Edited by nimblebear, 04 April 2007 - 04:14 PM.
Anyone know any CPA's ? Anyone?
Started by
nimblebear
, Apr 04 2007 04:11 PM
2 replies to this topic
#1
Posted 04 April 2007 - 04:11 PM
Some affluent appear to be creating "small fortunes." ......
HERB GREENBERG
The economy -- from the eyes of a CPA
Here's what's really going on behind closed doors in affluent America
By Herb Greenberg, MarketWatch
Last Update: 11:34 AM ET Apr 4, 2007
SAN DIEGO (MarketWatch) -- Nobody knows what's really happening to American households better than a CPA at tax time. I heard from one, who started his email like this:
"I am a CPA, CFP who specializes in individual income taxes for affluent Americans. I am shocked by the bad and deteriorating financial condition of many of my clients."
I suspected that this CPA, who will remain nameless for obvious reasons, was referring mostly to high interest expenses as home equity balances rise. I was only partially right. In a follow-up, he wrote:
"The underlying cause that is apparent to me is years of unrestrained/uncontrolled spending beyond one's means. This is now catching up with many.
"It is not so much slower income growth or the jump in interest expense.
The problem has progressed through the following stages:
"First: The careless tapping of home equity.
"Second: Extensive use of credit cards while paying the minimum (if lucky); getting killed on interest and the monthly late payment fees.
"Third: To pay bills now due, many are tapping their 401(k)s and or IRAs, taking premature withdrawals (not periodic). The big problem here has been that many have only 20% tax withheld when the burden is closer to 50%, with the U.S. Tax, a 10% penalty and the state tax.
"Two of my clients had to sell their homes last spring to cover their 2005 liabilities; some BIG numbers. These clients had adjusted gross incomes in excess of $200,000. At least they were lucky because the housing market was firmer a year ago!
"Another individual I know (though not a tax client) refinanced to an ARM to lower her monthly payments. Her payments jumped in December by about 20%, which she can't handle. I recently learned that this person opted not to have her real estate taxes paid monthly via escrow. The reason: She couldn't afford the monthly payment when she refinanced.
"WHAT are these people thinking?? They never come for advice before they get themselves in a hole!
"I am afraid that what I have been seeing is just the tip of the iceberg."
He's not alone in that thought. If you're a CPA who has similar stories to tell, and has noticed a change over the years, I'd like to hear from you. Post your comments on my blog, or if you prefer, e-mail me at hgreenberg@marketwatch.com.
Herb Greenberg is senior columnist for MarketWatch and contributor to CNBC television based in San Diego. He does not own stocks (except for shares of his employer), and he does not sell individual stocks short or invest in hedge funds.
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OTIS.
#2
Posted 04 April 2007 - 04:49 PM
Skeptical, based on what I see around me.
GD
#3
Posted 04 April 2007 - 06:06 PM
Boy, I know of folks who are rather smart, and who make a ton of money (out this way) who have generated huge CC and home equity debt. They seem to get it together, but usually at a cost of having to work a bit longer and perhaps skipping some trips and the like.
Frankly, it's hard for me to get my brain around, but then as any entrepreneur knows from experience, you never overspend because you just don't know what tomorrow will bring (or not!).
The good news is that many of these folks get a huge "raise" when the kids get out of school.
M
Mark S Young
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