September-October 2005

What I don’t know that I don't know!

Recently, I was provided an opportunity to participate in a pilot program for potential new leaders within the National Society of Accountants (NSA).  The program ran over a one year period and required the participants to read certain books related to being a leader, setting goals and managing projects.  In addition, the participants were provided guidance from proven leaders and opportunities to get first hand experience with effective and not so effective leadership traits.  This program culminated with the participants observing the inner-workings of this national organization.

When I was able to mingle and talk to the many individuals that attended the 60th annual convention of NSA in Las Vegas during the last week of August, I found that many individuals that attended the convention were unaware of many of the issues addressed by the leadership of this organization.  They all had their opinions about what they believed or perceived to be facts, as it related to the organization.

How often we really "Don't know what we don't know" and what we perceive to be fact often is fantasy and what we perceive to be weaknesses or failures are uncontrollable events or calculated alternatives.

A good example of this, as it relates to our practices, is a little known fact about the use of certain pension plans that are being sold to many businesses called 412(I) plans.  On the surface these plans seem to be the ultimate income deferral programs that provide current allowable deductions and the possibility of tax free distributions.  The fact that these programs are approved plans and if properly designed and implemented really are the ultimate in deferred and potentially tax free programs.

However, here is the rest of the story -

Many of these programs being sold by reputable companies have prohibitive components which make the contributions non-deductible.  And the worst part is -  if this prohibitive plan is incorporated into a tax return - you as the tax preparer could be subject to sanctions within the provisions of Circular 230.

In addition, the IRS has identified these plans as a hot issue and is currently performing multiple audits around the nation.  The state of Arizona has been identified as a major source of the sale and implementation of these plans.

So now you know the rest of the story.

One of my greatest fears as an accountant and tax preparer is that  . . .  I don't know what I don't know.  And what I don't know could be detrimental to me and my business.

If you are like me and fumbling out there in the world assisting individuals to manage their businesses, lives and investments, I’m sure you have had the thought “How do we gain the necessary knowledge to reduce what we don't know?”  I am finding that the best way to get that exposure is to participate in organizations such as ASPA and NSA.  Not only am I given specific training in areas that I had no idea of their importance or how much they affected my practice, but also I am able to gain insight from others that already walked down that same road.

I know that many of the members of ASPA are completely unaware of the relationship and closeness of the two organizations (ASPA & NSA).  It’s like not letting the right hand know what the left hand is doing, but it takes both hands to lift a heavy object.

During the next few months we are sponsoring Gear Up tax seminars in the Phoenix and Tucson area.  At these conferences the NSA Arizona State Director will be present at a vendor booth.  Why not come to the booth and see if there is something "You don't know that you don't know."

In closing, I would like to share a couple of truisms often told to me as a child by my grandmother  . . . "It's not what you belong to that's important - but what you contribute to what you belong to".  She also told me  . . . "The elevator to success is broken - so take the stairs."  So I guess I will see you on the stairs.

John Folse, EA, ABA

President