Ed Jenkins leads a bipolar life — at least, that’s how he describes it.
Jenkins is an instructor of accounting at Penn State and a tax consultant at State College firm Boyer & Ritter.
“I enjoy getting to know students and it’s rewarding to teach,” he said. “I also like to practice taxation. I’m focused on federal and international taxation. I can’t walk away from that, and it influences what I do in the classroom.”
He discussed what people and businesses are facing this tax season, his specialty in foreign bank accounts and how a wife learned her husband was a millionaire.
Q: Why’d you get into accounting?
A: I’ve always done things backward. I wanted to be a veterinarian. I went to Penn State to study animal sciences and realized I had no idea how to study for that, and then I got into international economics. That sounded really good to try to get a job. I ended up at Dun & Bradstreet writing business reports, and then I needed to get a job I could eat with. I went back to Penn State to get my MBA, got the credits I needed to be a CPA (certified public accountant) and took the CPA exam.
Q: What are some common questions people want answers to this tax season?
A: I specialize in international taxation, so I have clients that have international investments, real estate holdings and foreign accounts. There is a very big issue right now with foreign bank accounts. A lot of people are getting caught up in (the merger of) UBS Warburg and Swiss Bank. A whole regime that went into effect in 2010 is causing intergovernmental agreements to kick in and trade information. If you have an account abroad you’re going to get caught in it. I’ve spent 80 to 90 percent of my time working on foreign bank accounts and keeping people out of jail.
In terms of the general public, most people are just worried and feeling pinched. If you look at income statistics, income has been flat for years. People feel pinched and anxious. There’s talk about changing tax law. Congress for the last few years has passed extender legislation in December, so businesses and people come to me asking, “What do I do, Ed?” And the answer is that I don’t know what the law is going to be. They should have passed it before, but they waited until the end of the year. If we were supposed to spend half a million dollars on capital investments to spur the economy, why are they passing it in the second week of December? There’s a general anxiety, because people don’t know what the rules are.
The spouse — they’d been living very modestly in a rented apartment on modest salaries — is hearing for the first time about the $1.5 million offshore.
Q: What if someone doesn’t know the rules?
A: The scary thing is some penalties are severe. In the area I work in, foreign accounts, the penalties can be disastrous. If you don’t report income from a foreign bank account and get caught by the IRS, the civil penalty is 50 percent of your account per year for six years. If you have $1 million sitting offshore and don’t report it, that will end up a $3 million penalty. There is anxiety about that, and the law is so complex. There’s 55,000 pages of statutes and regulations to wrap your head around. How could a consumer who may not have a college education have a clue what they are supposed to do under tax law?
Q: What might someone miss doing their own taxes that would benefit them?
A: Some do it themselves without software. Some go online and use software. Some might go to an H&R Block. There’s a consumer that’s right for each of those. If you have a very simple return with some salaries and wages, you can probably do OK just filling it out and sending it off. As the complexity increases — you have children, you pay for day care, you own a home — there are tax credits, sometimes refundable. Once you have those transactions there are benefits. That’s when you want to have an accountant to do deductions, tax credits and those things. In businesses it gets even more complicated, and you really need a CPA — not just for your return but for planning future transactions.
Q: What should people find out about an accountant or firm before hiring them?
A: The IRS actually has on their Web page a way to go and select an accountant. It’s a function of your complexity and the prominence of the firm. You have local, regional, national and global firms. Boyer & Ritter is a regional firm in central Pennsylvania with some specialty areas like auto dealers, and we’re nationally recognized in that space. Different firms have different areas of expertise and staff.
Q: Specific to your work, why would someone want to have money offshore?
A: The one you’re probably familiar with is that someone wanted to avoid taxes, but there are actually very legitimate reasons to have money in another country. If you have business interests in China, you have to make payroll in China. If it’s business, rental property, you’re collecting rents, you need to have an account. In many cases the United States is a melting pot, and people from everywhere come here. It’s not uncommon for people to get inheritances from abroad, so they have an account from abroad. Many countries have currency restrictions, so you can’t move money easily. There is a whole host of reasons to have money offshore. Of course, there are illegal activities, and that’s why we have foreign bank account reporting to catch money laundering for drug lords, terrorist activities and those types of things.
Q: Is it pretty routine every year that some people bring you taxes at the last minute?
A: It’s a little pressure filled in the last two weeks of tax season. Right about now we start writing up extensions, and hopefully they’ll have enough paid in that they won’t have penalties. The procrastinator often gets an extension and doesn’t cause any high level of scrutiny. Very often someone might also want it done on time (without an extension), but the reality is we’ve got a queue of work stacked up. To advance someone who procrastinated up our list over people who didn’t procrastinate isn’t a realistic expectation.
Q: Got any good stories about your work?
A: I have an interesting one. (For a) foreign bank account project, we had someone come in through our website. Normally, I’ll explain the law for foreign bank account reporting, but I can’t have them tell me anything until an attorney hires me. Someone came in that was concerned, and they hired an attorney who hired me. My first meeting where this person can tell me what is going on he brings his wife. I said, “Well, you have about $1.5 million offshore, and the penalty will probably run you about $125,000.” So, I told him what he should do, the streamline disclosure program. The spouse — they’d been living very modestly in a rented apartment on modest salaries — is hearing for the first time about the $1.5 million offshore. It’s also the first time they’re hearing me say, “I think I can get you out of the criminal charges, and it’ll only cost you $125,000.” I would have loved to have been a fly on the ceiling of their car on the way home.