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How secure is Dropbox, Google Drive, OneDrive and iCloud?

Should you be worried about how secure your cloud storage provider is? Here is a pretty good article by Davey Winder at just published on 7/31/2015 discussing the popular choices. I learned a few things. The short answer is that there have been no problems yet except those cause or triggered by user error.

The take home lesson is that a combination of local file encryption (I use built-in HP encryption) used in conjunction with these services is the most reasonable approach to high level security for most of us.

Clear explanation that there are no “1099 employees”

I like this clear simple language in Employee Benefit News:

“Employers face an uphill battle in classifying a worker as an independent contractor due to DOL guidance that defines ‘employee’ so broadly that such a classification should only be reserved for a narrow subset of workers.”

It is amazing how many employers are oblivious of the risk until they are audited. I hear the term “1099 employees” often from people who do not understand this is an oxymoron.

Read more here on another recent blog post.

Re-examining my core value proposition

What is it that I do best? What key value do I bring to clients? What makes me different from others in a similar role? How do clients view me and my work? What is my core value proposition? These questions are all ways of getting at the same key concept. Today I updated the summary section of my profile on LinkedIn:

“Clients tell me that my strength is in explaining complex issues in a way that helps them reach important financial decisions. We focus on developing strategies to save on taxes, cut operating costs and ultimately put more away into investments – an approach called “strategic financial planning”. My work often focuses on using technology to help small business owners and professionals become more efficient and find ways to keep more of what they earn. A significant part of this work is collaborating with, reviewing and endorsing the services of others firms in the financial services sector.”

This change in wording is based on feedback from a few clients this past week. I had generally overlooked or undervalued these skills at explaining concepts in plain language and commenting/reviewing the proposals made by others. After thinking about it, I realize that the fact is that I do this well and many others tend to skip over it in their work.



Most workers are employees

The issue of worker misclassification – where businesses classify workers as independent contractors and local, state and federal authorities call them employees –  is a long-standing problem area for small businesses. Federal and state auditors (not just tax but worker’s compensation as well) have been engaged in an aggressive “crackdown” on misclassified workers. This week the U.S. Department of Labor issued Administrator’s Interpretation No. 2015-1. In the infamous words of Vice President Joe Biden to Obama: “This is a Big F* ing deal”.

My initial assessment of the new guidance, an opinion apparently supported by National Law Review and Wall Street Journal, is that an accountant would not be in a position to defend the position that workers are subcontractors in most of the popular uses in small businesses today. In simplest terms “most workers are employees“. My older articles like “Who is your employee?” will likely need to be updated with the new guidance.

However there is more to consider first:

1) There was already plenty of confusion and misinformation on this topic already before DOL guidance. There is legitimate reason for confusion.

2) Different legal authorities have different legal standards of “employee vs independent contractor”. Some states still use legal standards that have already been abandoned by federal authorities.

3) The tax risks associated with audits in this area were already the #1 tax risk for small businesses (see my article “Top 10 tax risks for small businesses“).

4) The new guidance by DOL does not change existing law. Specifically, it does not change IRS audit procedures.

5) The IRS does not automatically adopt all standards set by the Department of Labor.

6) Industry groups are infuriated by this new guidance and are calling for legislative repeal.

Yet even with all of these qualifiers, it seem silly to think that the defensive position of many small businesses that use long term independent contractors is not weakened by this DOL guidance.

My point is simply this: the guidance may be wrong and Congress may or may not eventually act to address the issue but in the meanwhile do not count on your accountant or attorney to keep you safe from additional tax assessments if you use independent contractors in a manner when an auditor thinks that you should have treated them as employees.

Sandy flood insurance claim review won’t be an easy process

fema meeting

US Senators from New York and New Jersey have been working for many months to get FEMA to admit that its contractors ripped-off Sandy victims by low-balling flood insurance claims. Finally FEMA agreed to review all flood claims of people who felt they were short-changed by the assessors. I was among those affected.

In short, the contractor I hired to do a damage assessment said that my small elevated home was “totaled” due to shifting and sinking pilings caused by flood waters. The county board of health then later said that my above-ground septic tank below the house that worked fine before Sandy was now not repairable. Yet the flood insurance assessor concluded that damage was minimal and settled my claim for only $1,200.

Today I spoke with the claim reviewer and realized that the review process may not be an easy solution. Now that 32 months have passed much of the evidence is gone. My memory is foggy about the details in the chaos that existed in those early days after the storm. I lacked the capacity to prove my claim then; I’m in an even weaker position today. I read this passage in recent coverage of the issue “George Kasimos, founder of the Sandy watchdog group Stop FEMA Now, believes that Sandy victims are better off hiring a lawyer to represent them. “I am of the firm belief that you should not go this alone,” Kasimos said. “People who just pick up the phone and do this themselves, I don’t think they will get the maximum they are entitled to.”” I agree. I should not try to do it alone again.

Their is no doubt that my modest house is in such bad shape that it needs to be replaced with another mobile or modular unit. The only question remaining is how to pay the $55,000 (or higher) cost now that my finances have been beat up so badly by the after-effects of Sandy. Only three years ago I could have written that check from my line of credit but no longer – Sandy repairs to the business have already chewed up all of the money that I’ve been able to gather.

One thing is certain: Sandy changed my life dramatically for the worse and the effects of its impact are not over yet.

For more see:  (My underlying belief is “fooled me once, shame on you, fool me twice, shame on me”. I think it would be unwise for me to attempt to handle this alone again). (interesting to note that other homeowners have the same reaction to stress that I’ve already reported to my claim reviewer)  (my latest rant on the topic)

Tax planning for small business excise tax penalties under IRC 4980D

Tax professionals are looking for the best way to approach clients in this environment of uncertainty surrounding new excise taxes for small business health plans. The excise tax affects two types of plans: 1) those that use individual health insurance, and 2) those that reimburse employee out-of-pocket expenses (often called an “HRA”). Those who say nothing could risk exposure to liability if the penalty stays as part of the law. Those who react to correct their health plans might wind up wasting time and money if the excise tax is removed. A CPA asked . I posted this message in response to an inquiry about a discussion on what defensive strategy I would suggest to a small business client The original discussion was in the NJ CPA forum but I thought that it might enjoy wider interest here.

I just saw that Kiplinger Tax Letter July 2, 2015 edition says “So if the Service does not grant relief, it’s a safe bet that taxwriters will do so”. So that seems like a citable source of opinion for offering a tax risk management plan. Based on that, we might discuss a three-pronged planning approach with our small business clients:

1) The probability that the Service will act proactively to amend Notice 2013-54 to prevent passage of Grassley/Boustany bill.

2) The probability of the Grassley/Boustany bill becoming law as proposed.

3) The likelihood that undocumented Health Reimbursement Arrangements won’t stand up to any examination and won’t be protected under any safe harbor or extension provisions.

So a risk management discussion might involve: a) accounting for employer-paid individual health insurance as a taxable bonus for now with the possibility of adjusting wages before the year end (no harm done), b) a review of health plan benefit plan documents (a smart precaution under any circumstances) and c) a plan to delay modification of HRA plan designs until clarification is available. 

The problem I see ahead with the proposed solution is that small group insurers will balk (they may withdraw products), employers with 50+ employees will complain at the discriminatory treatment and legislators will be scared about the public cost of more small business employers dumping employees onto the insurance exchanges if they pass legislation easing the path to this strategy.

More information is likely to follow. But let’s not forget that as the law reads today many small businesses are exposed to that $100 per employee per day excise tax that was considered necessary to maintain the integrity of ACA’s health care reform measures. And no matter what, take this opportunity to review and update your employee health plan documents.

Fixing the problems of financial do-it-yourselfers

New Jersey financial adviser Michael Kay wrote in yesterday’s Wall Street Journal “Do-it-yourselfers often approach advisers as a last resort when they have an especially complex or urgent financial issue, and advisers should proceed carefully with this type of client.” Since the launch of my own practice six months ago, I notice that a high percentage of my clients fall into this category of do-it-yourselfers who ran into trouble. The two most common types of trouble I’ve run into so far are tax penalties and suspected fraud. Dealing with relationships in a family business, handling problems with other advisers, and stalled divorce negotiations would probably round out the top five types of do-it-yourself problems. I find that, in fact, I like working with do-it-yourselfers who run into problems.

Problems handling financial issues are no reflection on the skills or ethics of the individual. The financial world today is unfathomably complex. Our tax laws are a mess and the procedures used by enforcement agencies are out-of-control. I say to my clients that I can;t fix the system but I can deal with the problem logically, one step at a time, and help relieve the enormous emotional stress that accompanies these issues.


Mr. Kay suggests caution in working with these cases and I agree. I add an extra disclaimer to my engagement letter to adjust for the added risk of these cases. The fact is that when a problem exists there is an inherent risk that your efforts to help will only make matters worse or may lead to a second previously unrecognized problem. These engagements need to be on a best efforts basis with relaxed accountability for the problems.


Do-it-yourselfers understand and appreciate the difficulties of managing finances. They tend to recognize the difference between amateur and professional service. They also notice the difference between the service I provide (confirming items in writing, doing what I promised, returning calls, being available). I find that they frequently express their appreciation about the improved level of service and that this helps our working relationship. (I’ve not found that these satisfied clients are any more likely to refer me to others, perhaps because they are sensitive of exposing their problem situation to others).


The main problem I have with  do-it-yourselfers is that I need to learn to price services appropriately. Undoing a problem typically takes 3 or 4 times longer than starting a project from scratch. You need to gain an understanding of the problem, research the consequences (often requiring outside expert advice and legal help), convincing other parties that it wasn’t your fault and they should let me “start clean” and then finally . WHere there are penalties or consequences from the prior work, that requires even more time. It is not unreasonable to price “fix-up” services at five times higher that the service would have cost if I started the project myself.


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