Author Archives: dannorcott

“IRS” Scams and what you need to know to protect yourself

13595730 Taxes Alert Shows Duty Safety And TaxpayerTax season and IRS Scams are right around the corner!

This time of year most people aren’t thinking too hard about their tax situation unless they need prior year tax returns for a big purchase. However, in a couple months we’ll all be scrambling around looking for receipts, paperwork we received from employers, 1099s from investments. Some will even be putting together their business expenses and income from this year to put on their business tax return. It can be a very stressful time of year, just imagine what your accountant is going through!

Either way, as I said, during the year taxes are the last thing on your mind. Whether that’s a good thing or bad thing only time will tell. However, one thing that makes everyone stop and think about their taxes is when they receive a phone call, a letter, or an email from “The IRS” claiming that they owe money. What is the first thing that goes through your mind? It is most likely something like: “OH S*%#, what do I do!?” Well, if you have received a letter like that or a phone call or an email, don’t panic! Never panic! Contact your trusted accountant and we will handle everything for you. Not to say we are perfect and never make mistakes, but there is a very good chance it is a scam.

This summer alone, more than $5 Million have been stolen from American tax payers due to an IRS telephone scam and more than 90,000 complaints have been made for similar scams. So how can you protect yourself?

Here is what you should look for and do if you ever receive any type of contact from the IRS.
1) Don’t panic – hold onto all letters and emails and contact your accountant immediately. If it is actually the IRS it does need to be handled in a timely fashion.

2) Don’t give information – The IRS will never ask for your SSN, bank account information, or any other personal information through an email, letter, or phone call.

What to look for:
1) The IRS will never contact you through email or phone call unless they have already been
working with you and you have been assigned to an IRS agent.

2) The IRS will never send a threatening letter or email or call you and threaten you. It just doesn’t happen. Think of them as robots, emotionless robots who only spew out “facts”. Anything else “does not compute!”

3) They will never expect you to make a payment, during the first contact, unless you have come to an agreement.

Remember, if you ever receive anything from the IRS, whether you think it is real or not, please contact your accountant immediately. If it is real, we can negotiate on your behalf and hopefully wave fees and interest. Have penalties taken away. Most importantly, we can potentially get your tax liability down or set up a payment plan. Don’t try to take on the IRS alone, we’re your line of defense!


Changing your withholding on your W-2s and How to do it.

W-2 withholding. If you aren’t sure what I’m talking about yet or you’ve never had the privilege of filling out a W-4, let me set the scene. – You just started a new job, you walk into HR and the person behind the desk hands you a bunch of legal paperwork to fill out and a W-4? After looking at it blankly for a period of time, you have no idea what to put. 1, 2, wait, I can put a 0? What the heck does this even mean!? You look up at the HR person and say “uhh… I have no idea what I should put. Can you help me out here?” Without taking their gaze off their computer screen they say “Just put zeros for everything”.

Their advice, on average is pretty good, but no one knows why and in a lot of situations is the safe thing to say but not always the right thing to say. No matter what you have on your W-4 right now, it might be time to take a look at it and change it. Have you been getting back high refunds every year or have you been paying extremely high tax liabilities every year to the IRS?

Some people feel it is fine to get a large refund at the end of the year but it isn’t a financially great decision. What they are doing is tying up their money in the government for a year until they get their refund. They could have been using that money but instead, the government sat on it, made interest on it for a year and laughed. If you had the choice, wouldn’t you rather have that money to spend, or save every month? I know I’d like to see less taxes taken out of my paycheck every 2 weeks!

On the other hand, some people don’t have enough taxes taken out of their paycheck and at the end of the year they owe a lot. This can be a problem for many reasons. What if you spent all your money and don’t have enough to pay your tax liability? You may need to pay interest on the taxes you didn’t pay. The IRS can hit you with penalties at the end of the year if you hadn’t been making your tax payments. If you have to pay interest and penalties you are, essentially, forking over money to the government at that point and have nothing to show for it.

It’s almost the end of the year. Take a look at what happened last year at tax time. It might make all the financial sense in the world to change your W-4 withholding. Not sure what to change it to? Well, the IRS has a withholding calculator that can tell you what you should put. Fill this out and bring your newly found information to your HR person and start taking control of your life! Don’t let the government take what they shouldn’t have!


What Is The Cloud? Part 2 of 2

WHAT IS THE CLOUD?What is the cloud Part 2

Part 2

In part 1 of our post on “the cloud”, we discussed what the cloud is how many of us use it already.  Our second part will focus on safety issues and using the cloud for accounting.

Is it safe?

Security depends solely on how much money the company puts into it and how important the information is.  If you use a reputable hosting company your information is going to be safer than if you had your information on your laptop or an external hard drive.

Yes!  Most online servers are very safe.  Companies such as your bank or online products use massive server farms to host their data.  These server farms are sometimes huge building that house hundreds of servers.  The servers are maintained and watched by an IT group and your information is secured with encryptions that are near impossible to hack.

Do accidents happen?  Yes, look at Target. 

People are sometimes very hesitant to use a cloud based service.  We hear a lot: “what happens if the server crashes, I’ll lose all my information!” or “What if the power goes out where the server is located?” and “What if someone breaks into the server and steals my information?”

Here is what I like to say to people, which I believe really helps:  Those are all very valid concerns.

First off, there are so many safe guards in place that you won’t lose your data or have it stolen. The information is stored on a server at hosting company, then there are one, two, and sometime three other servers all backing each other up in case something gets lost.  It’s almost impossible to lose your information.  This is how companies like Iron Mountain (currently the 712th largest company in the FORTUNE 1000) make their money.  They ensure your data is safe and that you can access it.

Secondly, I understand that it gives us a piece of mind knowing where our data is physically.  It’s on the hard-drive of my computer and backed up on an external hard-drive.  But what happens if someone steals your computer or your external hard drive?  What if there is a fire and you lose both of those?  You can’t recover it at that point.  A server hosting company has safeguards in place to prevent the loss of your data.  If you have a fire at your home or office you won’t lose any of your data.

Accounting and the cloud.

Thankfully, the invention of cloud computing has made it easier than ever to keep your accounting up-to-date and accurate.  Companies such as Xero and Quickbooks have online products.  Their products pull your bank transactions to make accounting easier than ever before.

This cuts the accounting cost of company greatly.  Instead of needing an accounting department, you can hire someone for a fraction of the price to work remotely.  Why pay a book keeper $10-$15/hour, 40 hours a week or a staff accountant at $45,000 a year, or spend over $100,000 or more on a controller or CFO when you can hire an outside accountant for fractions of what you’d pay a full-time employee?

Cloud computing has made it possible for you to get a CPA experience for less than a bookkeeper.  Experience that will help you run your business successfully.

Outside accountants can work on your books, reconcile your accounts, run financial statements, analyze reports and give you everything you need all from their own office.  You won’t need to expand and bring in an accounting department, no need to increase your expenses when you can save that money to grow your business.




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What Is The Cloud? Part 1 of 2

What is the cloud Part 1

In this first post, we will be discussing –

  • One sentence to answer what the cloud is
  • Elaborated answer on what the cloud is
  • Do you use it already?

Our second post will cover –

  • Is it safe?
  • Accounting and the cloud


The cloud in one sentence:

The cloud is a server that you can log into from anywhere you have internet connection, to access certain data that is important to you.

Elaborated answer to what the cloud is:

First off, I know I’m a little late on this topic and that it’s been written/blogged/tweeted/smoke signaled about at least 1.73 trillion times!  It’s just that everyone tries to over complicate the subject.  If my one sentence, defining the cloud, still confuses you or you ate it up but still want more then I’m happy to help.

The term “cloud” is just a metaphor for the internet.  When you look at flow charts, from back in the day, the internet was always represented as a cloud.  However, cloud computing or the new use of “the cloud” is more specific than just “the internet” these days.  Unfortunately, companies like Microsoft, Apple, IBM, and many others used the “The Cloud” as a marketing term to sell you their service.  In doing so, they made the consumer think they were buying a physical product.  This is what has created a lot of the confusion as to what “the cloud” actually is.

Cloud computing or cloud storage is the term used for storing data on a server, usually off-site, which can be accessed at any time.  When accessing this server, you sign in using a secure username and password through a web-service (in most cases, a website).  This login information is matched up with credentials on the server you are trying to access and if they match, you are able to access whatever related information that is stored on that server

Look at it this way, on your computer you have a hard drive filled with information.  Software, documents, and countless other types of files.  Let’s pretend you started writing a novel three years ago and never finished it.  One morning you decide you want to finish writing “Sunny, and The Confused Little Cloud” <– that’s the name of your novel!

After your first cup of coffee for the day, you walk over to your computer and log in using a username and (most likely) a password.  This gives you access to everything that is stored on your hard drive.  You search for your novel and start typing…darn!…you realize your writers block is as strong as it was three years ago and give up writing for now.  You save the document and close out.

“The cloud” is no different than the hard drive on your computer.  However, the documents and files are physically stored someplace else.  The great thing about this is that you can login and access your information from any computer anywhere at any time through the internet.  So if you stored your novel on a server you could log in, while at the beach, when inspiration strikes, and start typing away!

Do you use it already?

Chances are very good that you use cloud storage already.  As mentioned before, anywhere you have internet connection you can send credentials through the internet to access a server storing specific information.

Do you have an online bank account that you log into to see your account transactions?  Bank of America, Citizens, TD Bank, and most likely your local bank all have online access.

What about email?  Your email is stored on a server which you log into, to check every day.  Gmail, Yahoomail, and all the other email services are hosted on external servers somewhere that you access.  Only when you use a product like Outlook, do you download a copy of the email.

Even Youtube is an example of an online server.  Youtube stores millions of user-uploaded videos that you can log into and access.



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TED Talk – The Way We Think About Charity is Dead Wrong

It is “that time” of the year again for most non-profits – budgets.  Creating next fiscal year’s budget is a stressful and difficult task.  What expenses can we increase?  What expenses can we decrease?  Are we going to get federal funding next year?  What about that giant grant we received last year, can we count on that again?  Not only can it be overwhelming but as we all know, one thing overlooked can be the difference between closing the doors and reaching your goals.

We recently found this amazing TED talk that we feel every non-profit should watch, as it might change the way you think about how you run your organization.

Dan Pollata talks about the Catch 22 of being a non-profit organization and urges us to rethink how we run them.  Mr. Pollata makes great points, some bleak, but others a great call to action!

After watching this, how will you look at your budget?

F5 Accounting prides ourselves on the fact that non-profit organizations are our specialty.  We always tell people – we could pick up all the for-profit companies we can, make more money than we need, and retire.  However, we find that organizations that have a clear goal, a mission to help, and a drive for change are who we love working with.  We have over 35 years of experience with non-profit accounting.

If you need:

  • Monthly accounting
  • Grants management
  • Pre-audit workpaper preparation
  • Budget preparation
  • Internal financial statement preparation
  • Cash flow analysis
  • Key performance indicators
  • 990 Tax return preparation
  • Accounting system setup and training

Give us a call!  With our help you can finally be the change you want to see in this world!

Wash Sales

Wash SaleWhen Lucy first saw those black and tan Jimmy Choo heels she knew she needed them.  “They would look so cute with my new purse,” she thought.  Without hesitation, she found her size, whipped out her credit card, and bought them on the spot.  Once Lucy got home, she immediately tried on her new heels.  She then sat back on her couch for a little bit thinking about her purchase.  “These are so pretty!  Wait…did I really just spend $1500 on these?  That’s a whole month worth of rent!  I need to return these, I can’t afford them and my rent this month!”

Lucy is no different than the rest of us; we’ve all been there, buyer’s remorse!  It’s very common to buy something, especially on impulse, and regret it later.  But is there such thing as seller’s remorse?  There sure is; I’m sure you can think of a time when you sold something only to wish you could have it back.

A wash sale is an IRS rule that prevents a seller of a security from repurchasing substantially identical securities within 30 days of the original sale or trade.  This can also happen if the seller’s spouse or company buys substantially identical stock or securities within that 30 day period.


Lucy buys 100 shares of Microsoft at $40/share on January 1st.  On May 1st she sells her shares at $32/share for a loss of $8/share or $800.  On May 28th she reads an article about Microsoft and decides she wants to buy Microsoft again.  She purchases 100 shares at $35 per share on May 28th.  The IRS does not allow her to take the loss on the $800 but does allow her to add that amount into her basis of the stock.  This brings the basis of her stock up to $43/share.

This may look bad to you but there is a silver lining.  Since the IRS doesn’t allow Lucy to take the $800 loss right now, they will add it back into her stock and allow her to take it later, when she sells the stock.  If, later in the year, the stock price goes up to $45/share Lucy only gets $200 if she sells.  However, if the stock drops down to $40/share, instead of only having a $300 loss on her tax return she will have a $1100 loss.

The reason the IRS has this wash sale rule is to prevent taxpayers from taking advantage of losses.  Without the rule, if Lucy sold her stock at $32/share on December 31st she would have been able to take advantage of an $800 loss on her return.  If, on January 1st she bought back the stock at $32/share and it went up to $42/share she essentially made $1000 in the next year and wouldn’t have to worry about the taxes for a whole year.  This rule prevents this from happening.

We work with a lot of clients both individuals and corporations that engage in transactions of stocks and other securities.

If you are a new company and need help determining if issuing securities or debt instrument is a good idea, contact us we have plenty of experience.

If you are an individual and need tax advice regarding securities and your tax return we have a team that can help!



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Why Don’t Accountants Have Reality TV Shows?

Reality TV

Random Rant #RR

I know you read that headline and said “Dan is completely crazy!  Accountants are boring!”  Well you’re right, I am completely crazy and many accountants are boring.  However, trust me on this – accountants needs to have a reality TV show.

What makes a good reality TV show!?

  • Drama
  • Important people (or people who weren’t important but now are)
  • Bad Decisions

I’ll tackle each of these individually and hopefully I’ll sway you as to why accountants need a realty show.

Drama:  As an accountant I see drama daily!  Maybe not the “you’re cheating on me with my best friend’s boyfriend’s sister’s husband!” or the “You spend all your money on booze and drugs!” but the real drama that makes or breaks a company.  We see it all, corporate politics, clueless board members, and executives that couldn’t tell you how much money they made the year before!  We know how to handle it and we educate so that the drama turns into a well-oiled corporate machine!

Important people (or people who weren’t important but now are):  We have this in our lives all the time.  We pick up big clients who, if we name dropped, everyone would know!  But we love picking up small clients and startups who maybe have just an idea and some financial backing.  Those are the people who weren’t important to other accounting firms but we work with them because they’re important to us.  They then become very important to everyone else when they become successful!

Bad Decisions:  This is what makes accounting so interesting!  Companies that were on the brink of bankruptcy, companies that are in bankruptcy, and even theft!  It’s all in a day’s work for us.  Like our motto says – “We clean the mess”.   We love working with our clients but, we really like helping people too.  People make mistakes, and sometimes all we need is a helping hand.   We find the bad decisions and help turn them into good decisions.

So did I sell you on an accounting reality TV show?  No?? Well, trust me it getz krazy up in herre!

Peace out!


P.S. MTV or VH1 call me!  Or, if you’re a business that needs help with your accounting, give me a call.