NT - A Tax Man Takes Account of His Life

[Yardley CPA]

A Tax Man Takes Account of His Life

Even though it's tax season, accountant Doug Stives skied at Snowbasin in Utah last month.

CPA lives better, works less thanks to the art of deduction.

In the thick of tax season, most certified public accountants are chained to their desks grinding out returns.

Doug Stives, a CPA from Red Bank, N.J., went skiing in Utah.

"I always dreamed of coming here for peak conditions," he said in mid-March between runs at Snowbasin Resort.

The trip is among the many perks that have accrued from his decision, in 2006, to become, in effect, The Most Tax-Efficient Man in America. The experiment has led to a new career, frequent travel and obsessive documentation of expenses, such as a $6 hot dog he recently bought in the Philadelphia airport.

The "aha" moment came to him, he says, after a college approached him about a teaching gig and he realized he could put into practice many of the tax strategies he had learned over the decades.

Step 1 was to change jobs. Mr. Stives had been a partner for 36 years at The Curchin Group, an accounting firm. By accepting an offer to teach tax and accounting courses full-time at the Leon Hess Business School of Monmouth University in New Jersey, he was able to tap into a broad array of tax-free employee benefits not available to him at the firm.

Step 2 was the formation of Doug Stives LLC, the separate consulting business to which he attributes an impressive array of expenses. In general, people who are employees and have side businesses are often in the best position to maximize the tax code's benefits, say experts. Mr. Stives calls this "the best of all worlds."

The result, says Mr. Stives, is that while he earns less than 75% of his earlier pay, he takes home almost 90% as much. And he says he reaps another $40,000 a year in tax-free benefits from his college gig. Among other things, the school adds to his 401(k) contribution and provides tax-free, discounted health plans for Mr. Stives and his wife, plus disability insurance. As a partner in the accounting firm, he had to fund such expenses himself.

Not that all is perfect now. One peeve: dealing with what he calls "airline nonsense" -- long lines, rising fees and canceled flights. But overall, he says, "my quality of life is so much higher."

His wife of 40 years, Elizabeth Stives, agrees. "We travel so much now for his business," she says. "Next is Lake Tahoe."

Mr. Stives, 64 years old, says he's too miserly to focus solely on maximizing deductions -- a practice he calls a "rookie's mistake." In 2010, for example, he spotted a bonanza in "bonus depreciation" for large SUVs used in a business, but didn't need another car. "Sometimes my cheapness overcomes my love of tax savings," he says. "My wife will tell you I got her on sale."

Instead, he says, he uses the tax code's many quirks as the means through which he can live a fuller life.

The Schedule C form, used to report profit or loss from a business, is key to his strategy. On this form goes all of his income and expenses from his consulting work -- advising clients, preparing returns, helping write textbooks and conducting continuing-education seminars that CPAs need to maintain their licenses.

Mr. Stives chooses the locations for his seminars, most of which are sponsored by accounting groups. Often he opts for vacation destinations like Hawaii or Yellowstone Park. "People learn better when they are relaxed," he says.

Tax rules allow him to work for only three days of a 11-day trip and write off the airfare and a majority of other costs, he says. "To deduct the airfare, you have to spend more than half your working days on business, but travel days don't count, and neither do weekend days you wouldn't work anyway," says Mr. Stives. "So I can leave on a Friday, teach for three days midweek, and return the following Monday."

His wife usually flies free using his frequent-flier miles, which are tax free.

Having his own business also allows Mr. Stives to bolster his retirement fund. As the older owner of a one-person defined-benefit pension plan, he can put in almost 100% of his pretax self-employment income a year on top of his Monmouth 401(k). For the 2010 tax year he will probably put in 80%, he says.

Mr. Stives hired his wife for office support in part to qualify for an IRS-allowed Health Reimbursement Arrangement that covers out-of-pocket medical expenses with pretax dollars. He deducts her pay -- $300 per month for part-time work -- and half her payroll taxes on his Schedule C as well.

Then there are the flurry of tiny deductions that add up. He writes off allowable mileage and food expenses on business trips. He claims a home office, cellphone, his computer (a percentage), professional dues and subscriptions to publications.

Mr. Stives says he is careful to observe IRS rules. He has a contract for each speaking gig, and keeps one for his wife's arrangement, too. He uses one credit card for business expenses, making sure it provides a year-end summary by category.

Most zealously, he hews to the IRS's gold standard of "contemporaneous record-keeping" by noting expenses on his Outlook calendar soon after they occur. He saves all receipts, putting them in a milk crate in chronological order in case the IRS comes calling, although he says his personal return has never been audited.

Mr. Stives says he discovered his enthusiasm for accounting while a student at Lehigh University in the 1960s. The son of a New Jersey Bell executive and a homemaker, he arrived at college, "sick of literature and history. I didn't want to hear another word about the Civil War. But then I took an accounting class and thought, 'I can do this!'"

At Monmouth, Mr. Stives was voted the Hess School's Most Outstanding Professor in 2009, and now directs the M.B.A. program there.

"The most important lesson I teach my students," he says, "is that just because something is deductible, that doesn't make it free."

Students say they especially enjoy his creative-deduction exercises. His latest challenge: "Say you have a friend who is a client and you charge him about $500 a year. You'd like to spend $2,000 on a big night in New York for two couples -- limo, dinner, Carnegie Hall concert. What would allow you to take a deduction?"

The answer: "The client has a rich father who just died and you may get estate work."

[Catherine]

A Tax Man Takes Account of His Life

Even though it's tax season, accountant Doug Stives skied at Snowbasin in Utah last month.

<snip>

So, do we get together after 4/18, find, and then gang up on this guy? :lol:

[Lion EA]

I'm in!

[Lynn EA USTCP in Louisiana]

I'm in!

Well, you might want to come after me next. During tax season I usually go out of town for Mardi Gras. This year, the week before Mardi Gras I went to Arizona, riding my bicycle from Tucson to Wickenburg and back. It's been 7 days a week, 15 hour days ever since I got back, though.

Lynn

[Catherine]

Well, you might want to come after me next. During tax season I usually go out of town for Mardi Gras. This year, the week before Mardi Gras I went to Arizona, riding my bicycle from Tucson to Wickenburg and back. It's been 7 days a week, 15 hour days ever since I got back, though.

Lynn

You don't count for ganging up on, Lynn. Try harder next year. ;)