Archive for the ‘Accounting, Auditing and Taxes’ category

Busy Season – A New Associate’s Experience

February 18, 2010

I’m in the middle of my first busy season as an auditor at a big four firm. Exciting times.

For some auditors, busy season is winding down about now. It usually goes from about the second week of January, when companies with 12/31 fiscal year-ends are closing their books for the year, until the last week of February or the first week of March, when companies release press releases and file their financial statements.

I’m one of the lucky auditors whose schedule was somehow filled with busy-season hours all the way through the end of March.


As a new associate navigating busy season for the first time, I’ve recognized it has its pros and cons. Here they are:

The 3 Main Cons to Busy Season

1 – Long hours: The expectation is at least 10 or 11 hours per day. The reality is often more, depending on the assignment, the deadlines, the budget, the senior’s or manager’s preferences, etc. I’ve arrived home as early as 6pm on a Friday, so I have no room to complain.

2 – Pressure: Auditors must meet deadlines. The auditor who says “I’ll do it later” to a public company client (or any client, for that matter) is an auditor without a repeat engagement. Oh, and there’s a budget of hours to work with. Going over that budget is stressful to senior associates and managers, which means there’s pressure to finish your assigned testing quickly. But quickly and thoroughly aren’t always the easiest balance.

3 – Life Passing You By: The obvious result of working long hours is missing out on life. Coming home at 8pm every day leaves very little time to spend with family and friends, or to pursue hobbies and interests. When I get home, I have time to eat, do the dishes, discuss the day with TheFieryOne, and go to bed. I have to “make” time for anything else, which means not getting enough sleep. Like tonight.

Busy Season Has Its Pros, Too

1 -Accelerated Learning: They say it takes about 10,000 hours, or 10 years, to become an expert at any one thing. If every season was busy season, I’d be an expert auditor in less than 4 years.

2 – Network: One of the best parts about working is building relationships with coworkers. Busy season offers plenty of time for teams to get to know each other better. Just today, I learned a coworker of mine spent a semester abroad in London. So did I! Busy season is also a time when new associates get to work more with higher-ups such as managers and partners when they come out to review the audit work performed.

3 – Exposure to Clients, Industries, and Job Roles: Busy season is generally busy for clients, too, so you have a lot of people bustling about, trying to get things done, and auditors are in a unique position to see the inner workings of all sorts of companies. In addition to getting to know your client’s industry and business, as an auditor you get to know client personnel and observe them in their various job roles. If you ever jump ship, you’ll have a good idea what you might want to do.

4 – Free Dinner: When you work late, you can generally order in or get take-out. I’d rather eat dinner at home with TheFieryOne, no doubt. I could just as easily call her TheGoodCook. But every now and again it’s just nice to get a free meal.

5 – Work Experience – Big four firms tend to judge your audit experience upon how many busy seasons you’ve worked. You’re not considered an “experienced” associate until you’ve worked at least one busy season.


Finishing, Waiting, and Changes

August 12, 2009

Lots of things are changing.

CPA Exam: I took the fourth and final section of the CPA exam! Now I’m just waiting to find out the results of the last three. Here are my scores and score predictions based on how I felt coming out of the exams:

FAR – Prediction: 85, Actual: 95

REG – Prediction: 75 (this could easily go either way, as I mentioned in a previous post), Actual: ?

BEC – Prediction: 95 (maybe this is an overly generous estimate, but I felt better about this than FAR), Actual: ?

AUD – Prediction: 82 (I’ll be surprised if I don’t pass, but it’s certainly possible), Actual: ?

According to Jeff over at, score reports are predicted to be released fairly soon for Wave 1, which, for me, means I’ll probably see my BEC score within the next few days and REG at the beginning of next week.

Unfortunately, AUD will be Wave 2, so I won’t know how I did until mid-September.

That means I have no more CPA exam studying! It has been a serious chore for the sheer quantity of information covered. If I don’t pass any of the sections (REG?), it should be much easier to study the second time around just considering my familiarity with the topics. I certainly hope I passed all of the sections, but I’m not overly worried either way.

Moving: Saying goodbye to friends is proving to be more difficult and saddening than ever before. We LOVE our friends and don’t want to admit that we’ll probably never spend much time with many of them again. I’m confident we’ll make new friends where we’re moving, but that does little in terms of comfort.

Graduating: I’m within days of finishing my master’s degree! It’s just two final exams away, after which you may call me Master frugalCPA.

Money and Getting Out of Debt: I’ll soon be making money. It’s almost unreal, Friends! TheFieryOne might be even more excited than I am! We have over $30,000 in school loans. We’ll both be working full-time, so we should be able to get rid of our debt fairly quickly (possibly even during 2010). I’ll definitely document the journey.

A New Career – As you know, I’m super excited about starting a new career as an auditor at a “Big Four” firm! I’m curious to meet the people I’ll be working with, and I’m looking forward to being part of a team.

More Time for Future Posts Such As: Score results, ways I can start my career on the right footing, our choice of apartment, things I learn at work, business book reviews, and more.

Increase Your Net Worth in Seconds with Creative Accounting

February 22, 2009

Is there anyone in your life that does pretty much anything you tell them to do? Maybe one of your friends, neighbors, relatives, admirers, coworkers, or fans?

If so, you should consider doing as publicly traded companies do in consolidating their financial statements. Parent companies that own or effectively control other companies are required to recognize their affiliates (owned or controlled companies) by creating one set of consolidated financial statements for reporting purposes.

If you have people (let’s call them subsidiaries, or subs for short) who do what you say, you, too, effectively control them and their assets. When heed your advice or requests, like when you suggest they buy you a hamburger, or request they drive you somewhere, they have effectively relinquished control over their own resources to you, their parent company of sorts. In order to be more open and honest (regulators like the word, “transparent”) in presenting your net worth, you may wish to recognize your subs’ assets along with yours.

So go ahead! Give your subs a call to discover their financial positions, and increase your net worth in just minutes! And, hey! There’s no SEC regulation here, so feel free NOT to include any subs with negative net worth. Be discerning, and by extending your network of control, you’ll have a sizeable net worth in no time.

Share your success stories in the comments section!

5 Tax Myths

February 19, 2009

I started reading an article about 5 common tax myths on MSN Money and had a hard time continuing when the first myth was “Students are exempt.” Really? Does anybody really think that?

But I read on, and the myths did improve. People do wonder whether or not they can claim their working child as a dependent, they sometimes don’t know if they have to pay taxes on gains from the sales of their home or not, few people know much about sales tax, and filing status, though it’s not generally a problem, can sometimes be confusing.

Go check the article out if you’re unsure of any of these things.

Tax Refund. “That’s it?”

February 13, 2009

Today I prepared the tax return of a guy who was filing for the first time. He had two dependents (his son and girlfriend), had no taxable income (after standard deduction and exemptions) and was eligible for the EIC (Earned Income Credit) and the CTC (Child Tax Credit).

As he observed me inputting his information, he complimented me on my watch and asked what kind it was (an Armitron from Wal-Mart). He then explained that he has a different watch for every day of the week. “It’s kind of a hobby of mine.” I laughed, and he explained further that his most expensive watch was over $200. “How can anyone spend that much on a watch?” he asked.

As I listened, I noticed his refund amount increasing on the computer screen. He’d be able to buy 25 two-hundred dollar watches with his tax refund, which was almost equal to half of his gross income.

But when I told him, “you’ll receive a refund of over $5k,” he just sat there staring at the screen.

“That’s it?”

His response was a bit of a downer for me. I much prefer people to be thrilled about their refunds. That’s why I try to leave no stone unturned in discovering eligibility for deductions and tax credits.

But apparently, this guy’s $5k-plus refund was a disappointment to him. Had someone told him he’d get thousands more than that?

Oh well. At least there was another lady who was absolutely thrilled about her $1500 refund, never having received back more than a couple hundred dollars.

Absolute Basics: Individual Income Taxes

February 12, 2009

One of the things I’ve learned by going back to school is how much I didn’t learn the first time around. My parents always took care of my tax return, even through most of college. Since then, The Fiery One and I have used various tax prep software packages to do our taxes.

But I never felt all that comfortable with what I was doing. I trusted the software, and most of the questions seemed pretty straight forward, but I now recognize that I could have easily made some pretty serious mistakes (looking back, I don’t think I did, luckily). And being audited by the IRS is just about the last thing I want. Like many of you, I’d wager, I fall into the category of taxpayers who would rather be very conservative and report everything possible than risk being audited. That remains true even when I know that an audit isn’t the end of the world and can usually be settled fairly quickly and seamlessly.

So here are some tax basics I should have been more familiar with throughout the years. These are Absolute Basics, so you may want to just skim through and pat yourself on the back for knowing everything already. That said, it’s surprising how many people go out and pay a few hundred dollars for someone else to do their taxes when they could easily save the money and do their own tax return in an hour or two.

Either way, considering the IRS holds individual taxpayers responsible for understanding and abiding by all of their rules (meaning they don’t care when you say, “I didn’t know . . .”), we should all know the fundamentals before doing our own taxes:

Forms You Need to Prepare for the IRS

Form 1040 – “Home Base”: Every individual (as opposed to business) tax return is filed on some version of form 1040. Everyone can use form 1040. The other versions, 1040a and 1040ez, have fewer lines for less complicated taxpayer situations (like not owning your own business and not having dependents). In the end, the important thing to remember is that form 1040 is home base. It’s where everything begins and ends.

Backup Schedules: These are not as scary as I once thought they were. They exist to help you fill out the 1040 correctly and show more detail than can be shown on the 1040. All they do is support form 1040. Schedule C, for example, is used for detailing business profit and loss. So if you earn money other than as an employee of a company, you fill out Schedule C by showing your revenue and expenses. Schedule D is used for capital gains and losses. If you sold stock during the year for a profit or a loss, it goes on Schedule D, which helps you figure out how much to show on the 1040 as income or loss.

Worksheets: These generally don’t have to be included with form 1040 and the backup schedules. But worksheets can be extremely helpful in calculating the amounts that must be included on form 1040, and you find them in the 1040 instructions (they’re referenced on the 1040 by page number next to individual line items. Whenever it says “See page . . .” that means check the instructions for details or worksheets).

Tax Forms You Might Receive or Need to Find/Request (from Employers, Banks, Mortgage Companies, Brokers, Retirement Accounts, Schools, etc.)

W-2: If you have an employer, they should send you a W-2 that states your wages and taxes withheld (meaning your employer may have already paid some of your wages to the government in the form of Federal, Social Security and Medicare withholdings. Your W-2 should also show if you’re participating in a retirement plan at work (like a 401k) and the amount of your contributions that were not taxable (for a 401k, that’s your entire contribution). You can have as many W-2’s as you have jobs, and you use them to fill in your Wages, Salaries and Tips (note: if your employer didn’t include all of your tips, you’re supposed to add them yourself).

1099: This form is for various other types of income you have received in addition to wages. If you have a savings account and you earn interest throughout the year, you’ll receive form 1099-INT. If you earn dividends from investments, you should receive form 1099-DIV. A retirement account will send you form 1099-R, etc. Each form is used to help you complete form 1040 and supporting schedules. The best way to figure out what to do with each 1099 is to look it up on the searchable IRS website forms and publications list. The instructions to each type of 1099 (and other forms) describe how they are to be used.

1098: Mortgage interest you have paid on your home. This is generally deductible if it’s your principle residence and you meet certain eligibility requirements, as are property taxes paid.

1098-E:  Student Loan Interest Statement – If you’re paying interest on student loans and you meet certain eligibility requirements (again, those instructions come in handy) you can deduct that interest “for AGI” or “above the line,” which means the deduction makes your Adjusted Gross Income (AGI) smaller. That’s good because your AGI is used to determine your eligibility and amounts for other deductions, credits, etc. So the lower your AGI, the better. 

1098-T: Another “for AGI” (“above the line”) deduction (your AGI is the last line on page one of form 1040) is Tuition and Fees paid for qualified education costs. You’ll want to fill out form 8917 and compare it to what you might receive for Education Tax Credits instead (since you can only use one person’s tuition and fees for one or the other).

There are plenty of other forms you might receive, but those are the ones I see most often.

What else should you know?

Filing Status: This can make or break your return, and if you file as something you’re not, your return is next to useless because of the very different rules, credits, exemptions, etc. that are determined by filing status. There are specific requirements for choosing your filing status, so you can’t just choose what sounds good. You should find the specific requirements for each filing status, and if you do have a choice, choose the one that is best for you. The IRS has a good little teaching module here.

Dependents: The rules for claiming dependents are pretty complex, and very important because the tax breaks can be considerable. One of the big things to watch out for is not claiming a dependent that someone else is already claiming. Related is the question of whether or not you claim your children as dependents, or they claim their own exemption. You may want to review dependents at the IRS tutorial website  if you’re unsure of how it works.

Exemptions: This goes along with dependents. Each individual gets an exemption. If you’re married filing jointly, you get two exemptions. If you’re single, you get one. If someone else claims you as a dependent, you get no exemption because the person claiming you gets your exemption. Just like you get exemptions for your dependents.

Standard Deduction vs. Itemized Deduction: You have to choose whether to take a standard deduction, which is a set amount based on your filing status, or to itemize your own deductions. The key here is to know what you are allowed to itemize as deductions. The IRS has a handy little list you can check out here, with convenient links that tell you more about each thing.

Tax Credits: The government likes to use the tax system to promote not only its own revenues, but also its agendas. That’s what deductions are all about. Deducting mortgage interest is allowed because home ownership is encouraged by the government. Same for charitable donations. Tax credits are another tool the government uses to either create incentives for certain actions or lifestyles, or to relieve the tax burden of certain taxpayer situations. See another handy IRS list with links here.  I see people get these credits regularly, especially lower income tax brackets.

Extra Tax Facts

Some people believe that if you make more money and jump to a higher tax bracket, your entire salary is taxed at that higher rate. That’s not the case. For each level, your salary is only taxed at the rate for that level. For example, the first $8,350 of a single person’s income is only taxed at 10%. If that person makes $33,950 (the upper limit of the 15% tax bracket), the first $8,350 is taxed at 10% and the remainder up to $33,950 is taxed at 15%.

If you win a car on The Price is Right, that is considered by the IRS as taxable income. If you barter services with a neighbor, you are supposed to report the value of what you received for your service on form 1040 as income. For example, if a landlord forgives your $500 rent payment for a month in exchange for you babysitting her granddaughter several full days, you are supposed to report the amount you would have had to pay in rent as income. The landlord would have to report $500 as income also because the fair market value of the babysitting was apparently worth $500 to her, or she wouldn’t have forgiven the entire amount.

That’s enough for now. Let me know if I missed anything that should have been included. Good luck doing preparing your taxes!

Review Materials Shipped!

February 11, 2009

I just received notice that my CPA exam review materials have been shipped. That was FAST! Am I strange for being so excited?

[Update: A huge box of Becker goodies arrived on Valentine’s Day. Don’t worry, Becker. I will be yours for many, many an hour.]