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Recent criticism of my writing

I’ve written something, somewhere, intended for public exposure almost every day for the past 35 years. It started with the college newspaper then moved to electronic bulletin boards and early online class discussions. I was one of the first moderators for Financial Planning Online forum when peer-moderated professional groups thrived without spam. I wrote a number of newspaper columns in the 1990s and was able to gather significant online exposure to boost my career before the term “blog” was invented. It was natural that my writing about health care reform served as a lightening rod in the early 2000s for those with a political agenda or economic interest in the outcome. But by the time the term “social media” became popular, I was lost in the huge blast of voices and therefore insignificant.

So it comes as a surprise that lately I’ve been getting so much criticism for my writing from other CPAs. In this age of such volume of opinions expressed, I’m surprised that anyone really cares about just one more voice on the Web. Earlier this month one senior level professional basically told me to shut up and don’t contradict industry leaders with my unfounded opinions. Another said it was inappropriate to relay tax advice that was shared in an email with the public, even though it was generic advice. A third wrote that my online shared library of sample employee benefit plan documents might be a crime under New Jersey state law (practicing law without a license).

What do these complaints have in common? The only thing I can see is lack of tolerance for diverse opinions, approaches and personalities. Simply put, some professionals think they can characterize what is right, correct, legal or appropriate. I’m not so sure today’s issues worth writing about are as simple as that.

10 Tips for handling an Offer in Compromise to the IRS

When a taxpayer has no reasonable hope of paying the full amount of past taxes due or when it makes sense to borrow money from another source to pay taxes, sometimes it makes sense to settle the matter with an Offer in Compromise in order to get rid of the old debt and make a fresh financial start. I recently asked a group of accountants for tips in preparing an Offer in Compromise and this blog post is a compilation of ten tips that were offered:

1. The IRS pre-qualification calculator tool is excellent.

2. Download the latest Form 656 booklet that is updated almost every year. If you don’t use the latest forms, the offer will be rejected.

3. Worked out well with over $100,000 in debt forgiven.

4. More difficult to justify or get approved for lower dollar amounts.

5. It is not as easy as it used to be.

6. The whole process took under 3 months.

7. The process is very time-consuming and offers are not easily granted these days.

8. Make sure the client realizes that this is full disclosure.

9. Overestimate the time it will take and get a full retainer up front.

10. Be aware that clients who don’t pay their taxes often don’t pay their accountants either.


Reporting changes that affect health insurance

The federal government says:
“Once you have Marketplace coverage, you must report certain life changes. This information may change the coverage or savings you’re eligible for.”

Millions of people say:
“Dear I am one of the 75% of individuals who bought coverage on the exchange paid for with tax credits. I understand that I am reqquired to report life changes that may affect my health insurance. It seems that the news has been busy reporting changes in your status as well. Due to these recent legal developments I’ve lost confidence in your ability to continue to pay my insurance premiums. I need to go back to the “old way” of buying lower priced coverage – regardless of whether it meets ACA minimum coverage standards – that I can actually afford.” So when you cut my subsidy, please consider that I will drop your insurance at that time.”

What if I don’t have supplemental health insurance?

I recently recorded a presentation called “How to find supplemental health insurance” for Freedom Benefits. For those not familiar with the topic, the question may be “so what, what if I don’t have supplemental insurance?” It’s a good question in the rapidly changing field of health insurance.

Health insurance policies have changed dramatically since the implementation of the Affordable Care Act. Yet few of us have actually noticed. That is because most of us have medical expenses less than $1,000 per year. Insurance is not a major factor in this expense. Besides, regardless of whether our policy covers everything or nothing, it makes little difference to the overall financial welfare of most people. But for about one in ten households that incur out-of-pocket medical expenses in excess of their available financial resources, the impact is huge. Large medical expenses have been the primary cause of bankruptcy. Most of these bankruptcies involved people who had medical insurance before their financial problems.

With the implementation of the new type of health insurance, commonly called Obamacare policies, the financial risks are significantly larger. Policy deductibles and out-of-pocket expenses have now increased to $5,000 to $10,000 per year. So what happens if you incur this medical expense?

The options are pretty clear:

1) pay the bill timely if you have the resources like savings (ideally a Health Savings Account) or have supplemental insurance

2) pay the bill over time if the provider is willing to enter into this type of agreement

3)  have the unpaid bill settled through collection actions.

So as a practical matter, smart financial planning means that those without supplemental insurance should a) have a $5,000 to $10,000 reserve for out-of-pocket medical expenses, or,  b) be prepared to enter into a payment arrangement. For most households, this is not an easy choice and each option takes a toll.



Script of new introductory video

This is the working script to my new personal introduction video that will be recorded soon and then made into a multi-media video some time after that:

“Hello, this is accountant Tony Novak with a quick 10 point personal introduction:

1. The value I bring to clients today comes directly from experience and relationships built over several decades of operating small businesses in the Philadelphia area. I feel like I’ve personally experienced every type of struggle and had to work through every setback that my clients share with me now.

2. Even while in high school and college, I developed a passion for small business by growing several acres of organic vegetables with my younger brothers and sister that were sold to local grocery stores and at a roadside stand from our small farm in Worcester Pennsylvania. We also raised animals for natural grass-fed meats and I was active in the local 4H club.

3. I’ve revived this interest recently while working with the agricultural and fishery businesses of southern New Jersey. I’m working to revive a failed commercial marina adjacent to my office into a sustainable aquatic farming business.

4. I improved and operated rental houses as a part-time business and built some know-how that eventually led to a leadership position with the local remodelers association. I served as local chapter president of the Bucks and Montgomery County chapter and as a board member of the National Association of the Remodeling Industry.

5. After finishing Fox Business School at Temple University, I was fortunate to be hired by Drexel Burnham Lambert, Wall Street’s most powerful firm in the mid-1980s at a time when modern portfolio management was just coming of age. I was one of the early geeks to adapt to the use of desktop computer technology for investment decision-making and was able to make a living as a Registered Investment Adviser in my own firm in Doylestown Pennsylvania for some years.

6. Eventually I gravitated toward small business focusing on tax planning, compensation and benefits issues. Villanova Law School allowed me into their graduate tax program even though I am not a lawyer. For many years, most of my clients were accountants and lawyers who asked me to handle their own transactions.

7. My focus on online delivery of services meant that I attracted clients from all over the country so I still maintain insurance licenses in all 50 states and DC that are used by Freedom Benefits and other Web-based financial service operations. Other  services are allowed across state lines through reciprocity laws. My accounting systems is up-to-date with tax filing information in every state.

8. I pride myself on being easy to reach online and I still give out my personal cell phone number. Clear communications are a personal passion.

9. My strength, I think, is in the ability to match a client to the right person, service or company that will best fit their specific need. I don’t pretend to know it all and I want to make it clear that I work as part of a team in almost every project.

10. I welcome a conversation to discuss your financial concerns and I will be pleased to share some ideas that have worked for others in a similar situation.”

I welcome any comments or suggestions.

The first draft is at

Where is small business health insurance headed?

I’ve tried to filter through all the vested interest and political noise in media to gain an understanding of where the small business health insurance is really headed. It seems that for every point under this topic there is sharp disagreement. I browsed through several hundred publications in forming this summary opinion for my own use in addressing client questions. This is a summary – without source references – of everything I could find:

Quality of information: Most of the information published in this field comes from those with a vested interest and political agendas. Terms like “may qualify” or “could enroll” dominate the reports. Little actual data is available. As a result, it is difficult to get to the truth.

Qualifying for tax credit: HHS says up to 4 million small businesses may qualify for a tax credit if they provide health insurance. Inc. Magazine says the number is actually about half of that at about 2.1 million. Presuming that median size of this population is between 1 and 2 employees (per U.S. census data), then the number of people affected by this issue is around 3 million. Deloitte says that 6 million to 13 million people could enroll through SHOP by 2021 but does not project what portion may qualify for the tax credit. The large majority insurance industry sources say few or none of their small businesses actually qualify for the credit. IRS says that is will audit claims for credit but has not published results so far. As a result, no data is available on whether any firms actually qualified for the credit that became available for 2010 and subsequent years.

Advantages of SHOP: There are two primary potential advantages of using the Small Business Health Options Program (SHOP): 1) eligibility for employer tax credits, 2) built-in employee choice. Employee choice does not apply in PA or NJ for 2015.

Disadvantages of SHOP: The primary advantages of not using SHOP are: 1) wider range of choices, 2) better service.

SHOP vs. private exchanges: In the few states reporting SHOP enrollments (not PA or NJ), results are poor so far. Private insurance exchange growth is clearly booming with plenty of investment capital, technological innovation and fewer regulatory boundaries. As a result, SHOP is lagging and private exchanges are booming.

Online exchanges vs. traditional enrollment: The large majority if small businesses are using traditional enrollment (physical work-site) methods rather than an online self-serve exchange.

Individual vs. Group insurance: There is still a strong belief among industry sources that individual exchanges are better choice for the majority of small businesses. This conclusion appears to be gaining traction in mid-2014. Plenty of hypothetical comparisons are published but no actual data is available to actually verify this opinion. Predictions of imminent demise of the small business group insurance market are unsubstantiated.

Diversity of opinion: There is agreement are clear that “one size does not fit all” with regard to insurance advice and that there are exceptions to every trend point listed here.

My personal disclosure: I don’t have any ownership interests in the post-reform health insurance market. I sold most of my insurance business in 2008 and lapsed the remaining health insurance appointments by the end of 2010. I do continue to receive payments for my web sites, writing and referrals to insurance exchanges. I continue to receive requests for advice in various forms and I would be open to consider possibilities to re-enter the market in the future. For that reason, I follow this topic closely.

The problem with fee-only financial advice

Much is written about the benefits of fee-only financial advice. Yet the drawbacks that prevent its wider adoption among the relatively large portion of working-class affluent individuals are almost totally ignored in public media. The result is that we are sending a harmful message to the bulk of Americans who would otherwise benefit from solid professional financial advice.

Fee-only planning presumes that the client has the resources to find, evaluate, work with and pay the fees of multiple qualified professionals with different specialties, presumably working as a harmonious team. A fee-only adviser is not supposed to be affiliated with those who are paid for executing transactions. It’s a nice idea, but seldom reflects reality. The risks of failure in this approach are significant, especially considering that the net financial results are only as good as the weakest link in that team. An excellent professional financial plan, for example, will be rendered valueless if a broker messes up a key transaction. We could argue that the execution of the advice is at least as important as the quality of the advice itself. Transaction-based professionals know that they are the real rainmakers who bring results to their clients portfolio and may be indifferent to those who talk about results without actually delivering them. We know that competency within the financial advisory profession is not defined by method of compensation.

In today’s real world, the majority of those fortunate enough to be climbing the economic ladder – perhaps because they have a solid career or a growing business – face extraordinary demands on their time and financial resources. They are fortunate to develop a personal relationship and pay one good financial adviser, let alone a team. Most see no need to pay one person for advice and another to execute it. Today’s clients are more likely to rely on emerging Internet-based technologies to efficiently bridge the gap between financial advice and execution or transactions. As a result, most of today’s upwardly mobile individuals say that they hope to utilize the one most competent adviser they know and trust to handle as many tasks as possible.

My take on this topic is simple: fee-only advice is likely the best approach for helping the rich get richer but it is won’t help working class individuals gain a financial foothold on a secure future. In my own practice working with mostly with business owners and working professionals, my clients are best served by me maintaining relationships with multiple types of financial firms who can best “get it done” once we’ve decided on a course of action.


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