If you ask whoever is the best in knowing the cash flow of a big corporate or small business, an accountant is your go-to man. In this episode, we have invited an experienced Certified Public Accountant, Philip Kempisty, who has experience in working at a major accounting firm and owns a personal accounting firm himself. Have you ever wondered what an accountant’s life is like in reality? For our small business and entrepreneur audience, Philip is going to share any advice and improvement to file taxes during the tax season. Besides mentioning the things a person needs to be careful when handling tax-related situations, he also disclosed his opinion on business loans for small business based on expertise in the accounting field, and whether he would regret being an accountant. As a podcast that is aimed to bring inspiration and assistance for small business owners, we would like them to get great insight for Tax Season 2020. If you are those who are considering majoring and starting a career in accounting, this should be a great resource for you to understand the industry insight.
Angela: On episode 7, we are pleased to introduce Philip Kempaisty, a Certified Public Accountant. Philip, how are you doing today?
Philip: Fine, fine. (Smiling)
Angela: We’re glad to have you here! So Philip provides accounting services and owns his own firm. Right now, we’re in the mix of the tax season, so I think it’s important for our viewers to have some insight information in the accounting field, whether it’s personal or business and an accountant is one of the most important assets to a business. So with that being said, how does an accountant help a small business grow like their account there
Philip: We are like a teacher, a psychiatrist, and somebody to help them to do the work. You know, (who) guide them on how to do some of the work, that they don’t want to do it themselves right now. And (we) just talk about general business and (you know) help them meet the regulations of the state governments
Angela: When you see psychiatrists or psychologists, what do you mean by that?
Philip: Well, small business has a lot of problems. Sometimes, they just need somebody to talk to and there are tax issues they don’t know how to deal with them so they can at least talking to us if you want to make it better.
Angela: What would you consider the three skills on every accountant should have
Philip: They should know accounting and taxes, be personable, and communicate. Yeah, communication is the key. If the client and accountant do not communicate right, nothing will happen.
Angela: so with that being said, what is one of the toughest accounting challenges that you’ve solved or that you’ve had that you can think of? And how were you able to solve that issue?
Philip: Well, I mean it goes back to one of my trading clients and he had a huge tax that we had to counter back. And the number was so big, they had what they called “a congressional tax” on it. (“What was that?” – asked by Angela) Congress has to approve the refund and they send in a very knowledgeable auditor, who took three months, and it was just a very long and tough thing. And we are kind of having no change but because it was (taking) so long the client was blaming us that we did something wrong and who’s gonna get through it. But in the end, it turns out to be fine.
Angela: Okay, so are there any advantages in filing taxes early? Whether it’s business or personal?
Philip:If you’re getting a refund, you get your money early. If you’re paying, you know you can always wait on the April 15th to pay, so if you can at least know (you have paid) when you’re home, just like something out of your mind (and you don’t have to worry again).
Angela: And with business taxes, you can basically like if you don’t need a deadline you can extend them. Is that a bad thing, or will it have a negative effect on them?
Philip: No, extensions are not negative. (“the audit will not see it as a negative thing?” – Angela) No, what it is. It’s an extension to file, not to pay. You must have to make sure you pay any taxes due because if you owe money and you find an extension they can disallow the extension
Angela: I see. For example, if I am a business owner and I just opened up a new business, yet everything is hectic. I didn’t meet my deadlines and you file the extension, that’s not going to do anything because we file basically. And everything is okay (“That’s correct” – Philip). So what about student loans, do they affect taxes in any way?
Philip: Well, if you meet the income requirements. If your income is too high, you don’t get any benefit; but if you are with the lowest certain threshold, you’ll get a partial deduction for the student loan interest.
Angela: So have you recommended student loans and business loans well?
Philip: You know student loans, if you need them, you need them. In the business loans that again. It’s important to meet the cash flow and the business loans fulfilled a very important need.
Angela: Have you worked with startups before? And can you tell us a little bit about your experience?
Philip: Well, again, it’s communication. (For example) if you are a retail and you’re setting up sales tax, you know you want to get the Federal ID number and Sale Tax number; If you have your payroll, get your employment number or get all your required documents ready.
Angela: So I think when starting the business, it’s important to find an accountant(”thank you, yes” – Philip) So from an accounting perspective, what would you say is the biggest mistake that our startups or even small business, even large corporations make? What do you think it’s something from the accounting perspective?
Philip: Again, a lot of psychological stuff. People procrastinate, and they wait until the last minute. It’s hard to do for something the last minute in funding and you don’t have the money.
Angela: What are you doing in that case? Get a lawyer?
Philip: No (laughing) you get a loan and pay the penalties. I mean my trick is to always show good faith in files: if you don’t have the money, pay what we can; I have to know when you’re gonna pay so there are certain penalties that could be evaded. (for example,) If you haven’t had penalties and that’s just a one-time penalty and you haven’t had another penalty. So there’s a lot of different rules that your accountant can really help you. (My suggestion is) If you had a penalty, maybe give it evaded.
Angela: What kind of businesses or even individuals who get audited? Is it random? Is it something when there’s a large cash flow or large income?
Philip: It’s pretty random. It’s been a very low level for the last 20 years. The computers will generate the IRS scores they assigned and they return. The new tax law is not as much as itemizing deductions.
Angela: Does the client get angry with you or the IRS?
Philip: We jump off everything. But knowledgeable clients know the understanding. For example, if it is a 25 thousand dollar contribution and their income is 50 thousand so IRS is gonna ask what happened.
Angela: Going back into business loans. What do you think is a good way for a business to figure out how much funds do they need? Sometimes we tend to think that businesses take out too much and then you’re stuck with this large loan? Sometimes they don’t even take enough.
Philip: You are going to project your cash flow and then see how much you need. If you take too much, you could always pay it back sooner. So hopefully depending on your interest rate, you can probably cut pension and then cut some of the interest rates. The trick is you want to match the cash flow, the operating cash flow with the business loan.
Angela: Right, I do want to know what led you to become an accountant and do you think that being with your current experience? Has it been an experience that you expected like before or is it something you imagined?
Philip: No (Laughing) It’s not, actually (the reason I get into accounting is) I do good in accounting and took the job at a major accounting firm, an auditing firm. And it has been auditing for most of my life. (“oh, did you?” – asked by Angela) I travel the world and it was a very amazing job. When I started my own practice, everything has changed but I still want to get clients around the world by traveling around the world. At some point, it stopped and we just became domestic, back to doing basic accounting.
Angela: So what should you do if you haven’t filed taxes in several years?
Philip: Okay, if you haven’t filed your taxes in several years, don’t stop procrastinating and start filing it as soon as you can. Whatever you can file, start filing. Whether you have to work backward or going to file, you gotta get it started. So that in the event you get caught or you know you can show good faith. If you can’t afford to do your own taxes seek out a non-profit like VITA (Volunteer Income Tax Assistance) and see if they can help you do the returns, but you want to file, knowing your stand and you can work on a payment arrangement. (“So the IRS gives you that option?” asked by Angela) Yeah, if you don’t have the money to pay a financial statement, you can defer. But at least, you’ll sleep better. I mean, I had an instance where the guy was married with two kids, owns a house and tons of deductions, who didn’t file his taxes. The IRS filed it for him, (with) “single, no dependents” and instead of getting a $10,000 refund each year, they started garnishing his payment. The man couldn’t sleep at night and came to us. We filled that taxes, and he’s got thousands of macro refunds because of what he had paid. The very least filed by a non-profit, get it done, and hopefully, get it right. Then you could sleep better at night, you’ll feel so much better than your life will become. This is where I talk about being a psychologist. And it’s true, I mean when you don’t have this thing laying on your mind, worried about taking a check-in. If there’s money in your bank ever the IRS (“That takes a big toll on anyone” – Angela) Finance takes a toll and you want the marriage on everything.
Angela: Do you recommend people doing their own taxes? I see some websites where I get, even now, it’s tax season. They’re you know trying to file their own taxes.
Philip: Depending on your value of time. I mean people come to us for a couple of hundred dollars for maybe half of the price they do it themselves. And they’ll take three, four (days). For some people to take a weekend, some people think of it for several days. If your time is worth 10 cents, a dollar an hour, and having it done professionally. (“I think it’s better to have it done professionally by somebody” – Angela) I think so high and if you’re professional, you really guarantee the work. If there’s a penalty, you will have somebody to reimburse you.
Angela: Well, thank you so much! It was a pleasure having you!
Philip: Thank you!