Virtually Virtual CPA Firm – Nothing In Reality

Virtually Virtual CPA Firm – Nothing In Reality

Virtually Virtual CPA Firm – Nothing In Reality- the advent of the internet has given rise to cloud-based accounting software, virtual bookkeepers, virtual controllers, virtual CFO’s. It would seem that anyone can be anywhere that they want to be, in the cloud.

Well…not so fast. The accounting profession, whether we are speaking about State Accountancy Acts, the IRS and Circular 230, or AIPCA Professional Standards have rules that govern what CPA’s can and can’t do.

Perhaps the most extreme example is IRC Sec. 7216(a) which govern privacy with respect to tax return information.

and then we have IRC Sec. 7216(b)(3) which creates an exception that includes the Regulations:

Then we have Reg. Sec. 301.7216-2(b)(2) which states:

“Tax return preparers located within the same firm in the United States. If a taxpayer furnishes tax return information to a tax return preparer located within the United States, including any territory or possession of the United States, an officer, employee, or member of a tax return preparer may use the tax return information, or disclose the tax return information to another officer, employee, or member of the same tax return preparer, for the purpose of performing services that assist in the preparation of, or assist in providing auxiliary services in connection with the preparation of, the taxpayer’s tax return. If an officer, employee, or member to whom the tax return information is to be disclosed is located outside of the United States or any territory or possession of the United States, the taxpayer’s consent under § 301.7216-3 prior to any disclosure is required.”

The takeaway being that express consent from a taxpayer is required when tax return information is being used in virtual context where the return preparers are located outside the United States.

The next situation is going to require a bit of detective work to fully understand, but there are significant concerns as we will see. Let’s start by looking a typical small firm. Here is the front page of their website [we have tried to redact personal information.]

CPA Firms - Virtual versus Reality

The firm asserts that they have expertise in working with the cannabis industry.

Let’s introduce Partner 1, CPA

CPA Firms - Virtual versus Reality

Partner 1 CPA’s bio indicates that he is licensed in numerous states throughout the US and that he specializes in cannabis taxation. [We will revisit some of this later. Notice that Partner 1, CPA’s cellphone has an 847 prefix.

Let’s move to Partner 2, CPA

CPA Firms - Virtual versus Reality

Partner 2, CPA is licensed in Illinois, and her cellphone has a 224 prefix.

The third member of the practice is Staff Acct 1.

Staff Acct., CPA is licensed in Illinois and has a cellphone with a 224 prefix.

Let’s see what services the firm offers to the cannabis industry.

The list includes a huge range of services for a three CPA firm, with Business Valuation being the most suspect, we don’t see an ABV anywhere.

Now let’s see where they tell us their offices are located, where we see some very fancy office buildings.

Now the map of area where they serve cannabis industry businesses.

Looks like we have California, Nevada, Arizona, Montana, Wisconsin, Illinois, and Maryland.

Now let’s dig a bit deeper into Partner #1 CPA’s licenses. with a trip over to our favorite tool, which tells us:


This is interesting. CPA Partner 1 has

Active License – Maryland

Expired – Wisconsin

No License – Illinois which is where it appear he lives based upon his cellphone prefix.

Partner 2, CPA and Staff. Acct. are licensed in Illinois

Let do the scorecard and review where this firm says it practices, and where they are licensed:

No licenses – California, Nevada, Arizona, Montana, Wisconsin, Maryland

Licenses – Illinois, Maryland

CPA Firms – Virtual versus Reality

The corporation is registered with the Illinois Secretary of State:

The corporation is also registered with the Illinois Dept. of Financial and Professional Regulation:

So the firm is licensed and domestic to Illinois. We do have one small open issue which is that it appears that Partner 1 CPA may be an officer of the firm, but we do have the provision from the Illinois Professional Corporation statute below..

It is entirely possible that everything is ok, but if we were going to hire the firm, it is certainly a question we would ask.

The Illinois statute for professional corporations states:

(805 ILCS 10/7) (from Ch. 32, par. 415-7)
    Sec. 7.
    No corporation organized and incorporated under this Act may render professional services, except through its officers, employees and agents who are duly licensed or otherwise legally authorized to render such professional services within this State. The term "employee" as used in this Act does not include "ancillary personnel" as that term is used in this Act.

The critical point to us is that there are no licensed CPA’s or the firm in the majority of the states where the firm asserts it practices. Let’s be clear, a license isn’t required for tax practice. Attest work is an entirely different matter which we aren’t going to get into. However, if one was to research the Accountancy statutes in the states where the firm asserts they do business, there certainly are additional requirements.

CPA Firms – Virtual versus Reality

It is probably appropriate for us to do show and tell since we are drawing the comparisons. Our firm has a physical presence in New York, Illinois and California.

Let’s start with

Licensed in – California, Florida, Illinois, New York and Texas

The firm’s corporate registration –

and our Professional Corporation

and California

Professional License for the firm



Some people might ask why did you go through all that time and effort putting this together. The answer is very simple, we are who we say we are and do what we say we do. At the present time, our cannabis practice is limited to California and just beginning to venture in to Oregon. We believe that the cannabis industry is complex enough that one state – California has just about as much complexity as we can manage.

Perhaps we aren’t as bright as some people, but we have our doubt about firms that say they serve the cannabis industry in states where they don’t have licenses or physical presence. There clearly are exceptions for services like tax compliance and bookkeeping. The reality that we have learned is that the licensing, regulatory compliance, zoning, and cultivation, excise and sales taxes are complex enough that the first two services are NOT sufficient.

We welcome your thought and comments.

Virtually Virtual CPA Firm – Nothing In Reality

You can learn more about being physically present in California here.

Learn about the STATES Act proposal here.


Slack-Jawed Yokel Blow Job

Slack-Jawed Yokel – Blow Job

Slack-Jawed Yokel – Blow Job demonstrates the magic that begins once Slack-Jawed Yokel puts it in his mouth.

Slack-Jawed Yokel – Person (usually referring to a male though not gender biasmaintaining little to no discernable speaking skills often associated with one who fornicates with barnyard animals.
Dag yo, the slack-jawed yokel jus did it to a pig.
also portrayed in a Simpsons episode to the song “some folk el never lose a toe and then again some you’ll, Cletus the slack-jawed yokel”
Slack-Jawed Yokel - Blow Job
Slack-Jawed Yokel – Blow Job

Stinky Home

Background – Smelly Family –  family who seems well-suited to residential life in a mobile home park and is distinguished by poor hygiene, foul language, slovenly or slutty clothing, and general ignorance. Recreations include drinking malt liquor in lawn chairs under tattered R.V. awning and teenage pregnancy. Close synonym for poor white trash. Can also be used as the literal term for personal effects strewn by a tornado when ripping through the mobile home park.

Slack-Jawed Yokel – Blow Job


Slack-Jawed Yokel Approved Law Schools

Slack-Jawed Yokel Approved Law Schools

Slack-Jawed Yokel Approved Law Schools is a list of where criminals and mental defects acquire their illegal legal educations

1. Thomas Cooley Western Michigan U – 146/142/139. Cooley has already been found out of compliance with  Standard 501 by the ABA. They recently lost in their efforts to get a restraining order against the ABA to keep this secret from prospective students and did little to improve

Slack-Jawed Yokel Approved Law Schools
Cletus Having “Fresh Meat” for Dinner

their chances of having that decision reversed with this year’s embarrassing incoming class, with similar credentials to last year’s (147/141/138).   But the school is still making a fortune with an entering class of 458, third largest in the country (after Georgetown and Harvard). Cooley accepted 85.6% of applicants, far and away the highest acceptance rate in the country.  (Vermont, with 159 entering 1Ls, was second, with a 78.8% acceptance rate.)

2. Texas Southern – 146/143/141. Already sanctioned by the ABA for standards violations and under remedial measures, Texas Southern nevertheless enrolled a large class of 256 students, a significant increase from last year’s 227.  Unfortunately, these students are virtually all at high risk of failure.  The school grew its class by lowering its already dismal admission standards across the board.  Last year they were at 147/145/142.  What are they thinking? The school should be placed on probation.

3. (Tie) Appalachian – 149/143/141 Found out of compliance by the ABA last January and formally notified in May, they hid this fact from prospective students and managed to nearly double their class from 38 to 73 entering students, while very modestly increasing their numbers from 147/143/140. The bottom half of the class are all at extremely high risk of failure.  Their bottom 25% UGPA is an especially woeful 2.51, the lowest of any law school in the country.  Appalachian also boosted enrollment in its upper divisions by taking 16 transfers from Charlotte School of Law, which is not likely to boost their abysmal bar passage rate. Expect Appalachian to be sanctioned.

3. (Tie) Southern – 146/144/141. Number one on my list of schools that deserve to be sanctioned but haven’t yet. Southern has enrolled 200 students, virtually all of whom at are very high or extremely high risk of failure. They increased their class size to 200 from 171, so they could have raised standards, but basically held steady at atrocious. (Last year: 146/143/141) Where are you, ABA?

5. (Tie) Charleston – 148/145/142 Charleston enrolled a large class of 251 students, up from 215, by admitting 71% of applicants.  They could have been more selective and raised their standards considerably.  Last year: 149/145/141. So, for the last three years, at least 75% of Charleston’s class has been made up of high-risk students.  The ABA must put a stop to this exploitation.

Slack-Jawed Yokel Approved Law Schools

5.  (Tie)  Thomas Jefferson –  147/144/142.  In January, TJ was found out of compliance by the ABA on Standard 501.   TJ dishonestly kept this secret from its prospective students, enabling the school to grow its enrollment.  But this school is digging itself is an ever deeper hole by admitting a pathetically weak class in a state where students with LSATs below 146 have extremely poor prospects of passing the bar, and everybody below 150 struggles.   Last year TJ had 232 students with a profile of 147/143/141, and the second highest non-transfer attrition rate in the country at 37.2%.  Despite knowing they were facing sanctions due in part to its lax admission policies, TJ chose to increase its class size and essentially maintain its abysmal admissions standards.  The one point increase at the 50th and 25th percentiles was offset by lower UGPAs across the board.  Not surprisingly, TJ was recently placed on probation by the ABA.  Expect droves of transfers from TJ this winter and next summer, and continued bar passage woes for the foreseeable future, assuming TJ can stay in business.

6. N.C. Central – 149/145/142. Now that Charlotte has closed, NC Central takes over the mantle of least selective law school in North Carolina.  To their credit, they did raise their LSAT standards a bit by shrinking the class from 183 to 166.  Last year they were at 149/144/141.  But this one point increase at the 50th and 25th was offset by lower UGPAs across the board.  More troublingly, NC Central had the highest level of 1L non-transfer attrition of any law school in the country last year, at 37.7% nearly twice the rate that the ABA has stated will result in presumptive non-compliance with Standard 501.  The ABA needs to take a hard look at NC Central.

7.(tie) Atlanta’s John Marshall Law School – 149/146/144.  This school was recently notified that they are out of compliance with Standard 501 by the ABA, and now I am starting to understand why.  They’ve slipped from 2016 when they were at 149/148/145, and they had a 21.9% non-transfer attrition rate, 12th worst in the country, and above the ABA’s presumptive exploitation rate of 20%.   Last year they had 195 entering students.  This year 216.  This was not the year for the school to grow the class by lowering their standards.

Slack-Jawed Yokel Approved Law Schools

8. (tie) Florida A&M University – 149/146/144. FAMU is up a smidge from 148/145/144 last year, but not enough to reverse their sliding bar passage rate. With 222 students, up from 151, they could have maintained their class size or even grew modestly and raised standards considerably, instead of growing by 50%, remaining in the bottom 10 nationally. FAMU is practically begging for ABA scrutiny.

Concordia – 151/147/144. Although there are four other schools with a bottom 25% at 144 and 50% at 147,  and two of these have lower LSATs at the 75% by one point, the UGPAs at Concordia is by far the lowest of these five schools (3.24/2.90/2.59) so they narrowly edge the competition for the coveted tenth slot in the bottom 10.  Although Concordia had great bar results last summer, they have placed their future in jeopardy by lowering their standards for the fourth year in a row.  Their entering class of 2014 was at 157/152/149.  2015: 154/150/146.  2016: 151/149/145.  This year: 151/147/144.  And other than Valparaiso, which recently announced it was suspending admissions,  Concordia had the smallest entering class of any law school in the country, at just 48 students.  Not good signs.

Slack-Jawed Yokel Approved Law Schools

Slack-Jawed Yokel Attorney

Slack-Jawed Yokel Interview

Smelly EA – Rumination-Blather-Prattle

Smelly, EA Interview – You May Barf

The following is a summary of our Smelly, EA Interview – You May Barf.

Us: So Smelly EA, what would you like us to know about you?

Smelly EA - Rumination-Blather-Prattle
I’m Smelly, EA

Smelly, EA: First of all, I am semi-famous.  I see you play around with cannabis in California.  I’m living in my ass, and have more cannabis clients in California then you could ever hope to have. However, I don’t fight fire with fire.  Why sink to someone’s level who is obviously jealous of my success?

Us: How would you describe yourself to someone who has never met you?

Smelly, EA: However, I am high-strung, and I don’t like being drugged down to a level where I slow down and feel stupid. [Comment: Take away – “High Strung, Slow and Stupid”] Smelly, EA Interview – You May Barf

Smelly, EA: When we are engaged by a new cannabis client, we charge a consulting fee, and have to travel to the location where that client is, for which we are reimbursed. We spend about three to four days at the new client’s location to set all of this up, then monitor it from a cloud-based accounting software. As I said one slip up, and the whole thing can be torn down by the IRS. Then we visit, for a fee, and all expenses paid, at least once a year to make sure that everything is running right.

Us: So that means that you and your firm with the California Secretary of State as a foreign entity, right? Both you are your entity for and paying California state taxes on the income you earn in California, when you are physically in California, right? Your clients are following the law with respect to withholding on the non-resident contractor, correct? You wouldn’t want violate the law by evading California state taxes

Smelly, EA: Most owners are packing guns and will remind you of that several times. Unless you are well-known, they will test you over and over. If you fail any test, then there is an unspoken rule that you could be killed.

Us: Are you aware of Wilson v. Lynch, 14-15700, August 31.2016 where the United States Court of Appeals for the Ninth Circuit held that federal law prohibits registered medical marijuana users from legally purchasing guns.

Us: So what got those panties with skid marks on the outside in a knot today?

Smelly, EA: BTW, I don’t pay attorney fees, so this can go on and on, and cost you so much money that your business will fold.  We will sue your company, and the principles of the business, jointly and severally. [Comment: That would be principals, and any 4th grader knows that.]

Us: So Smelly, EA what made you so emotionally brittle and small-minded, and always trying to use bluster and posturing to make up for all of the deficiencies in your personality, intellect, and presence?

Smelly, EA: You know nothing about me.  I grew up as the only white family in the worst ghetto in the World of Trailer Trash.  I have had to fight my whole life.  This fight is no big deal, and I will win it, come out better than ever, and you and your firm.  That is a promise.

Us: Hey Smelly, EA, there is an odoriferous. fetid, putrid, rancid, insalubrious, noxious stench emanating from your mouth. It is difficult to describe, it’s a combination of sewer gas, the necrotizing carcass of a pig, and skunk, worse than anything that ever came out of 1000

Smelly EA - Rumination-Blather-Prattle
Liquid Ass

bungholes. It is almost as if you used Amorphophallus Titanum to create a mouthwash. It is as if I could close my eyes and see calliphoridae larvae gushing out of your mouth.

Smelly, EA: That’s just me, it is as if I had gargled with Liquid Ass.

Smelly EA - Rumination-Blather-Prattle
Fresh Drop – Toilet Freshener

The only way to mask it is a homemade mouthwash that I invented using Fresh Drop Toilet Freshener.

Us: So Smelly, EA can you tell us how does Stinky, EA manage to tolerate a mentally defective sociopath like you?

Smelly, EA: Simple I married Stinky, EA.

Smelly, EA Interview – You May Barf – read more here.

Smelly Home

HR Block Made Homer Barf

HR Block Made Homer Barf and with good reason…using the terms “tax experts”, “tax gurus” and “superhero tax ninjas” in the same sentence with HR Block is enough to make any competent tax professional VOMIT.

HR Block Made Homer Barf
Cletus eating a rat for dinner?

Perhaps with exception of some Enrolled Agents that have been fed a diet of feces for so long they are immune.

Let’s also keep in mind that using self-aggrandizement to declare expertise that can NOT be confirmed is misleading advertising which is sanctionable under Circular 230, Sec. 10.30 states”

§ 10.30 Solicitation. (a) Advertising and solicitation restrictions. (1) A practitioner may not, with respect to any Internal Revenue Service matter, in any way use or participate in the use of any form of public communication or private solicitation containing a false, fraudulent, or coercive statement or claim; or a misleading or deceptive statement or claim. Enrolled agents, enrolled retirement plan agents, or registered tax return preparers, in describing their professional designation, may not utilize the term “certified” or imply an employer/employee relationship with the Internal Revenue Service…

Circular 230 Sec. 10.35 continues

§ 10.35 Competence. (a) A practitioner must possess the necessary competence to engage in practice before the Internal Revenue Service. Competent practice requires the appropriate level of knowledge, skill, thoroughness, and preparation necessary for the matter for which the practitioner is engaged.

§ 10.51 Incompetence and disreputable conduct. (a) Incompetence and disreputable conduct. Incompetence and disreputable conduct for which a practitioner may be sanctioned under §10.50 includes, but is not limited to — see Circular 230 for details

Circular 230, Sec. 10.52 provides sanctions for

 (a) A practitioner may be sanctioned under §10.50 if the practitioner —

(1) Willfully violates any of the regulations (other than §10.33) contained in this part; or

(2) Recklessly or through gross incompetence (within the meaning of §10.51(a)(13)) violates §§ 10.34, 10.35, 10.36 or 10.37.

If this were the first time we had seen unprofessional conduct, it would have been appropriate to share a private word with the tax practitioner involved. However, wait for it…this is certainly NOT the first instance of this type we have observed…here is an oldie but goodie…

How do we like this…HR Block offering attest work…well some people NEVER learn

If you observe incompetent or unprofessional conduct by an attorney, CPA or Enrolled Agent the place to fo and share that information is:

Internal Revenue Service
Office of Professional Responsibility
SE:OPR, Room 7238/IR
1111 Constitution Avenue NW
Washington, DC 20224

Maybe they should hire Bluewire Strategy to clean up the mess.