement during a webcast in which he answered industry questions about the IASB’s recent consultation over its future strategy.

Bruised regulators brace for Dodd-Frank court fights [Reuters]
U.S. regulators are scrambling to bulletproof dozens of financial reforms after a court last month tossed out an important part of the Dodd-Frank financial oversight law. The federal appeals court ruling faulted the Securities and Exchange Commission for conducting a flawed economic analysis to support a rule to make it easier for shareholders to nominate directors to corporate boards, a process called “proxy access.

Ex-auditor admits violating state law [Boston Globe]
Former Massachusetts auditor A. Joseph DeNucci agreed yesterday to pay a $2,000 civil fine after admitting he violated state conflict of interest law by hiring his 75-year-old cousin to work in his office in 2008.

Bondholders Win in Rhode Island [WSJ]
Central Falls, R.I., a city of 19,000 residents that filed for bankruptcy Monday, is a bondholder’s dream. Thanks to a new state law that places bondholders ahead of other creditors, Central Falls plans to pay investors the entire $635,000 it owes them in October.

XBRL Enters the Final Phase [Compliance Week]
When public companies file their latest financial statements in coming weeks, almost all of them will be required to use the XBRL tagging system for interactive data. The smallest companies have had three years to prepare, but many still struggle with the technology. “I’d say a lot of the smaller, ‘Wave 3’ companies are still pushing this off,” says Raul Varela, vice president at Rivet Software.

Nearly $1M recovered by auditor [Clarion Ledger]
Nearly $1 million in misappropriated or misspent funds was recovered by the state auditor’s office in the last fiscal year.
A report released by State Auditor Stacey Pickering shows the funds ranged from a 35-cent repayment for an unspecified piece of missing equipment from a state Department of Public Safety employee to $1.2 million embezzled by a now-deceased accounting clerk in Jackson County.

Grant Thornton

Grant Thornton Dodges the Koss Bullet, Is Dismissed From Shareholder Lawsuit

Adrienne Gonzalez
August 4, 2011

U.S. District Judge Lynn Adelman has dismissed Grant Thornton as a defendant in a class-action shareholder lawsuit against GT, Koss Corp. and CEO Michael J. Koss, filed in January 2010 on behalf of plaintiff David Puskala and other Koss shareholders.

In his ruling, Adelman stated that the plaintiffs failed to make a case for GT’s epic failure to detect former Koss executive Sue Sachdeva’s $34 million embezzlement/hoarding scheme. Reasonable, considering GT auditors scared the crap out of old Sue, even though they were sticking newbies on the gig. “Fear was one thing. I thought it was imminent,” she said in a court deposition last year. “Their auditors, every time they walked in, I’d say, ‘This is it. They’re going to catch me.’” Shareholders’ issue – we assume – is that they didn’t. Year after year after year after year until 2009 rolled around and the whole house of cards came tumbling down.

The judge also dismissed claims of willful or reckless behavior against Michael Koss, saying “I conclude that the innocent explanations are more compelling than the inference of recklessness.” Meaning Mike couldn’t possibly have known Sue had been siphoning off millions in company money over a six year period, absent hanging out at her house and noticing all the fancy new shit she had strewn everywhere. And stashed in closets. And bursting out of her garage.

As for Grant Thornton, the judge wrote that the occurrence of fraud and failure to detect it doesn’t imply recklessness on the part of the accounting firm, but rather that the firm was negligent. While it is clear that Sachdeva used her position with Koss to bypass the company’s not-rock-solid internal controls, it is also believed that the controls were sufficient so as not to be obviously unreliable to a reasonable person (or auditor fresh out of accounting school). We’re looking forward to hearing how audit professors use this decision to emphasize the cavernous depth between “negligence” and “recklessness” on the part of auditors.

Sachdeva is still a defendant in the Puskala lawsuit and is currently serving 11 years for the fraud.

Grant Thornton dismissed from Koss shareholder lawsuit [Milwaukee Journal-Sentinel]

Would-Be Audit Noob Struggles With Picking a City (After Already Picking a City)

Adrienne Gonzalez
August 3, 2011

I’m pretty sure this isn’t a troll and this guy actually wants to know if this is OK. I have some location-based advice having lived in that area for over a decade, hoping you guys can fill in the rest. What would be the etiquette on this?

I am starting with a Big 4 firm in a little over a month in their San Jose office. However the more that I think about where I want to be and the housing options available I am more interested in San Francisco. Would I be risking my offer by asking to transfer so late in the game?

If it matters at all, I have heard from a friend in the SF office they are still looking to fill a few entry level audit positions.

Are you kidding me? You’re trying to kick off your career as “that guy” (don’t think recruiters aren’t tweeting amongst themselves all the time; you will get talked about) over the difference of a 45 minute drive. I could understand if you were struggling between New York and Los Angeles (with tail and good salary potential in both relative to cost of living and actually being able to enjoy the apartment you pay too much for) but you’re within the same metro area. San Jose isn’t that bad and you have the advantage of being able to “escape” city life to some extent when you are not actually at work.

Would you be risking your offer? Did you sign it? Did you feel like it was right at the time but now think a handful of miles will be worth considering that bridge burned?

But living in San Jose means you don’t live in the thick of it. San Francisco is fun to visit and great on paper but after a few years, it gets really old. You’re already putting yourself through life in the Big 4, why make that worse by also subjecting yourself to guys peeing on the Muni and those damn grey speckled recycled blankets everywhere? What makes you more interested in San Francisco?

In your copious amounts of free time, you can drive near San Francisco, BART in, enjoy yourself a paper-bagged PBR and BART your ass back to the San Bruno parking lot and retreat back to your San Jose lair. It’s practically like being in San Francisco.

If you haven’t actually signed the offer, you could try to get a lead on “your friend’s” firm; tell them unsubstantiated rumors are one thing but calls from HR are another. I’d advise against rejecting the San Jose firm’s offer without having some sort of reasonable assurance (bleh) that the San Francisco office actually wants you but with less than a month to go, you better have started pursuing that yesterday. I assume you don’t have the luxury of doing this in person; if you were local, you would know San Jose and San Francisco are pretty much the same thing if you are talking about money but there’s also a quality of life issue here that you need to look long and hard at.

If you still like this idea, please go read So You’re Moving to San Francisco by Twitter API lead Alex Payne. I’m not trying to talk you out of it, I’m just asking you to really think this through before you screw yourself in San Jose. If you signed the offer, you should do the grownup thing and suffer through it for two years like everyone else. Then once you are sufficiently jaded, have passed the CPA and have the work experience to get the actual license, you are more than welcome to bail on the firm after the competition in San Francisco poaches you.

The market is not that good to allow you the opportunity to get this picky unless you are an Elijah Watt-Sells winner, 4.0 MAcc superstar or putting out. A lot.

News

Arizona City of Surprise Gets to Keep Its AA Rating Despite 10 Years of Accounting Errors

Adrienne Gonzalez
August 3, 2011

Standard and Poor’s (S&P), one of the nation’s most well-known credit rating agencies, has informed Surprise it is affirming its “AA” credit rating. After a review, S&P cited a diversifying and strong local economy, new city management, low debt and ongoing corrections to past financial issues as reasons for affirming the high rating. S&P defines an AA rating as “a very strong capacity to meet financial commitments.”

This ignores the fact that the city of Surprise has (surprise!) suffered through a decade of multi-million dollar accounting errors and financial mismanagement.

Surprise finance officials say the news is a positive statement about the overall financial and economic health of the City. “S&P’s decision to affirm our AA rating is good news for Surprise taxpayers,” said Surprise Chief Financial Officer Scott McCarty. “This is one of the agency’s highest possible rankings, and the news is a positive checkpoint on our road to financial resiliency.”

Right. The same cannot be said of Surprise Mayor Lyn Truitt, who claimed more than $464,000 in mortgage, credit card and other debt when he filed for bankruptcy earlier this year.

Anyway, in FY 2010, Surprise had 33 prior period adjustments, compared to just one the year before and nine the year before that. The city found errors dating back to the year 2000 and stated that every financial statement category was affected. These errors had a $56.3 million liability impact related to the city’s sewer system alone and left the operating budget a little over $5 million in the hole.

Yeah… good luck with that.

(UPDATE) Fulltime Offer Watch ’11: Interns, Let’s Talk About Offers

Adrienne Gonzalez
August 3, 2011

A wise suggestion from the mailbag:

I had an idea for an interesting blog topic – most Big 4 interns will be finishing up within the next week or two. It would be interesting to see what the starting salaries and bonuses are turning out to be across the firms and across the different offices for new hires starting Fall 2012. I know you did a similar compensation blog a while back and it had several hundred comments with people sharing their respective numbers.

Thanks, astute future capital market servant! Jesus, is it really August already? We did do this last year around this time and you are correct that we got some great feedback from the kids. Except for the ones who got kicked off the team before the big trip to Disney, awww sucks for them.

Instructions this year are the same as last year, please be sure to include 1) your starting salary 2) your office 3) practice 4) signing bonus (if applicable) 5) Bonus for CPA (if applicable). Remember that anything you post will be seen by everyone you know including your colleagues, lover, dog and grandma so please, if you want to remain anonymous, post as such. Mommy won’t be around to moderate your discussion.

Because not everyone fits into the Big 4 cookie cutter, all interns looking forward to full-time offers are welcome to join the conversation, compare packages (erm) and brag about how much better their firm is than others. There’s no crying in baseball but this is public accounting, which means whining is also welcome.

Get on that, future leaders of the industry!

UPDATE:
The latest:

I believe PwC and DT offers come out this Friday. I’d really appreciate the input from other readers. It could affect my own FT offer.

News

Cokehead Accountant Almost Bankrupts His Company By Embezzling His Drug Money

Adrienne Gonzalez
August 3, 2011

58-year-old Charles Shaffer has been ordered to serve two to four years in prison for stealing nearly $400,000 from his employer to fund a nine-year-long coke habit.

According to testimony, Shaffer stole $381,361 from telecommunications consulting firm Icore Inc. between 2001 and 2010 by writing checks to himself from a medical expense reimbursement employee fund.$381,361 over a nine year period really isn’t that bad of a cocaine habit, unless the guy was buying crap $20 grams from club kids. Think about it… if he was snorting up a really good gram a day at $100 a gram that’s $36,500 a year, but doesn’t take into account high-stress, high-use days like holidays, birthdays, anniversaries and yearly internal audits. Oh wait, obviously they didn’t care about that last one.

“He stole money from Icore, put it up his nose and Icore suffered the consequences,” said Lehigh County Judge Robert L. Steinberg in his decision.

The saddest part of this story (besides the part where the cokehead robs his employer for 9 years and no one seemed to notice) is that Shaffer’s actions very nearly caused the small company, which employs about 15, almost went under had they not had insurance and taken out a loan to stay afloat. “We came pretty close to shutting the doors,” said company VP Paul Kutches in testimony. “(Shaffer) was entrusted to make sure the finances were on the right path.” They were on the right path, alright, straight up his nose. “I would just hope this court imposes a sentence that reminds Mr. Shaffer of stabbing his friends in the back every day,” said Kutches when asked what sort of sentence he’d like to see his former employee receive in this case.

Shaffer started with the company in 1997, however company bank records only go back to 2001. Company officials first contacted investigators in June 2010 when they discovered missing money and Shaffer was arrested the following August. At that time, he signed over his $33,634 company retirement plan and forfeited his $80,000 a year salary.

Now that he’s off the powdered sauce, Shaffer is showing signs of regret for his actions. “There isn’t a day that goes by that I don’t feel remorseful,” he told the judge.

Remember, kids: internal controls are an awesome, awesome thing.

Accountant gets prison for embezzling to buy drugs [Morning Call]

The JDA

What To Do When You Inherit Money

Adrienne Gonzalez
August 3, 2011

If you’ve recently inherited a little money from a deceased relative, please accept our condolences. Then accept our advice, which might help you navigate this tricky area without ending up in the IRS penalty box and/or screwing yourself later on down the road.

Special thanks due to Allen DeLeon, CPA, PFS of DeLeon and Stang, who gave me good advice when I found myself in this situation with no clue how to handle it and some pointers for this article. If you are in Maryland and need an expert to help with your inheritance (Fluffy Mattress, CPA is not taking on new clients at this time), hit up the firm and they’ll be happy to help. The following is not presented as tax advice and is not meant as a substitute for a professional assessment of your personal situation.

First, you might be a CPA but that doesn’t mean you are an expert in personal financial planning, estate rules and tax law. So unless you happen to be a partner with 20 years experience handling inherited IRAs and pension plans, find yourself a qualified CPA from whom you can get a little advice. Maybe there is a partner in your office who you trust that knows a thing or two about this area but absent that, check with your state society of CPAs to see if they have a recommendation. It shouldn’t be hard to find someone in your state.

Second, get any real estate or other property valued and save all documentation. You aren’t taxed on the receipt of property, so if your grandma leaves you her house, you don’t have $200,000 in income to claim but you will have a gain (or loss) to report later (should you sell this property) that is based on its value at the time of the owner’s death. If you end up never valuing it and renting it out for a decade and then want to sell it, you’ll be ass out if you don’t have a baseline value. This goes for stocks too but you should have no problem figuring out what those are worth.

On the federal level, the only initial tax you have to worry about is on inherited IRAs and pension plans, which are taxed as income (meaning at your normal tax rate – be wary of a large sum changing your tax bracket). If you cash these out, you can elect to have the tax withheld or pay it directly to the IRS yourself after distribution but keep in mind there could be penalties associated with that option.

Currently, most inheritance is not subject to income tax. The second Congress reads this article, however, that could change so again, talk to someone who actually knows the rules and keeps us with any changes if you are at all unsure how to proceed.

Good luck!

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