Newsletter from
Steve Richardson & Company, Certified Public Accountants

Dear Friends:

I have recently (hopefully) completed my involvement as an expert witness in a substantial divorce action.  It was brutal for me; I can only imagine how terribly difficult it was for the people most affected by this legal action.

It’s legal; I can talk about the people involved and the specifics of the case.  A divorce action is a public record; but, to me, it’s not ethical.  At the very least it’s not polite to talk about other people’s business in any event.  So, I’m not going to do that at all.

This letter is about the financial ramifications of divorce from my perspective as a CPA.

The Rules:

The first three rules for divorce are as follows:

Rule #1: Don’t Get Divorced

Rule #2: Avoid Divorce at All Costs

Rule #3: Do whatever is necessary to Stay Married

I’m not being funny here; this is a very serious discussion.  Divorce is a financial disaster.  This family that is suffering through this divorce is (was) very wealthy, not any more.

Rule #4: Stay Married – The best research on the subject is compelling.  If you manage to get to the other side of a marital crisis, your marriage will be happier and healthier than it was before the crisis.  To summarize Rule #4: Practice the arts of forgiveness and reconciliation.

The marital estate is being split between two people.  This is an extremely continuous division of assets involving many lawyers (too many by half) and at least five CPAs.  The legal fees and CPAs fees are horrific!  I worked so hard on this case, hour after hour; my fee is ginormous.  I worked hard; I earned the money; I did a really good job.  The job that I did was an invaluable help to my client.  All these CPAs and lawyers are expensive!  This divorce is so expensive that the marital estate has been substantially reduced merely by the costs of litigation.  Contested divorce actions are brutally expensive.

Rule #5: Do not go through a contested divorce.

By all means, hire a lawyer; a good one.  I know several and I can make a referral if necessary.  But, negotiate a settlement to your divorce.  Hear me very clearly: Negotiate a Settlement!  Negotiate a Settlement before you go to trial!

Rule #5 has an important subsidiary rule; I’ll call it Rule #5(a).

Rule #5(a): Tell the Truth.

You cannot beat the system.  If you do not tell the truth you will not get a negotiated settlement.  If you fail to get a negotiated settlement you will go to court.  If you go to court you will be (100% guaranteed) extremely unhappy with your settlement.  There are no exceptions to this rule!

If you do not tell the truth the CPAs and the lawyers will help sort out the truth as best they can.  When CPAs and lawyers are allowed to sort out contentious issues their fees are ridiculously expensive.  There are no exceptions to this rule either.

When a “willful misrepresentation of the truth” (a lie) is presented in a divorce action everything slows to a crawl.  When legal machinery slows to a crawl it is far more than merely expensive.  The family issues, particularly with children involved become more unstable.  The potential for emotional, even physical abuse rises.  A lie creates a no-win scenario for either party.  A lie hurts the person who perpetrated the lie, the other party to the divorce and certainly the children.  Rule #5(a) is very important: Tell the Truth!

Rule #6: If you lie once you will do it again.

Lies perpetuate lies; it’s a cycle that, once started, is hard to stop.  In point of fact it often doesn’t stop.  Years after the divorce action a lie will cause the parties to be back in court again over child support, custody rights, alimony and other adjustments to the initial court order.  The lawyers and CPAs will continue to bleed you dry if you tell a lie.  Sorry; the rhyme is accidental.

Rule #7: No one wins a divorce (except for the accountants and the lawyers).

A divorce has no winners, only losers. Everybody loses.  The tax and financial implications of divorce are complex and very unfair. You will need a CPA for years after a divorce merely to keep up with tax rules that are crystal clear to non-divorced taxpayers.

Rule #8: Do not deliberately compromise the marital estate by incurring substantial debt or starting up new high-risk business ventures.  A basic financial planning rule applies to this situation; when you are in a high risk economic environment be careful; be conservative; avoid additional debts.  The wisdom on this should be obvious. Running up super large credit cards or mortgages is counterproductive.  It helps no one and it hurts everyone involved.

Rule #9: Beg, cry, plead, get counseling, pray, pray some more, do any and everything possible to avoid divorce.

Rule #10: If a divorce becomes unavoidable, call me! Get professional advice early in the process.  Even an uncontested divorce requires professional advice before you do anything!

Divorce is absolutely, and I mean, absolutely the last resort.

Again, thank you for allowing us to be of service.

Sincerely,

Steve Richardson, CPA

Dear Friends:

Many of you have asked me about our firm logo. It is a personal Crest.

I received this Crest as an unexpected gift from my dear friend, David P. Johnson, Ph.D. David’s hobby is Heraldry. It is actually much more than a hobby for David; it is a passion. David is too modest to proclaim that he is internationally recognized as an expert in this ancient and artistic field.

This personal Crest tells about me. The Griffin or lion image is a strong warrior image of Celtic origin. I have a passion for Celtic history. The Griffin is wearing a black belt and holding an abacus. The black belt symbolizes my black belt in Karate and the abacus, of course, is a reference to my profession as an accountant. The two roses make reference to my passion for flower gardening (I have a beautiful garden) and the cross is a reference to my Christian faith that is very important to me.

The Griffin at the top is my favorite image on the Crest. He is holding a sword that becomes a Balm branch. The image is of a warrior who fights to bring healing to his clients. I think of my professional practice as a CPA as the art of bringing financial and tax healing to my clients. That is why I am in this business – to help people.

This Crest amounts to a magnificent thank you note from my friend David Johnson. He has put his opinion of me in a beautiful and ancient art form. A gift like this can only make you humble. There is no way that I deserve such a gift. Perhaps by David’s design, there is no way for me to say thank you for such a gift than to attempt to live up to the standards that David has now rendered into art.

Thank you, David. I will do my best.

Steve Richardson, CPA

A global accounting practice is a bit unusual for a modest sized CPA Firm in Alabama.  Our clients are indeed scattered all over the world.

For 2015 we’ve structured our practice for growth.  We cannot remain stagnant; the investments necessary for growth also help keep us on the cutting edge of our profession.

Our goal is to grow 10% this year!

It’s an ambitious goal and we can’t do that without your help.  We rely on the active referrals of our clients and friends to grow.

We rely on and appreciate your referrals!

Please take the time and effort necessary to refer you friends and cohorts to our CPA Firm.  You, your family and your businesses are very important to us; your referrals are also very important.

Thank You!

In case you didn’t know, the word blog is a combination of two words, web and log. You go onto the web and log your thoughts and try to provide interesting and valuable information for your “readers.”

When something comes along that I believe is important for you to know, I’ll post it here. This blog will also become a section of our new website that is going to be rolling out very soon.

Feel free to let me know if there’s a subject that you’d like me to cover here and I’ll do just that.  I’ve mentioned several times that I am moving toward a more digital approach to keeping in touch with my clients and this blog is the perfect way to do it.  I’ll be presenting some webinars and other activities during the year as well.

I’ve just put out our January newsletter and what better way to start off than to post it here for those who may not presently be on my email list?

The way this blog is set up is that the last post, or article, that I write will be seen first.  By scrolling down, you be able to see my previous posts going back in time. You’ll also notice that there’s an archive containing every post I’ve done. You’ll see a “search” entry where you can search for words or phrases and find where they are located in the archives as well.

Of course we are just beginning this process and right now, we don’t have years of posts to search, but you get the idea. Time flies and it won’t be long before we have a lot of great info here for you.

I hope that this will be a benefit to all of you! Don’t be shy, leave me a comment and let me know what you think. You’ll find the newsletter right below this post.

 

Newsletter from
Steve Richardson & Company, Certified Public Accountants

1/18/15

How CPAs Deal With Bullies!

Dear Clients & Friends of the Firm:

Litigation support is not normally a significant part of our firm’s practice; 2014 was different. We were instrumental in winning two important cases both of which could impact you.

This Tax Case Affects You!

We won an important tax case; I was privileged to represent my client before Judge Bill Thompson. Judge Thompson is the Chief Administrative Law Judge for the Alabama Department of Revenue. He is well known and highly respected.

Although CPAs are licensed to practice “tax-law” in court, in practice, in the vast majority of cases, tax-attorneys are engaged to represent clients in the courtroom for a variety of really-good reasons. In this case, hiring a lawyer was not possible. This was not a big dollar case tax case; the matters at issue represented a disputed tax of less than $10,000. In a small dollar case, hiring a lawyer simply does not make economic sense.

Even though it did not make economic senses to hire a lawyer, this case needed to be litigated. The Alabama department, frankly, bullied my client by a willful misapplication of the law believing that the case was too small and the client too poor to hire a lawyer. I don’t like bullies.

I really don’t like bullies. I cannot let a bully win without a fight; so, we had a righteous fight.

I won!

This case is important to you. It is about the documentation required to properly deduct business mileage of an auto. It is also about the business mileage deduction as it related to ministers and whether or not people in ministry are in a “profit motivated trade or business”. I know that last phrase, a “profit motivated trade or business” sounds a bit strange. I thought it strange that Alabama even raised this argument. It was a backdoor attempt to disallow the mileage deduction. To claim a mileage deduction a taxpayer must be in a “profit motivated trade or business”. In short, the Alabama Department tried to use the charitable nature of ministry as an argument that ministry lacks a profit motivation and is therefore unable to take a mileage deduction. Silly argument. But an argument that I had to defeat.

This case will go into the law books and is precedent setting in Alabama and in federal tax law. The case is cited as James M. & Rebecca T. Farrell, Docket No. Inc. 12-430.

If you want a copy of the case, email a request to me and I will forward a copy on to you. It’s only seven pages long but those seven pages say a lot!

The important point is this: to deduct automobile mileage you must maintain some contemporaneous documentation; typically this is a calendar. In this case it was a paper calendar but it could have been Google Calendar or a phone app calendar. Most people actually keep some sort of appointment books just so that they show-up where they are supposed to be, on the right day and at the correct time. That’s all.

You are not required to keep an odometer reading of each trip.

Your contemporaneous records (calendars) must be sufficient so that YOU (not the Alabama Department or the IRS) can communicate to me, your CPA, the business nature of your auto use. That’s all!

This case has some problems; the records were, as Judge Thompson said in his opinion, “inartfully” maintained. That means the records were really a mess; they didn’t even add up. The taxpayer-client admitted to being mathematically challenged. The key fact is this: they kept records and they knew exactly what, where, when and why they used their auto on any given day. It was enough to win.

Why is this case important?

I was able to convince Judge Thompson that a taxpayer who complies with the letter of the law (IRS §274(d)). The Alabama Department had made a corporate decision to hold automobile mileage deduction to a much higher legal standard than required by law.

This case established that the Alabama Department cannot arbitrarily hold a taxpayer to any standard other than the law. They simply do not have that legal right. This is a big deal! This case affects you.

If you want to see the full case you can look it up on-line or email me and I will mail you a copy of the decision.

The Second Case —

I mentioned that there were two significant cases that involved our CPA Firm this year. There is only one common point between the Farrell v. State of Alabama and this second case: I cannot let a bully win without a fight!

I simply can’t.

This second case was a civil case that involved very wealthy people, active business enterprises and lies. Lots and lots of lies. Unfortunately it also involved serious physical and mental abuse.

The details of this case are unimportant but the central truth, the important point, of this case is immensely important to you.

The Central Truth –

Whenever you are in trouble, no matter what the trouble is, always tell the truth! Always!

Lies have consequences; lies in a courtroom can have catastrophic consequences.

For my clients!

• Never make an important legal statement without talking to a lawyer first!

• In any legal case, even minor legal cases, be they criminal or civil, the first and only word out of your mouth should be “lawyer”!

• The 5^th Amendment is a powerful right; know what it is and how to use it.

• Always tell your lawyer the entire truth – never hide anything from your own lawyer.

• When you are compelled to speak, say exactly what your lawyer has told you to say – no more.

• Make short answers; you, no, I don’t know, I do not recall are all perfectly acceptable answers.

• Do not defend yourself; that is your lawyer’s job.

• Never lie! Ever!

The plaintiff in this case broke each of these rules in an effort to hurt my client. More distressing is he coopted his CPAs and had them to lie on his behalf.

My response –

I went through thousands of paper documents, page at a time, hour after hour, and uncovered every lie. The judge was not happy! My bill was, even to me, obscene.

The results –

The person who lied lost – everything. He lost his businesses; he lost his wealth; he lost his reputation and he lost his freedom. The not happy judge put him in jail for contempt.

For my clients –

How does this case impact you? What should you do about it?

Learn the eight rules shown above on this page; teach them to your children, your spouses, your cohorts and colleagues.

Thanks! I love my job and, without you, I would not be able to so what I do. Thank You!

Steve Richardson, CPA