A discussion below with Otis and John H leads me to this discussion.
The great cosmic struggle this time involves brilliant, sharp-penciled accountants and a craggy old sawmill operator, and has ramifications for all of us to think about.
WhizBang, the young and inexperienced accountant graduates from college, and eagerly accepts a job keeping the books for a sawmill. The owner contracted for logs to be cut 10 miles away in two separate and equal tracts, with only one problem. There was no way to get the logs back to the sawmill.
So a driver was contracted to load and haul the first tract for $3500. Craggy owner paid the driver, but thought $3500 was too much money. So he finds a local guy, notorious for having only three teeth and a broken-down truck. Toothless says he will haul the second tract for $1500, but needs to borrow $300 for tires before his truck can be road-worthy. Owner loans him the $300 and tells him to get the logs in. After logs are delivered, toothless gets paid his $1500 and conveniently "forgets" that he owes $300, so he just drives off.
The next couple of days, WhizBang balances his books and storms into Craggy's office and tells him Toothless has $300 left owing on the books and got out of Dodge before paying the sawmill back the money he owes. Craggy is undisturbed by this apparent outrage, and quietly tells accountant to write it off because it was doubtful the sawmill would ever have the chance to collect the money again.
If you've read this far, WhizBang is willing to scour the earth and bring the $300 debtor to justice. Ol' dumb Craggy is thinking he just reduced his logging cost from $3500 to $1800.
So it is also with accounting and taxation. We encounter situations where we can calculate a $50,000 quarterly payment, which is 110% of previous years' liability, and the client is guaranteed to have NO estimated tax penalty. Or, we can suggest $30,000 per quarter, and maybe encounter a $200 penalty at the end of the year. We've saved the client the interest on $80,000. I think there might be a little Craggy in each of us....
The great cosmic struggle this time involves brilliant, sharp-penciled accountants and a craggy old sawmill operator, and has ramifications for all of us to think about.
WhizBang, the young and inexperienced accountant graduates from college, and eagerly accepts a job keeping the books for a sawmill. The owner contracted for logs to be cut 10 miles away in two separate and equal tracts, with only one problem. There was no way to get the logs back to the sawmill.
So a driver was contracted to load and haul the first tract for $3500. Craggy owner paid the driver, but thought $3500 was too much money. So he finds a local guy, notorious for having only three teeth and a broken-down truck. Toothless says he will haul the second tract for $1500, but needs to borrow $300 for tires before his truck can be road-worthy. Owner loans him the $300 and tells him to get the logs in. After logs are delivered, toothless gets paid his $1500 and conveniently "forgets" that he owes $300, so he just drives off.
The next couple of days, WhizBang balances his books and storms into Craggy's office and tells him Toothless has $300 left owing on the books and got out of Dodge before paying the sawmill back the money he owes. Craggy is undisturbed by this apparent outrage, and quietly tells accountant to write it off because it was doubtful the sawmill would ever have the chance to collect the money again.
If you've read this far, WhizBang is willing to scour the earth and bring the $300 debtor to justice. Ol' dumb Craggy is thinking he just reduced his logging cost from $3500 to $1800.
So it is also with accounting and taxation. We encounter situations where we can calculate a $50,000 quarterly payment, which is 110% of previous years' liability, and the client is guaranteed to have NO estimated tax penalty. Or, we can suggest $30,000 per quarter, and maybe encounter a $200 penalty at the end of the year. We've saved the client the interest on $80,000. I think there might be a little Craggy in each of us....
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