Foreign Asset Reporting

Foreign asset reporting deadline is June 30. 

Foreign asset reporting scares me to death because the penalties are so large. They start at $10,000 and go up from there. There is no tax associated with the filing, but the IRS is apparently convinced that U.S. citizens are hiding assets overseas. They are not fooling around.  They are very serious and the penalties are enormous, sometimes exceeding $100,000.

Foreign asset reporting is required if you have assets in foreign accounts. We need info well in advance of the deadline.  We cannot extend the foreign asset reporting.

Two forms have to be filed. Penalties are for filing late or failing to file. If you have no assets in foreign countries, you don’t have to file. But if the IRS ever determines you had assets that should have been reported, the penalties will come down hard and heavy.

If you do have assets in foreign countries, all you have to do is file.  

You can also find the organizer on the web site on Client Tool Box.

 Here’s a link that explains what needs to be reported and what doesn’t.


Our Story

Our principal, a mensan, graduated with the highest grades in his college and took a position with the largest accounting and consulting firm in the world. He went on to take executive positions with a Fortune 250 company, an international bankcard and an oil & gas company before founding his own firm, which has clients in 46 states and is headquartered in rural Colorado. In his long and storied career, he worked alongside and with some very important people and was involved in a number of significant events that are still talked about.
Throughout our principal’s long and storied history, he watched the accounting profession lose relevance in the modern era and fail it’s closely held business clients. Closely held businesses are wholly owned by a single person or small group. As opposed to publically held companies which are owned by investors who buy stock on the public exchanges.  Besides their size, the basic difference between them is this. Closely held companies are managed by people who are spending their own money. For that reason, their primary concerns are cash flow and income taxes. Publically held companies are spending other people’s money.  As a result, they primary concerns are annual audits and earnings per share (EPS).
Our principal watched as his profession fell into complacency and replaced meaningful, thoughtful service with busy work. His opinion is the accounting profession today sees very little difference between businesses or owners and a template approach is a perfectly fine approach. He thinks they deal with every business in exactly the same way.  In addition, most firms are working 14 hours a day in an attempt to push product out the door. That is not an environment to breed clear and innovative thinking.
The noted author Robert Greene said, “After learning your profession, you have to experiment, but most don’t. They do what’s safe and stagnate.” Those who experiment over a long period of time actually reinvent their profession and set a new standard of excellence. That’s what this firm is doing.
The result of general stagnation in the accounting profession is this … business owners pay more tax than the law requires, potential profits go unnoticed in the accounting database, owners of closely held businesses have no idea what their financial statements mean (nor do many accountants), cash & profits are wasted on frivolous workforce costs. time and money is wasted on mundane backroom functions that distract management from the critical areas of product development, marketing and sales and … regulatory damage runs rampant. But closely held businesses get little or no help from their accounting professionals, who seem to still be stuck in the 15th century with Luca Pacioli.
Watching his profession fade into irrelevance was a great frustration to Mr. Ellis, especially after the 2008 housing crisis when many closely held businesses failed precisely because of the issues discussed in the previous paragraph. The deep recession that struck then convinced him to devote himself and this firm to reinventing the accounting profession to provide the tools closely held business owners need to navigate the hazardous 21st century. That’s when our tagline was born … the edge to survive in a dangerous world.
This is our mission – to reinvent the accounting profession to make it relevant in the 21st century. We are a lone firm striving against a giant marshmallow that threatens to smother us.  But at Ellis we don’t just do taxes. We cut taxes to the legal minimum. We don’t just do accounting. We mine new profits. And we provide other needed services, each of which offers unique twists that make it alien and unrecognizable to the general profession. We are constantly refining and adding as the economy dictates.  Today we take pride in providing the tools closely held businesses need to survive and thrive in the 21st century … or in the words of Steve Jobs (who serves as our model) … to leave their mark on the universe.

Carpe Diem

Carpe diem. 

Patience for minutes or hours or days may be a good idea. But I would never give the impression that I’m a patient person. Impatience adds a sense of urgency to the situation, and even a little impatience gives the other side artificial deadlines and strengthens your side. But patience for weeks or months or years is a complete waste of time. You only live once and each minute comes only once. Don’t waste a single one. You could grow and die while they live the good life. If someone is extolling the virtues of patience, they’ve already lost or they’re a couch potato destined for an unremarkable life. If you’d prefer a remarkable life, be a trifle impatient. 

Carpe diem.

Looking At Every Angle

Looking At Every Angle
Most closely held businesses are unwilling to pay for anything but the bare minimum. An example is analytics. Despite the fact that analytics can deliver insights to your business that will drive profits higher, few closely held businesses are willing make the investment necessary.
That’s why the vast majority of closely held businesses will never leave a mark on the universe.
Contrast that to large publicly held businesses. It is not uncommon for publicly held companies to have consultants from two or three firms on their premises every single day of the year. They overspend on this. But they try to be sure they have considered every single angle.  That’s why they’re big and you’re not.
Ellis analytic accounting is not exorbitantly priced. It is well within reach for any closely help business.  
The downside is small, but the upside is large.

Apple’s Tax Strategy

I was at the gym a couple of days ago bantering with a gal in one of the classes I take and she asked me what I did. I told her I had an accounting practice and she asked me the name but she’d never heard of us. I told her that’s because we try to keep our profile down locally. I got all the high profile I ever want during an unsuccessful campaign for U.S. Congress.  I told her we don’t have a sign on our building or on the door to our offices, but my practice is one of the largest individually owned CPA firms in the United States. We have clients in 46 states. After oooing and ahhhing for a moment, she said something very interesting. She said, you seem very … “lively” for an accountant. And of course, you all know what she meant.

Besides the issues this attitude creates for ‘unlively’ accountants, it raises a larger point more pertinent to the typical businessman about the innovations people expect from their accountants and tax advisors. They expect absolutely none.  Because they’ve never gotten anything other than ‘timing differences’ whenever they asked for tax advice. Year end tax advice is always swimming with timing differences. Unfortunately, with unlively goes dull and slow, at least in the minds of most business owners. Their tax accountants have trained them to think that way. Creativity and innovations are certainly unexpected.

That puts many business owners in the unfortunate position of having to plod along year after year paying more tax than the law requires and missing profit opportunities because they think they’re getting all you can expect from an accounting firm. But that’s not true.

Take the case of Apple. In 1998 when Steve Jobs returned to Apple, the company was three months from running out of cash and going bankrupt.  We all know the story about how Jobs pulled Apple from the brink of bankruptcy and propelled it into the most valuable company in the world.  Everybody knows about the iMac and the iPod and iTunes and the iPhone and iPad and what a great successes they were. But very few people know about the role tax strategy played and the 400 billion dollars it added to Apple’s coffers and cash balances.


Tax Strategy is an essential element of each of these companies’ success. They built their cash positions and balance sheets with tax strategy.  They are all wildly successful companies, and all of them have been heavily criticized for pursuing legal, effective tax strategies.  GE’s still embroiled in controversy for paying no income tax in 2010. Google and Amazon have been heavily criticized throughout the E.U. In fact the U.K. Parliament went so far as to ‘condemn’ Google.  But Apple’s story is the most interesting.

Apple’s story is below.

It may be a coincidence that this story spans Steve Jobs’ tenure at Apple, but I don’t think so. It begins in 1997 with Jobs’ return and Apple sitting at the brink of bankruptcy.  It ends sixteen years later after the greatest turnaround in history and Jobs dead and in the grave.   From a single billion in 1997, Apples cash position had risen to $57 billion by 2010; and, as Apple’s market value had risen from $839 million to $549 billion, the company had become the most valuable company in the world.

The NYT initially broke the story in 2010, alleging, apparently inaccurately, that Apple’s effective tax rate was only 9.8%. It culminated In 2013 with Congress grilling Apple for avoiding $400 billion in tax using a “web of tax shelters” with catchy names like the ”Double Irish and a Dutch Sandwich”. Note the use of the word “avoiding” which implies it was all done legally, instead of “evading” which would imply laws were broken.

Apple had broken no laws. They will never be prosecuted for tax avoidance, because tax avoidance is not against the law. It’s human nature to avoid income tax. None of these companies had broken any laws. None of them will ever be prosecuted.

This story is not about Apple outwitting the world’s governments. The point of this story is that the biggest companies in the world are quietly and effectively sheltering their income from taxation with legal tax savings devices and tax preferences that legislators embedded in tax codes for this particular purpose. The story is about Apple cutting it’s taxes all the way to zero in many cases by taking advantage of what the world’s governments willingly provided. Many tax savings devices and tax preferences have been embedded in the U.S. Tax code by the U.S. Congress. And most businesses are leaving them unused. But not voluntarily.

In Apple’s case, newspapers have reported the company saved $400 billion in taxes. But if the truth were known, it was probably more than that. Never the less, that $400 billion went into the cash balances on their Balance Sheet and into their market value, fueling their rise to ‘the world’s most valuable company. But their tax strategies added greatly to bottom line profits and company value.  It’s a statistical fact, that $400 billion in tax savings fueled Apple’s rise to overtake Exxon Mobile as the most valuable company in the world.

Jobs obviously had no desire to contribute precious working capital to taxing authorities through faulty tax advisors.

Here’s the moral of this paper: If you want your company to break through the barrier that separates the ordinary companies from the remarkable companies that leave their mark on the universe, you need to pay a lot more attention to your income tax and your income tax advisors. If you intend to survive and thrive in the tumultuous 21st century, it’s essential to cut tax to the legal minimum. Paying more tax than the law requires is not the pathway to success.  For multinationals sophisticated tax strategy is required to keep pace with competitors.  But for closely held companies, those savings open doors otherwise closed and provide a needed burst of competitive advantage.

Tax strategy is the first prong in a four pronged approach to turning a company around. The others are ‘modern workforce management’, ‘regulatory management’ and a form of analytics we call ‘analytical accounting’ or ‘transactional analysis’.  If you’re doing this, greatness is a viable option. And so is putting your mark on the universe … a’ la’ Apple.

You can bet Apple’s tax advisors are of the lively variety.

For more information, visit our web site: , or call: 888-241-5040.

By the way, I’m also an anarchist.

From Vox Day, via Zero Hedge

“One need not be a socialist, or oppose capitalism, to oppose the income inequality that is the result of theft. With the assistance of the Federal Reserve and Congress, the banks have financially raped the American economy and the American people through fraud and political corruption. A reckoning is overdue. Everything that has been done in the last five years has been done in order to postpone it. And yet, a reckoning is coming nevertheless, because that which cannot continue will not continue. The rich simply cannot consume enough to substitute for more equitable consumption; how many cars can a man drive? In how many homes can a man dwell?”

<a href =””&gt; Vox Popoli

People are bitching about the income inequality between the richest 88 people in the world and the rest of us. But there are more important things out there we should be paying attention to. The worst thing about this kind of income inequality is the potential for creating a landed aristocracy. But the answer is an estate tax that prevents passing on enormous estates to heirs unhindered, or worse yet, parking them in dynasty trusts,. A few generations of heavy taxation and incompetent heirs would eliminate that wealth. You probably hate estate tax, but that is all that stands between us and a landed aristocracy. Is it really healthy to have families like the Kennedy’s and the Bush’s rise to the top of the food chain? Would it even be possible for another Lincoln to rise to the Presidency?

Kill those dynasty trusts.

Very rich people make a lot of money, but they don’t just take it away from us. We have to participate willingly for capitalism to work, and we do. After all, it’s the best system out there for delivering the goods we want for a price we can afford. The only alternative, and it’s not a very good one, is centralized planning.

The income inequality we can’t deal with so readily comes from other sources. The most egregious comes from the abuse of government and power … just because they can. In many countries, this one included, that is the big problem. People get rich just because they’re powerful enough to take it away from us. Our government first bled us dry in the name of social engineering, just because they could, just because we trusted them. Then when we were already bled dry, they drove us deeply into debt to raise the money to feed their magnificent machine, enriching themselves and their favored classes as they went. just because they could.

The only way to deal with that is political revolution. Perhaps there will never be enough opposition to put a stop to this kind of income inequality. Perhaps we can never recover. Perhaps the values we used to hold dear are gone forever. But perhaps someday people will begin rolling out the guillotines.

Just thinking.

The Lease Bad Solution

For insiders only.

For casual readers, this will probably go way over your head. If you’re a C suite executive of a publicly traded company, you’ve probably already heard about this. If not, get on the phone with your auditors and find out how this will affect your balance sheet. Then have a meeting with your in house experts to estimate the impact on your stock value.

It could be significant. It would have been for Enron. Of course Enron specialized in ways to hide liabilities from investors and regulators. We’ll give you the benefit of the doubt and assume your company isn’t.

“Off-balance-sheet’ issues in Enron’s financial reporting ate Arthur Andersen alive, it pains me to have to say that because AA is my alma mater. When I was with them they were the biggest and best, and they attracted the smartest people on the face of the earth. When I joined them, my entire freshmen class had graduated number one from their college or university. There were always two types at AA, the bright but thoughtful and the the type that were so smart they weren’t afraid of anything. The wrong element got into power at the wrong time. When Enron and a few bad apples drug them under, their consulting arm had just split away and become Accenture. But they were the largest CPA firm, Accenture was the largest consulting firm in the world and their new in house consulting firm was second largest. Plus, AA was the only real large accounting firm to grow on its own abilities. All the other big firms did it by forming associations. AA never even acquired another firm as far as I know. You may not realize this, but the entire Big Four are associations of individual firms. They grew by forming associations.

In any event, when the Enron debacle hit and AA’s shortcomings became public knowledge, Congress directed the SEC to investigate ‘off-balance-sheet’ issues and repot back. Four years later, the SEC issued a report condemning lease accounting as a ‘giant loophole’. Since then, the world’s two largest accounting rule makers, the FASB and the IASB have recommended wholesale changes to lease accounting. PwC, one of the four largest accounting firms, describes the resulting proposals to change all of this as the biggest accounting change ever.

Enron’s ‘modus operandi’ was to figure out ways to leave liabilities off the balance sheet. In many cases, including their’s, this resulted in leaving the assets tied to these liabilities off as well, even if the asset was worthless – which in Enron’s case it usually was. This can have the affect, as it did in Enron’s case, of greatly strengthening a company’s appearance to the financial markets.

For instance, if you are a reporting company who leased a big ship for which you still owe $40 million in lease payments, but the ship is now worthless and sitting in dry dock, other than for some notes disclosing limited data, this entire transaction is hidden from the public, the investors, and the regulators. This is the loophole the AICPA and the IASB are attempting to close.

This is a necessary change to the accounting rules. I remember when they were trying to figure out how to report for leases, we professionals called it the lease of the month club. They must have issued thirty opinions about leases. That’s how I remember it. It became a joke. The FASB ran off the tracks in those day and never really recovered. At least that’s my opinion. The were often guilty of overthinking. Which is what happened here. It certainly would have gone a lot better had they simply concentrated on the users of financial statements. Today the SEC plays a bigger role in accounting rule making than does the FASB. That’s what happens when you turn an important task over to a bunch of technocrats in green eye shades.

But, you can be certain, this will have a significant impact on financial reporting.

News From Davos


From Bloomberg

Mergers and acquisitions are surging, with $130 billion in takeover offers already announced this year. And enterprises from Microsoft Corp. to Volkswagen AG are readying plans to step up capital spending after companies have squirreled away a record amount of cash to protect against a new financial crisis.

“The animal spirits are coming back,” said Mark Zandi, chief economist for New York-based Moody’s. “This is going to be a good year” for capital expenditures and hiring.

We’ll deal with animal spirits in the next post.  Sounds weird, but there’s a simple explanation. This post however is dedicated to why big companies see things differently than small companies and why they would take an expansive approach at exactly the time many prognosticators are projecting doom and destruction.

ELLIS Forecast

If you can survive 21st century chaos long enough to improve in every area you have compete control over, you’ll participate in the biggest, craziest boom ever. You don’t make the improvements, doom and destruction are waiting down the road. Our firm is forecasting an unusual future. On the one hand we are forecasting continued sluggishness for the overall economy. But on the other hand we are forecasting increasingly discriminating taste of most buyers. The ability to deal with this is what will separate sucesses from failures.

With two competitors on the same street in the same block of the same city with all the same outward appearances and the exact same pricing, why would one thrive and one face demise?

Because of their business model and their infrastructure …

Here’s the lay of the land …

@ Google & Wikipedia are the future of knowledge, not the university system.
@ Amazon & Apple are the future of business. They and Apple are busy spoiling your customers right now.
@ Apple is the future of innovation and customer loyalty.

With that competitive landscape staring you in the face, you have to adapt to survive. If you can’t compete on a level playing field with Amazon, your customers will be disappointed and you won’t survive. Amazon and Apple are making customers very particular.  Who on this earth has never purchased anything from at least one of these behemoths?

If you haven’t already experienced the rising expectations, you will soon.

That’s where ELLIS comes in.

We are specialists in helping small businesses over this hump. Our business model will improve your business in every area you have complete control over. Our infrastructure helps make your internal workings hum like a Stradivarius.

Of course, you’ll have to do you share, sales, marketing and product or service development. But we can provide the time for you to concentrate on theses essential areas that you may have never concentrated before.

In the final analysis, Ellis makes it possible for you to leave your mark on the universe.

Why Davos Companies are Different from your Business

The companies that participate at Davos are all the biggest and best in the world, They already have their business model and infrastructure in place. The writing has been on the wall for a long time. The issue is all the other businesses in the world, especially wholly owned business in the United States. I can’t speak for other countries, but I suspect it will not be unlike the U.S. in this respect.

Most wholly owned business don’t think it’s worth the money to pay for consulting or for being on the cutting edge. While most very large businesses pay to have the world’s biggest consulting firms in their place of business on a daily basis.=; often more than one at a time. Whether they take their consultants’ advice, they want them around. This is one of the reasons few small wholly owned businesses break free of the crowd. 99.99% remain small and wholly owned for their entire existence.

  • Infrastructure is key
  • Google is the future of knowledge
  • Amazon is the future of business
  • Apple is the future of community
  • Ellis is the future of professional services
  • the way Americans do business is changing
  • regulatory strangulation
  • talent drought
  • faster deliver
  • better service
  • more digital revolution
  • tax increases (never cuts) as we socialism a try
  • mind bogglingly complexity
  • economic turbulence as Pacific Rim raises
  • new and unexpected competition
  • … from new and unexpected sources
  • … often financed by government, ala Government Motors
  • and, last but not least …
  • greater opportunity for those who are ready

Are you ready?