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Founder Files: Stephen Buller broke the Big Four mold

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While most accountants dread conducting on-site inventory observations — often considered one of the rote tasks shoved onto those at the bottom of the food chain — Stephen Buller loved them.

While working for a Big Four firm, he remembers going to a lumber yard in his home state of Washington for an inventory count. He recalls walking around the snowy fields in soaked sneakers and socks, looking every bit the ill-dressed, out-of-place accountant, but loving every moment of it. 

“I really enjoyed those experiences because I got to see the nuts and bolts of the business,” Buller said. “I think a lot of what I’ve taken into my own business now is that numbers are just numbers. Is a million dollars a lot? I don’t know, what’s the context? Is this a good revenue number? Am I paying too much for payroll?”

“The numbers are not enough,” he said. “You have to have context in the business.”

It’s one of the reasons he was never content working at the Big Four. Buller wanted to spend his hours helping business owners put more money in their bank account, not telling the Securities and Exchange Commission that a company’s finances check out. 

“I never felt much satisfaction from the actual work that was being accomplished, and maybe that has to do with the intangible nature of numbers,” he said. “The final delivery of a $100,000 audit is a single page, written up, signed by the partner that basically says, ‘We don’t find any problems with your finances.’ That’s just the industry — it’s not necessarily a criticism of that product.”

Stephen Buller Founder Files

‘It was really painful for me’

Buller studied accounting at the University of Washington. He was a member of Beta Alpha Psi, the accounting and finance honors society. From his interactions with recruiters through the society, he interned at the Big Four firm before graduating with his master’s degree and joining full time. But it wasn’t what he expected. 

“It was really painful for me,” he said.

Buller didn’t enjoy the number of hours spent behind a desk. While the firm had an efficient and detailed audit methodology, he felt as though seniors and managers were always creating more work — even after the job was done. 

“There were a couple of people I worked with, supervisors and managers, who bucked this trend,” he said. “They were really focused on, ‘These are the things we need to get done, and when we get those done we’re done. We don’t have to work hours we don’t need to.'”

He said it boils down to the billable hours you can charge a client: “I got the sense that partners never wanted to report fewer hours because that might justify a cut in the fee.”

Buller felt his proposed ideas for improving processes were usually shut down before even being considered. “This isn’t necessarily a criticism directly of [the firm] but just of any very large organization,” he said, referencing the “If it ain’t broke, don’t fix it” mentality. 

He also disliked the lack of work-life balance: “The overall perspective of the public accounting industry is that 45 to 50 hours a week is a break. That’s like vacation to them.”

Buller left the firm in 2010 after about three years. He jumped around a variety of tech companies, startups and public companies as an accountant and controller. Around the same time as leaving the Big Four firm, Buller took his first swing at building his own company. He dropped a few thousand dollars on setting up a website to start an e-commerce business selling self-defense and security products, like pepper spray and tasers. The venture was unprofitable and he jumped ship after one of his managers told him he needed more time before he’d be ready to run a business. 

He finally started his own practice, Buller Accounting, in 2015 after acquiring a bookkeeping firm from a local tax accountant who was selling. Buller’s firm offers a variety of services including bookkeeping, in-house payroll and more. With his five employees, he manages about 50 clients, mostly small-business owners based in Washington State and the Northwest Coast. 

‘We can do things differently’

Buller’s creed is that he can do things differently at his firm. 

“I felt like at [the Big Four firm] I was not treated like a human being, with thoughts and feelings, good ideas and bad ideas, wants and dreams, and hopes and fears. I felt very much like I was a tool. I was meant to be used, and when my productivity or patience had run out I was to be discarded. And I think that is awful,” he said. “I think there are plenty of good things that I take from [the Big Four firm], and then there are things that I say we can do differently.”

But Buller isn’t trying to rebuild the wheel. One of the things that he carries on from his time in the Big Four is the mantra, “If it’s not documented, it’s not done.” 

Oftentimes, a business owner hiring an accountant doesn’t necessarily care how the work gets done — just as long as it gets done. Problems usually don’t arise until someone is audited, it’s tax season, or they receive a surprise letter from the IRS. That’s why showing his work is so important.

“Everybody messes up from time to time, and we can do our best to build processes that avoid mistakes, but they will still happen,” Buller said. “And so our real goal should not necessarily be to ensure no mistakes ever happen, but to ensure we can support what we did and why we did it.”

Where Buller does diverge from big firms is in his pricing model. He explained, “For me running my business, a huge part of being successful is knowing how much revenue is going to come in, and how many expenses are going to go out.” 

It seems simple, he said, but it’s hard to do for many business owners who don’t know anything about accounting. For instance, when Buller tells a client they need to amend a filing, which may take a couple hours and result in an additional $500 added onto their bill, clients can feel blindsided. 

So instead, Buller works with his clients for a couple of months to develop a thorough scope of what services they actually need, and then he quotes them a flat-rate fee. “If we do work outside of that scope, I do my best to tell the client ahead of time, ‘This is outside of scope, I think it’ll take about this much. Is that OK?’ And then anything that’s in scope that just happens to take us longer, then that’s on us.”

“So I just need to manage my hours very carefully and see what clients are consistently going over budget or under budget, and adjust accordingly,” he added.

For clients that consistently take him and his team less time than he has budgeted, he’ll voluntarily reach out and tell them he’s decreasing their bill by a certain amount. For clients that consistently take more time, he explains what he missed in the estimate that constitutes a higher bill, but he purposefully works on a month-to-month basis so as not to make clients feel as though they’re locked in to an unfavorable agreement.

Buller’s first piece advice, for young accountants especially, is the reminder, “You don’t know everything.” 

“I think a really good way to start your career is to go to work in an industry that interests you. Work for a company, boss, team and people that you respect and enjoy,” he said.

He also does not recommend trying to start a business right out of college, warning that most people will lack the experience and knowledge necessary to do so effectively. “Instead, I would go to work for somebody who does what you want to do, learn as much as you can from them about what not to do and what to do, and then maybe move on to starting a business.”

And as someone who did not feel like he fit into the traditional accountant mold but loved the accounting itself, Buller emphasizes the broad scope for applying accounting skills: “Once you have that framework and you understand the debits and credits, the different accounts and how it all works, you can look at any business with a perceptive eye.”

“A lot of businesses come out of a couple of people working at some company, seeing the same complaint over and over again, and then saying, ‘Why don’t we start our own business and solve this problem?'” Buller said. “That’s the heart of entrepreneurship — seeing a problem and solving it — and people will pay you to do that.” 

This story is part of series on how accounting entrepreneurs launched their practices.

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Senate unveils plan to fast-track tax cuts, debt limit hike

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Senate Republicans unveiled a budget blueprint designed to fast-track a renewal of President Donald Trump’s tax cuts and an increase to the nation’s borrowing limit, ahead of a planned vote on the resolution later this week. 

The Senate plan will allow for a $4 trillion extension of Trump’s tax cuts and an additional $1.5 trillion in further levy reductions. The House plan called for $4.5 trillion in total cuts.

Republicans say they are assuming that the cost of extending the expiring 2017 Trump tax cuts will cost zero dollars.

The draft is a sign that divisions within the Senate GOP over the size and scope of spending cuts to offset tax reductions are closer to being resolved. 

Lawmakers, however, have yet to face some of the most difficult decisions, including which spending to cut and which tax reductions to prioritize. That will be negotiated in the coming weeks after both chambers approve identical budget resolutions unlocking the process.

The Senate budget plan would also increase the debt ceiling by up to $5 trillion, compared with the $4 trillion hike in the House plan. Senate Republicans say they want to ensure that Congress does not need to vote on the debt ceiling again before the 2026 midterm elections. 

“This budget resolution unlocks the process to permanently extend proven, pro-growth tax policy,” Senate Finance Chairman Mike Crapo, an Idaho Republican, said. 

The blueprint is the latest in a multi-step legislative process for Republicans to pass a renewal of Trump’s tax cuts through Congress. The bill will renew the president’s 2017 reductions set to expire at the end of this year, which include lower rates for households and deductions for privately held businesses. 

Republicans are also hoping to include additional tax measures to the bill, including raising the state and local tax deduction cap and some of Trump’s campaign pledges to eliminate taxes on certain categories of income, including tips and overtime pay.

The plan would allow for the debt ceiling hike to be vote on separately from the rest of the tax and spending package. That gives lawmakers flexibility to move more quickly on the debt ceiling piece if a federal default looms before lawmakers can agree on the tax package.

Political realities

Senate Majority Leader John Thune told reporters on Wednesday, after meeting with Trump at the White House to discuss the tax blueprint, that he’s not sure yet if he has the votes to pass the measure.

Thune in a statement said the budget has been blessed by the top Senate ruleskeeper but Democrats said that it is still vulnerable to being challenged later.

The biggest differences in the Senate budget from the competing House plan are in the directives for spending cuts, a reflection of divisions among lawmakers over reductions to benefit programs, including Medicaid and food stamps. 

The Senate plan pares back a House measure that calls for at least $2 trillion in spending reductions over a decade, a massive reduction that would likely mean curbing popular entitlement programs.

The Senate GOP budget grants significantly more flexibility. It instructs key committees that oversee entitlement programs to come up with at least $4 billion in cuts. Republicans say they expect the final tax package to contain much larger curbs on spending.

The Senate budget would also allow $150 billion in new spending for the military and $175 billion for border and immigration enforcement.

If the minimum spending cuts are achieved along with the maximum tax cuts, the plan would add $5.8 trillion in new deficits over 10 years, according to the Committee for a Responsible Federal Budget.

The Senate is planning a vote on the plan in the coming days. Then it goes to the House for a vote as soon as next week. There, it could face opposition from spending hawks like South Carolina’s Ralph Norman, who are signaling they want more aggressive cuts. 

House Speaker Mike Johnson can likely afford just two or three defections on the budget vote given his slim majority and unified Democratic opposition.

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How asset location decides bond ladder taxes

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Financial advisors and clients worried about stock volatility and inflation can climb bond ladders to safety — but they won’t find any, if those steps lead to a place with higher taxes.

The choice of asset location for bond ladders in a client portfolio can prove so important that some wealthy customers holding them in a taxable brokerage account may wind up losing money in an inflationary period due to the payments to Uncle Sam, according to a new academic study. And those taxes, due to what the author described as the “dead loss” from the so-called original issue discount compared to the value, come with an extra sting if advisors and clients thought the bond ladder had prepared for the rise in inflation.

Bond ladders — whether they are based on Treasury inflation-protected securities like the strategy described in the study or another fixed-income security — provide small but steady returns tied to the regular cadence of maturities in the debt-based products. However, advisors and their clients need to consider where any interest payments, coupon income or principal accretion from the bond ladders could wind up as ordinary income, said Cal Spranger, a fixed income and wealth manager with Seattle-based Badgley + Phelps Wealth Managers.

“Thats going to be the No. 1 concern about, where is the optimal place to hold them,” Spranger said in an interview. “One of our primary objectives for a bond portfolio is to smooth out that volatility. … We’re trying to reduce risk with the bond portfolio, not increase risks.”

READ MORE: Why laddered bond portfolios cover all the bases

The ‘peculiarly bad location’ for a bond ladder

Risk-averse planners, then, could likely predict the conclusion of the working academic paper, which was posted in late February by Edward McQuarrie, a professor emeritus in the Leavey School of Business at Santa Clara University: Tax-deferred retirement accounts such as a 401(k) or a traditional individual retirement account are usually the best location for a Treasury inflation-protected securities ladder. The appreciation attributes available through an after-tax Roth IRA work better for equities than a bond ladder designed for decumulation, and the potential payments to Uncle Sam in brokerage accounts make them an even worse asset location.

“Few planners will be surprised to learn that locating a TIPS ladder in a taxable account leads to phantom income and excess payment of tax, with a consequent reduction in after-tax real spending power,” McQuarrie writes. “Some may be surprised to learn just how baleful that mistake in account location can be, up to and including negative payouts in the early years for high tax brackets and very high rates of inflation. In the worst cases, more is due in tax than the ladder payout provides. And many will be surprised to learn how rapidly the penalty for choosing the wrong asset location increases at higher rates of inflation — precisely the motivation for setting up a TIPS ladder in the first place. Perhaps the most surprising result of all was the discovery that excess tax payments in the early years are never made up. [Original issue discount] causes a dead loss.”

The Roth account may look like a healthy alternative, since the clients wouldn’t owe any further taxes on distributions from them in retirement. But the bond ladder would defeat the whole purpose of that vehicle, McQuarrie writes.

“Planners should recognize that a Roth account is a peculiarly bad location for a bond ladder, whether real or nominal,” he writes. “Ladders are decumulation tools designed to provide a stream of distributions, which the Roth account does not otherwise require. Locating a bond ladder in the Roth thus forfeits what some consider to be one of the most valuable features of the Roth account. If the bond ladder is the only asset in the Roth, then the Roth itself will have been liquidated as the ladder reaches its end.”

READ MORE: How to hedge risk with annuity ladders

RMD advantages

That means that the Treasury inflation-protected securities ladder will add the most value to portfolios in a tax-deferred account (TDA), which McQuarrie acknowledges is not a shocking recommendation to anyone familiar with them. On the other hand, some planners with clients who need to begin required minimum distributions from their traditional IRA may reap further benefits than expected from that location.

“More interesting is the demonstration that the after-tax real income received from a TIPS ladder located in a TDA does not vary with the rate of inflation, in contrast to what happens in a taxable account,” McQuarrie writes. “Also of note was the ability of most TIPS ladders to handle the RMDs due, and, at higher rates of inflation, to shelter other assets from the need to take RMDs.”

The present time of high yields from Treasury inflation-protected securities could represent an ample opportunity to tap into that scenario.

“If TIPS yields are attractive when the ladder is set up, distributions from the ladder will typically satisfy RMDs on the ladder balance throughout the 30 years,” McQuarrie writes. “The higher the inflation experienced, the greater the surplus coverage, allowing other assets in the account to be sheltered in part from RMDs by means of the TIPS ladder payout. However, if TIPS yields are borderline unattractive at ladder set up, and if the ladder proved unnecessary because inflation fell to historically low levels, then there may be a shortfall in RMD coverage in the middle years, requiring either that TIPS bonds be sold prematurely, or that other assets in the TDA be tapped to cover the RMD.”

READ MORE: A primer on the IRA ‘bridge’ to bigger Social Security benefits

The key takeaways on bond ladders

Other caveats to the strategies revolve around any possible state taxes on withdrawals or any number of client circumstances ruling out a universal recommendation. The main message of McQuarrie’s study serves as a warning against putting the ladder in a taxable brokerage account.

“Unsurprisingly, the higher the client’s tax rate, the worse the outcomes from locating a TIPS ladder in taxable when inflation rages,” he writes. “High-bracket taxpayers who accurately foresee a surge in future inflation, and take steps to defend against it, but who make the mistake of locating their TIPS ladder in taxable, can end up paying more in tax to the government than is received from the TIPS ladder during the first year or two.”

For municipal or other types of tax-exempt bonds, though, a taxable account is “the optimal place,” Spranger said. Convertible Treasury or corporate bonds show more similarity with the Treasury inflation-protected securities in that their ideal location is in a tax-deferred account, he noted.

Regardless, bonds act as a crucial core to a client’s portfolio, tamping down on the risk of volatility and sensitivity to interest rates. And the right ladder strategies yield more reliable future rates of returns for clients than a bond ETF or mutual fund, Spranger said.

“We’re strong proponents of using individual bonds, No. 1 so that we can create bond ladders, but, most importantly, for the certainty that individual bonds provide,” he said.

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Why IRS cuts may spare a unit that facilitates mortgages

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Loan applicants and mortgage companies often rely on an Internal Revenue Service that’s dramatically downsizing to help facilitate the lending process, but they may be in luck.

That’s because the division responsible for the main form used to allow consumers to authorize the release of income-tax information to lenders is tied to essential IRS operations.

The Income Verification Express Service could be insulated from what NMN affiliate Accounting Today has described of a series of fluctuating IRS cuts because it’s part of the submission processing unit within wage and investment, a division central to the tax bureau’s purpose.

“It’s unlikely that IVES will be impacted due to association within submission processing,” said Curtis Knuth, president and CEO of NCS, a consumer reporting agency. “Processing tax returns and collecting revenue is the core function and purpose of the IRS.”

Knuth is a member of the IVES participant working group, which is comprised of representatives from companies that facilitate processing of 4506-C forms used to request tax transcripts for mortgages. Those involved represent a range of company sizes and business models.

The IRS has planned to slash thousands of jobs and make billions of dollars of cuts that are still in process, some of which have been successfully challenged in court.

While the current cuts might not be a concern for processing the main form of tax transcript requests this time around, there have been past issues with it in other situations like 2019’s lengthy government shutdown.

President Trump recently signed a continuing funding resolution to avert a shutdown. But it will run out later this year, so the issue could re-emerge if there’s an impasse in Congress at that time. Republicans largely dominate Congress but their lead is thinner in the Senate.

The mortgage industry will likely have an additional option it didn’t have in 2019 if another extended deadlock on the budget emerges and impedes processing of the central tax transcript form.

“It absolutely affected closings, because you couldn’t get the transcripts. You couldn’t get anybody on the phone,” said Phil Crescenzo Jr., vice president of National One Mortgage Corp.’s Southeast division.

There is an automated, free way for consumers to release their transcripts that may still operate when there are issues with the 4506-C process, which has a $4 surcharge. However, the alternative to the 4506-C form is less straightforward and objective as it’s done outside of the mortgage process, requiring a separate logon and actions.

Some of the most recent IRS cuts have targeted technology jobs and could have an impact on systems, so it’s also worth noting that another option lenders have sometimes elected to use is to allow loans temporarily move forward when transcript access is interrupted and verified later. 

There is a risk to waiting for verification or not getting it directly from the IRS, however, as government-related agencies hold mortgage lenders responsible for the accuracy of borrower income information. That risk could increase if loan performance issues become more prevalent.

Currently, tax transcripts primarily come into play for government-related loans made to contract workers, said Crescenzo.

“That’s the only receipt that you have for a self-employed client’s income to know it’s valid,” he said.

The home affordability crunch and rise of gig work like Uber driving has increased interest in these types of mortgages, he said. 

Contract workers can alternatively seek financing from the private non-qualified mortgage market where bank statements could be used to verify self-employment income, but Crescenzo said that has disadvantages related to government-related loans.

“Non QM requires higher downpayments and interest rates than traditional financing,” he said.

In the next couple years, regional demand for loans based on self-employment income could rise given the federal job cuts planned broadly at public agencies, depending on the extent to which court challenges to them go through.

Those potential borrowers will find it difficult to get new mortgages until they can establish more of a track record with their new sources of income, in most cases two years from a tax filing perspective. 

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