Cloud computing: A whole lot of fluff

14/06/12 9:52 pm | Comments (1) | Posted By:


As I’m staring at an article in Business Week, I keep searching for the article to explain why my company wants to pay for something we already have. The “cloud” is by definition just a network of computers and the reason they came up with the name is because of the original diagram shape of the internet (a cloud). In the cloud are networks, applications, data, servers, etc…the usual stuff, which I already have.

What am I paying for with the cloud? In all respects you are paying for three things – security, expertise and opportunity costs.

Supposedly there are armed guards guarding these database centers where your cloud is located. Ok, that’s a step up from the glass windows and wooden doors at the office. Security covered.

The expertise consists of IT managers making sure you get the right amount of speed and continuous accessibility of your information.

The opportunity costs could add up. As accountants, we think of everything to make the cloud have superior cost effectiveness over a server. The cost of the server, say $5,000-$10,000 a year depending if you buy a new one, the IT personnel hired, the relevant costs of your business growing out of your current server, the rent space, carrying costs and the electricity overhead of the server.

But in order to take advantage of these opportunity costs you would have to do a lot of service analysis. How much accessibility will you need? When will your accessibility needs change? What services do you require? In accounting there’s busy season and then there’s really busy season, so calling up the cloud and saying you are going to increase your accessibility requirements and pay more the next couple of months isn’t the easiest estimate. If estimating sales variability and growth at the drop of a hat were that easy then we’d all be working alongside guys named Professor X and Obi-Wan Kenobi.

The cloud is having all your information online, in real time, freely secure and accessible all within reach. But that distance is only as far as your nearest wi-fi connection, and that’s what it truly boils down to. Sure wi-fi and Internet hot spots are popping up exponentially but they just aren’t everywhere yet. Until they do I look forward to the days without a cloud in the sky.


07/06/12 9:27 pm | Comments (1) | Posted By:


So you think you have financial issues?  Just listen to what Nina Olson, National Taxpayer Advocate, has to say about the IRS.  In her annual report to Congress she suggested that the IRS’s increasing workload and declining resources are the most serious problems facing taxpayers.  So how does she connect the dots to conclude that this is a “taxpayer” problem?

  She reasons that the resulting inadequate taxpayer service, erosion of taxpayer rights and reduced taxpayer compliance are causing harm to the taxpayers.  That’s how!  I don’t know.  Seems to me like an IRS problem rather than a taxpayer problem.  But, then again, doesn’t the taxpayer always get stuck with the tab?

But wait.  Maybe there is a solution that doesn’t stick the taxpayer with the bill.  It turns out that increasing funding for the IRS might actually be a good investment.  Current inadequate funding contributes to many of the problems facing today’s IRS.  When the federal individual income tax was first enacted in 1913, it applied only to high-income taxpayers, which totaled about 358,000 people.  That total today stands at 141.2 million with one tax return for about every two people in the United States.  And believe me, the returns are a lot more complicated now than they were almost 100 years ago.

It seems that as the collection agency for the U.S. government, the IRS does a pretty good job.  On a budget of $12.1 billion, the IRS collected $2.42 trillion in fiscal year 2011.  That is to say that for every $1 that Congress appropriated for the IRS, it collected about $200.  Now with the current “tax gap” at about 15%, every household is paying an annual “noncompliance surtax” of about $2,700 to enable the federal government to raise the same amount of money it would have collected if all taxpayers had reported their income and paid their taxes in full.

While I doubt that appropriating an extra $1 would produce the same collection rate when applied to the last 15% of noncompliance, I’ll bet it would provide an attractive return on the investment.

Taxes, Taxes, Taxes! How Much Do You Really Pay Each Year?

31/05/12 8:42 pm | Comments (0) | Posted By:


Have you ever wondered just how much you pay in taxes over a year? Not just big tax items like income and property taxes, but even the taxes on the gas you pump into your car to the taxes on your utility bill?

Maybe you haven’t because you’re not obsessed with taxes like us CPAs, but if you are curious, the American Institute of CPAs has come out with a nifty tax calculator that is designed to give U.S. taxpayers a complete picture of their estimated total federal, state, and local tax obligation.

To give you fair warning, you will not be able to just plug in a few numbers and get your calculation.  For the calculation to be accurate, you will need your prior year’s tax return, your estimated income, and a good idea of what you spend a month on expenses like gasoline, cable, cell phone, electric and gas, alcohol, clothing, etc. With just a click of the button you will be provided with a total estimated annual tax liability and exactly what percentage of your income is paid over to the taxing authorities.  If you have a moment – check it out; the results just might shock you!

The calculator is also available on our website –, in the resources/links section.

Spring Fever is the right time for College Tax Planning

24/05/12 11:47 pm | Comments (0) | Posted By:

It’s spring time in the Truckee Meadows. The river is running high, the trees are green, and students of all ages are getting spring fever.

With graduation on the horizon, it’s hard not to think about what is coming next. Whether your student is finishing kindergarten, graduating high school, or currently in college, it’s always a wise idea to be thinking about a plan for higher education.

It’s never too late to start saving, but just like planning for retirement, the earlier the better. These days there are a lot of options available for consideration including Section 529 plans, education savings bonds, Coverdell education savings accounts, and education loans. As the cost of college continues to increase it is important to be prepared. According to the Project on Student Debt, two-thirds of college seniors in the class of 2010 graduated with loans, and the average debt carried was $25,250.

The cost of college continues to be on the rise. Make sure you look into all your options for investing in your child’s future as well as for deducting your current costs.

If your student is already in college or will be starting this year, make sure your CPA is making the most of education deductions and credits. For those that meet the requirements, student loan interest can be deductible on a qualified education loan. Taxpayers may also be able to claim a deduction for qualified tuition and fees. Education credits include the American Opportunity Tax Credit and the Lifetime Learning Credit . These deductions and credits should be coordinated to maximize the tax benefit. While taking this all into account, it is also important to review the dependency exemption and determine when it is the optimum time for your child to no longer be claimed as a dependent.


A Look inside the President’s Finances

17/05/12 7:46 pm | Comments (0) | Posted By:


It’s always interesting to get a look into somebody’s finances, and who better to snoop at than President Obama. He released his 2011 tax return, which can be viewed at:

It’s a very simple return: Wages from being the President of $394,821, $10,694 in interest income and $441,369 from selling his books, for total income of $789,674.

I always like to deduce how much somebody has in the bank, and by using Obama’s $10,694 in interest income, assuming he is getting a 1.5% return, that implies he has $713,000 in the bank. This is somebody who has made $1.8 million in 2010, $5.5 million in 2009, $2.7 million in 2008, $4.1 million in 2007, $983,826 in 2006 and $1.7 million in 2005 for a total of $18 million over 7 years. With this much income, I find Obama’s saving rate atrocious.

But what is the sense of saving when you can expect hundreds of millions of dollars in income after you leave the presidency? For example, Bill and Hilary Clinton have made over $109,000,000 from 2000-2007 after his two terms were up as President for activities such as speeches and book sales. So I’m sure Obama will be making boatloads of cash after he has left the Presidency, and there is always the few hundred thousand he has contributed to self-employed retirement plans that are tax deferred.

Next, looking at Obama’s itemized deductions shows he paid over $47,000 in mortgage interest. Assuming he refinanced recently and is getting a 4% interest rate, this means his principal balance is over $950,000 thousand. He has more in mortgage debt than he has in the bank and has made $18 million just in the last 7 years. But at least he isn’t underwater. According to Zillow, the value of his Chicago home is $1,052,100. But, since he purchased it for $1,650,000 in 2005 it appears he’s hurting like the rest of us.

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