How IRS' New Rules to Restrict Political Lobbying Through 504(c)(4) Organization Impact CPAs?

Recently, the Treasury Department and the IRS has proposed to spell out specific activities for the 504(c)(4) organizations that are considered to be political.  The intention of this proposal is to reduce the financial influence that political lobbyists can exert on political campaigns by hiding behind the tax-exempted non-profit organizations.

As a CPA, I am surprised it takes the IRS this long to make such a proposal.  As most taxpayers know, any expenses spent on political lobbying is not tax deductible. But contribu­tions to civic leagues or other section 501(c)(4) organizations, while generally are not deductible as charitable contributions for federal income tax purposes, they may be deductible as trade or business expenses, if ordinary and necessary in the conduct of the taxpayer’s business.  (This is where it gives a lot of flexibilities to the political lobbyists to fund their politicians buddies.)

Under the current rule,  companies and wealthy individuals can donate lots of money to these 504(c)(4) organizations and receive huge tax deduction while financially supporting certain political candidates they affiliate with.  On their books, it's usually under the "advertising and corporate sponsorships" or "marketing" expenses to promote their products or services" to the communities blah blah.

In my opinion, this practice allowed under the current law is unjust.  The more tax deduction the companies and wealthy individuals pay, the more the IRS need to either cut my future social security benefits or increased my current income tax, which it already did.  The more financial influence big money can exert on politicians, the more the system is going to be skewed to benefit the big money at the expense of little me. 

As a CPA, I welcome this new proposal from the IRS.  But even if this proposed new rule is passed, it will only be effective if only CPAs and auditors who are advising these heavily politically involved 501(c)(4) organizations and their donors, are competent and ethical enough to advise their clients against misclassifying and misallocating political donations as non political expenses on social causes.  In my career as an auditor, I had seen CPAs liberally classify a lot of non-deductible expenses as deductible; many are so outrageously misclassified that I can't believe my own eyes .  Making sure that donations are classified properly are much more difficult than just proposing a new law.

My First Attempt in Getting My First Tax Client

A while back I met a lawyer at  my first and last happy hour for 2012.  He recently referred to me someone who needs a CPA to back file several years of tax returns.  I was so very excited and I started to dream about quitting my current job and having my own tax practice.  Well, such a dream turned out to be very short-lived.  This person whom the lawyer referred to me turned out to be a total flake.

After wasting my time emailing with this person and talking to him on the phone, I was so excited that he agreed to come into my office with his accounting records.  I was so looking forward to the appointment.  But he never showed.  He totally stood me up. I called his office several times and he just dodged my phone calls.  I left messages with his employees but he never called back.  I emailed him few times also trying to re-schedule his "missed" tax appointment.  He never emailed me back.

This flake wasted my time talking to him on the phone, answering his tax questions only to later pull a no-show on a scheduled tax appointment.  He didn't have the courtesy to call or email to cancel.  He didn't have the decency to even return my phone call or email to apologize for his no-show.

I am going to black list this guy's company and him and I swear to never give his company any business or pay my visit at any business that he is affiliated with.  I will warn my clients about this guy if any of them have the misfortune to be solicited by this guy's company.  A flake like this can't be fit for any one to do business with or to even work with.  This explains why he and his company haven't filed taxes for the last few years.

Now that I realize how hard it is to get a client, I have more respect for my current and former bosses for getting enough clients to pay for my salary and benefits.  Building a small accounting firm is definitely no easier task than getting a job from a Big 4.......Why is it so hard to get tax clients?  How can I get my own tax clients? Until I can answer these questions, I guess I better be back to job hunting instead of client hunting....

Tax Returns Assembly Factory

Today, I have finished 15 tax returns, several of them are corporate tax returns that have a filing deadline on September 15, 2012.  Most of them are individual tax returns that were put on extension from April 2012.  I don't know why many CPAs like to do tax returns.  Most of the time it's really data entries, particularly for the individuals' tax returns.  I guess one thrill of doing tax returns is the quick turnover.  With professional tax software's powerful diagnostics, it really doesn't take that much thinking to do tax returns anymore.

With the occasional special issues of tax free exchanges for real estate partnerships, enterprise zone and other industry specific manufacturing credits, and the occasional debt forgiveness, the 15 tax returns that I did today presented no time consuming challenge to me.  At times, I was feeling not like an accountant but a bored  data entry clerk.

The main difference between working in small CPA firms vs Big 4 is that you get to do the boring tax returns during times like this, after you are done with your financial audits and you missed out the tax season back in April.  You will get to do tax returns and plenty of them now.  It's as if there is a second tax season.  I never liked doing tax returns because I hate data entry and I get bored by the process easily.  But I am pulled into this tax filing fun because of these September 15 and October 15 deadlines.

A lot of the tax codes are only applicable to very few people and situations.  The ones that apply to majority of the people are always the same old same old....  This is why even a hair dresser and a travel agent can do tax returns and they put tax returns filing signs outside their barber shop and travel agency.  Pretty soon, I believe I will see car mechanics putting their tax sign up saying "Have your tax return filed while having your car's oil changed."

As a CPA, I often feel like doing tax returns is like doing something that even my high school grad grandpa  can do on Turbo Tax (yes, he never let me do his returns, he loves doing his own on Turbo Tax ... ). I feel kind of being degraded.  After all, one doesn't have to be a CPA to do taxes.   I wonder what it's like to do taxes in the Big 4, may be their tax clients' situations are so complicated that doing taxes can actually be fun and challenging?

Anyway, I'm looking forward to have this Sept and Oct 15th deadlines over, so I can go back to work on attestations and other advisory projects.