Practice Management: Taxes, Alcoholism and Your Clients
What is alcoholism and why is understanding it important for Enrolled Agents?
At least one out of ten adults is a substance addict. These addicts have an affect that is way out of proportion to their numbers. Understanding the behaviors of alcohol and other-drug addicts we encounter will help us to protect not only ourselves, but also our clients from what is likely the most significant cause of family and business break-ups and one of the greatest contributors to financial failure.
If we understand alcoholism we can:
1. decrease the odds of getting entangled in fraud
2. identify problem clients before becoming involved with them
3. more competently deal with estate planning, divorces and other financial issues when working with families of addicts
4. identify problem law enforcers and learn how to better deal with them
5. possibly even help clients avoid financial scams
As with so many issues, ninety percent of the solution is in understanding the problem
The following is the commonly accepted definition of alcoholism:
"Alcoholism/Chemical Dependency is a primary, chronic disease with genetic, psychosocial and environmental factors influencing its development and manifestation. The disease is often progressive and fatal, and is characterized by continuous or periodic:
1. impaired control over drinking/using
2. preoccupation with the drug
3. use of alcohol/drug despite adverse consequences and
4. distortion in thinking, most notably denial"
There are several problems with this definition:
1. How many years does it take an alcoholic to lose control over drinking? AA meetings are filled with stories of testing one’s ability to control use for decades. Actor Anthony Hopkins tells us he would brag that he could go for six weeks without taking a drink, before finally getting sober over three decades ago.
2. Adverse consequences for whom? Enablers often protect the addict from such consequences for decades, making it difficult and, sometimes, impossible, for the user to experience appropriate outcomes for their misbehaviors.
3. Denial implies a willful attempt to not admit to something. As we will find, the disease causes distorted perceptions, leaving nothing to admit.
4. An observer cannot see impaired control, preoccupation with a drug or distorted thinking. The observer may never see the adverse consequences we would otherwise see absent enabling. Therefore, it's a useless definition for both the afflicted and affected.
This definition misses the descriptor that the early-stage biochemistry (see the following) predicts: loss of control over behaviors and destructive conduct.
Consider this more useful definition:
"Alcoholism is a genetic disorder that causes the afflicted to biochemically process the drug alcohol in such a way as to cause that person to engage in destructive behaviors, at least some of the time."
The problem is the biochemistry is very different in addicts. Understanding this is essential to making sense of alcoholic behaviors.
1. brain damage to the frontal lobe of the brain (the neo-cortex), which is the “human” part responsible for reigning in the impulses of the lower brain centers
2. this leaves the lower brain centers with relatively greater control
3. the basal ganglia, or “reptilian” brain, is responsible for base survival
4. the limbic system is the “emotional” brain, which can make alcoholics over-the-top in emoting feelings
5. we’re dealing, then, with a person whose reptilian brain and limbic system ride unrestrained over the neo-cortex. This explains, among other things, the sometimes pre-civilized behaviors observed in alcoholics, their unparalleled ability to find the mark and make the sale, and their oftentimes extraordinary impulsiveness.
Without the right definition, we cannot identify alcoholism until the late stages, after most of the damage is done and, frequently, multiple tragedies have occurred.
Ask yourself how many people you know. Let's say it’s 300. In how many of these have you identified likely alcohol or other-drug addiction?
Most are hidden. Some are in recovery, most are not. Many may not be drinking until late at night; only a few begin early in the morning. Some are not drinking at all for days, weeks or even months at a time. The question is, "what does the behavior that results from addictive drinking look like?" The answers to this key question provide the requisite clues to early stage alcoholism.
But first, a key result of a damaged brain, which will help us to more easily spot behaviors indicative of alcoholism: distortions of perception and memory
1. Blackouts, during which times the events never even enter the memory. This is different from passing out. During a blackout, the alcoholic may be able to drive an automobile and appear stone cold sober.
2. Euphoric recall, which causes the alcoholic to “recall” everything he does or says during drinking episodes through self-favoring lenses. If everything you do or say is good and right and nothing bad or wrong, doesn’t that make you god-like? How could alcohol be a problem or the alcoholic be causing a problem? He views himself as perfect. (And why don’t alcoholics want to stop drinking, and why are relapses so common? If I felt like I were God when I was drinking, I wouldn’t want to stop either.)
This “euphoric recall” causes
egomania: an inordinately large sense of self-importance
Now, get the circular effect here:
early-stage alcoholism causes egomania, which in turn results in a need to continue building up the ego, or sense of self-importance, the success of which in turn fuels more of the same
How does one most effectively fuel egomania?
by wielding capricious power over others
How does one most effectively wield such power?
this is the key to identifying early-stage alcoholism
Identifying Alcoholism: Basics
Here are the key signs:
1. physical abuse
2. financial abuse
3. verbal, psychological and emotional abuse (applies to practically every alcoholic)
4. becoming an extraordinary overachiever regardless of the cost - What better way to wield power and make it appear as if you are completely functional? Wield power over fans, constituents, customers, employees, co-workers, employersor even tax-professionals. Or, if you’re an alcoholic tax professional, you can exert power over your client and, for a time, even the IRS.
Overachievement not only does not preclude the likelihood that one is an alcoholic; it increases the odds. Ted Turner would likely not have taken the risks he did in founding CNN were it not for his egomania, which happens to be rooted in his alcoholism. Consider screen legends Elizabeth Taylor, Richard Burton and Mel Gibson, not to mention thirty percent of Academy Award® winning actors. Three of the greatest baseball players everMickey Mantle, Ty Cobb and Babe Ruthwere practicing alcoholics over their entire careers. Five out of the eight Nobel Prize winning American authors during the 20th century were alcoholics.
We won't necessarily see drinking or use of other drugs. We will see misbehaviors, which are usually rooted in alcoholism.
The form that addiction takes is a function of environment, circumstances, underlying personality type and the virulence of the strain of alcoholism inherited.
As a result, there are as many forms of alcoholism as there are addicts on the planet.
However, the common thread in the early and middle stageslong before the addict needs the drug at every waking momentis abusive behaviors toward someone somewhere in his life. Are there exceptions? Sure. Some cannot be explained; there are no doubt sad nonfunctional alcoholics who become reclusive early on.
Ninety five percent of alcoholics appear functional during ninety five percent of their drinking careers.
How often does anyone say anything? Due to the stigma of alcoholism, rarely if ever is anything said and even more rarely is an intervention performed. Anything but an alcoholic! How often are they identified? If you have tentatively diagnosed alcoholism in three or four of the 300 people you know, there are likely 26 or 27 others who you have not identified depending on who your friends and associates are, the social circles in which you hang out and your particular business.
How difficult is it to identify the addict based on the usual idea that we are going to see the use?
Former "Full House" child star Jodi Sweetin was married to an LAPD cop for five years, two of which she was a full-on methamphetamine addict. Her cop-husband didn't have a clue. The daughter of the great British comedian John Cleese, Camilla, tells us she triggered her alcoholism at age eleven. John didn't have a clue until she was at least 15. She was living with her parents the whole time and they had no idea, and Cleese is no dummy.
When somebody says, "You should have known." No! You shouldn't have.
Addicts are amazingly proficient at guarding their secrets. Most of the time, we just don't know what to look for. We might see plenty of misbehaviors. We might even see the drinking and using, but we are not connecting the dots because we have never been taught to do so. The person is too young, too intelligent, too well-raised. Actress Drew Barrymore tells us she triggered her alcoholism at age eight. You are never too young. It has nothing to do with intelligence or how good a person he is or how wonderful is your friendship. It has nothing to do with relationships or upbringing. None of these have anything to do with biochemistry, which is what makes an alcoholic.
So what do we look for? Long before he creates problems in his own life, he will create problems in the lives of others. All of this is rooted in the damage to the brain that makes him think he is god-like, this alcoholic egomania. We need to look for the resulting behaviors that suggest a sense of invincibility or a Supreme Being complex.
We need to add another piece to the equation:
The average age at which one triggers alcoholism is thirteen.
You’re a budding young teenage alcoholic. You’re wielding power in school by bullying, or perhaps by becoming the class president or the hot young athlete or serial Don Juan of the school (no doubt competing with other alcoholic Don Juans). What are you going to do when you graduate?
The question that every teenage alcoholic eventually asks (consciously or not):
“In what occupation will I be able to most effectively wield power over others?”
If you walk out of Beverly Hills High, you might choose to exert power by becoming a doctor, lawyer, politician or CEO. If you walk out of South Central, you may become a thug. If you live in a middle-class neighborhood in a suburb, you might become a cop or a prison guard.
An occupational example:
Drug Recognition Experts are police officers who are trained to identify drug-impaired drivers. DRE refers not only to the officers themselves, but to the 12-step procedure these officers use to identify which drugs are in the system, and how much. The DRE program was developed by two Los Angeles Police Department (LAPD) officers in the 1970s. In 1979, the Drug Recognition program received the official recognition of the LAPD. As of 2005, approximately 6000 police officers nationwide were certified as Drug Recognition Experts.
While ten percent of the population consists of alcoholics, the best estimate from Drug Recognition Experts who I interviewed when writing my books is that, depending on the police department, twenty to fifty percent of active duty cops are practicing alcoholics. The best estimate for prison guards ranges from fifty to as high as eighty percent. However, based on my experience, I believe that as few as ten percent of IRS agents are alcoholics. Why so few? After all, they are law enforcers too! Because becoming an IRS agent just doesn’t have the same ring to it. You can walk into a bar and brag you’re a cop; you don’t do that if you work for the IRS.
But there are some. Who is more likely to be unreasonable: an alcoholic IRS agent or a non-alcoholic one? You want to be able to identify and do your best to circumvent a confrontation with an alcoholic in whatever setting you may find yourself. One of the key concepts to understand about alcoholism is that we cannot predict how destructive an addict may become or when.
We can’t predict what a practicing addict may do, or when
We can’t say “but that addict is different.” He might be; after all, there are some relatively benign addicts. However, we are not God. We don’t know who will suddenly turn and become non-benign. Therefore, once we spot possible alcoholism, we must get out of the way.
Identifying Alcoholism: Specific Clues
Reckless behaviors include being reckless in investing
If you think you're invincible, you think you can't lose, whether it's in Vegas or in business or investments. When you see somebody who has rolled the dice once or twice too many times, you've got to start wondering, is there an addict? Or a friend or a family member of a client who asks for money to invest with them might be the addict. Your client will say, "I've know her for too long. There's no way she's an alcoholic."
Victimizing others financially
I began experimenting with my clients. When my clients suffered financial abuse, I'd say, "alcoholic." They'd say, "no way, my (parent, child, best friend, partner) is too smart to be an alcoholic." I'd say, "It has nothing to do with intelligence or relationship; take another look." I'd hear back from that client a day or a month later saying, "you're right, how the heck did you know?" Four out of five times, I was proven right. So I began to think I was onto something.
The rules don't apply to me
Whether it's driving laws or tax laws or any other clues suggesting an inflated sense of self-importance (not to be confused with a favorable sense of self, which is self esteem), the rules are not for the addict. After all, if you're God, you get to make the rules.
The reason the 12 step programs work as well as they do is because every single step of the program works to deflate the ego
No practicing egomaniac can say "I'm powerless over something." No practicing egomaniac can say, "I need to do a searching and fearless moral inventory. There's no inventory to do, I'm perfect." No practicing egomaniac would ever say, "I need to pay amends to someone." Why would he have to pay amends to someone if he did nothing wrong, which is what the distorted perception of euphoric recall tells him?
Beethoven moved seventy times in thirty-five years, which was a terrific clue to his alcoholism. Why do they move? Possibly because they think if they move to another area, another house, another location, things will improve. On the other hand, they could be moving to escape those who are after them. So they move a lot. There might be a higher incidence of addiction in those who frequently switch tax professionals.
Using twisted logic
This is a wonderful indicator of alcoholism. For instance, consider the tax protester. Anyone who thinks they are more powerful than the U.S. government and the courts are going to side with him is obviously not thinking clearly. We’ve got ask: what is wrong with their brain? How can their perceptions be so distorted?
Usually, if there are distorted perceptions, there is alcoholism.
Intimidating others to get his or her way
Long ago, I had an audit in the Bay area that I handled from my office in Southern California. I sent the auditor everything I could. My client, a principal at a school, didn't have all the receipts backing the checks or all the checks backing the receipts. We might have been off by ten dollars here, maybe a hundred dollars there, but overall she had pretty darn good records. So I sent it all in and next thing you know the auditor wrote me a two page letter enumerating all of the additional backup he needed and I wrote back reminding him that the Commissioner of Internal Revenue Service has stated that the mission of the Service is not to enforce detailed compliance but rather to achieve "substantial compliance". I told him, "this is all I've got, please send it to appeals." He wrote back to saying, "You have failed to comply with a direct request of an Internal Revenue auditor and a record of your non-compliance will be duly noted and forwarded to Appeals or Managerial review." After I cooled off for about a day, I called his supervisor to discuss the case. She said, "I remember that tax return coming through; it was very competently prepared and I don't know why I didn't just survey it." She pulled it and said, "I think we can cede this, this and that, in fact I think we can cede everything. I'm going to send it to another auditor and instruct him to make it a no change." I said, "I love you," and asked, "can I write a letter to your manager commending you for your reasonableness?" She immediately gave me his name and address. Then I asked, "by the way, should I mention the fact that this auditor was rather unreasonable?" She said, "They don’t look at these letters right away but when they do a review for a promotion they look, so yeah, go ahead." Then she added almost as an afterthought, "by the way, do you know how difficult it is to get rid of someone around here?" Now, she couldn't tell me that he was an alcoholic, but what are the odds? I've had auditors who were disorganized or belligerent or nasty and didn't do what they said they would do. I've proven alcoholism in a couple of these cases.
So when you see any problems at all, don’t try to argue with them. Just assume. Our minds are not courts of law. If I think someone is an alcoholic, this isn’t a legal matter; this is just for my own protection. I need to protectme; therefore I’m going to assume that person has the disease of alcoholism. I’m going to get out of their way. One way of doing so when you have no other choice is to simply go around them.
What can we extrapolate from a study linking hazardous driving behaviors to DUIs?
It turns out there is a fabulous study conducted by the National Highway Traffic Safety Administration linking on-road misbehaviors to DUI. If someone is tailgating, we wouldn’t think that there’d be a fifty percent probability that the person is under the influence because we’ve all tailgated from time to time. We wouldn’t think that for someone making an illegal u-turn, the odds are thirty-five percent. We wouldn’t think that just because somebody is temporarily straddling the line or if they flip you off the odds are sixty percent. We’ve all been angry; we’ve all done weird things from time to time. Why are the odds so high?
Because the addict does it far more frequently than the non-addict
We can't spot alcoholics just by looking at them.
Not even cops can tell, even if they think they can. In a study conducted in Fort Lauderdale, Florida, traffic violators cited by police but not suspected of DUI, were about to get back on the road when researchers administered breath tests. For every ten DUIs the original citing officers arrested, the researchers found thirty-seven more. Every alcoholic knows all they have to do is chew gum, take breath mints and make sure they do not smell of booze. Female addicts know it's not ladylike to smell of whisky, so what do they do? They may drink to a .06 blood alcohol level drinking wine and then down a Valium or Vicodin. Different drugs potentiate each other in a way that’s logarithmic. An equal, single dose of two different drugs is far more powerful than a double dose of any one drug. That’s why addicts mix drugs, even though all the Rx bottle labels warn against it. Remember, addicts think they’re invincible. That’s why they so often die of overdoses.
We are going to see the behaviors long before we can confirm addiction by seeing the use.
This and "drunk dialing" are common to alcoholism. But will we see it? We might!
I had an employee who was occasionally "off." I long suspected her husband of alcohol or other drug addiction and even occasionally commented on the possibility. She worked for me before, during and after I understood addiction so she watched me go through what I went through and ends up marrying one herself. Aside from the verbal abuse, which accounted for my employee being occasionally "off," her husband was always suing somebody for one little thing or another. His method of inflating his ego was suing other people and verbally abusing his wife. They were divorced after four years. Another example was of a client who filed numerous lawsuits. This was when proceeds were generally tax free. They had a ball. Once I began to understand addiction I made sure they went away.
Someone moving from one employer to another or unable to keep a job is a sign of latter-stage alcoholism, but not always latter-stage or even alcoholism in some industries. However, if you're going a little nuts just dealing with the person--or there are any other clues--alcoholism should be suspected.
When I begin to get rattled over what I call "intellectual dishonesty," I now know to look for addiction.
Belittling remarks of others
Relatively benign misbehaviors are often the first and sometimes only clues we outsiders will ever see to alcoholism. Perhaps the most powerful of these indicators is belittling and disparaging remarks. Why would this be such a great clue? It’s a way of saying, “I’m better than that person, I’m more important than you.” It’s a way of wielding power.
My wife and I were at a wedding sitting at a table of eight, including a couple of women, one of whom began making belittling and remarks of the bride. Can you imagine? I knew enough to shut up. I don’t argue, negotiate or discuss with chemistry. I let her run off at the mouth. When she took off for the ladies room, I looked at her girlfriend (who had been fairly quiet the whole timea clue that it was safe to talk to her openly) and asked, “So, how long has your girlfriend been drinking heavily?” A stunned look came to her face and she finally asked, “How do you know?” I explained her friend was making disparaging remarks of the bride and you don’t do that unless your intent is to exert power by showing how important you are relative to someone else, a need that is usually rooted in the disease of alcoholism. Her jaw was on the ground during our entire discussion.
I recall a perpetually relapsing alcoholic client whose addiction took form in serial Don Juanism. He brought his yet latest hot babe to have her taxes prepared. He was making belittling remarks of her during the entire interview. I was stunned, but I knew enough not to say anything. This was early on in my alcoholism research, but already knew not to argue or comment. I had to get some additional information from him in a few days and I’d use that opportunity to say something. When he called, after a brief discussion regarding the questions that needed resolving I asked, “By the way, can I be perfectly frank with you?” He said, “Sure, we’ve known each other for a long time.” I said, “Either you’ve relapsed or you’re getting ready to relapse.” Relapse prevention expert Terence Gorski, in his book, Staying Sober, explained that alcoholics will sometimes begin to act the way they are when they’re drinking before they begin drinking again as it can be a part of the relapsing process. They might be thinking, “I want to drink again, so I may as well begin acting like I'm drinking!” So I confronted him and he responded, “No, Doug, I haven’t relapsed!” and went into a five minute defense of himself. When he stopped giving me his excuses (all nonsense, of course), I said, “I’m sorry, it doesn’t wash. You were belittling this gorgeous woman the entire time you were sitting there.” And I repeated, “You’ve either relapsed or you’re getting ready to.” And he was quiet, didn’t say anything for ten or twenty seconds and he finally said, “Alright, I’ll come clean with you. I went to a bar that night. I ordered a drink and it took so long for them to serve me I had time to change my mind. I left and went to an AA meeting instead.” I said, “Good for you.”
A client once came in when I used to see people in early April. (I don’t anymore because I don’t want to see people whose lives are out of control; they can mail it, drop it off, whatever.) He would call every year about April 8th and had a different excuse each time for why he wasn’t in earlier. “Oh come on, please see me, please take me, please get it done by April 15th!” He absolutely insisted that it be done by April 15th, not just started. He wouldn’t mail it in. I said “alright, come on in.” He went away back in ’93 or ’94. I began learning about addiction in ’95 and ’96. In ’97 or ’98, his wife called and said, “Doug, can I get copies of those old tax returns?” I said, “sure” and we talked a bit and I asked why she needed them. “I’m divorcing him and I need copies of all the old returns for the purpose of avoiding having to pay him alimony.” I said “by the way, did your soon-to-be ex-husband drink heavily?” and she said, “Doug, I had black and blue marks all the time. He beat me; that's why I’m divorcing him." So the fact that he was unreasonably demanding suggested that he thought he was more important than everyone else. And who thinks that? Normal people don’t, normally, and non-addicts don’t make these absurd and repeated demands. Addicts sometimes do. A common thread of addiction is abusive behavior directed at someone. It might not be you if you’re lucky. It may be somebody else. But you never know who's going to be next.
Several years' worth of filings
Usually by the time they are ready to catch up, they’ve been in recovery for some time.
Early withdrawals from IRAs especially when the client earns plenty to live on
I had a client once who while making $200,000 a year regularly withdrew from his IRA’s, suffering fifty to sixty percent tax and penalties. He died suddenly at age 46 of a heart attack. What drug causes heart attacks or increases the likelihood of a one? Cocaine! What drug is expensive? Cocaine! Might he have been a coke addict? Probably. That was the only thing I saw in him that suggested alcoholism other than the fact that he was a salesman for a title insurance company.
Complaints about other people or their jobs and disparaging remarks are a small piece of the blame game. I’m not to blame for my problems; my employer is, my spouse is, my parent is, the dog is. They blame anyone but themselves for their problems. Why? Euphoric recall tells them it's never their fault.
Foul language is a clue because there’s something about saying the f bomb that says I’m bigger than you and more important than everyone else so I can talk however I feel like.
I had a client about whom I was a little suspicious but didn’t have any hard evidence of addiction. Since he was a high powered attorney with gross business income of about $200,000, I didn't really question the $10,000 he'd spent on continuing education. But when I saw the receipts he mailed to me for an audit, I couldn't tell what the educational item was really for. I called him and got his voicemail and said, “David, I need to be able to explain this $10k expense for what appears to be continuing education to the auditor. How does it relate to being an attorney?” He called me back and said, “You know Doug, I think this may be a little bit over your head. Why don’t you package it all up and mail it back to me and by the way, f- you, f- you and f- you again.” He was screaming and I knew better than to say anything other than “ok” and I hung up. He called back and got my secretary and screamed, “f- you, f- you and -f you again” and my poor secretary got off the phone all shaken and asked, “What the heck was that all about?” I said “Let’s call Joseph, his friend who referred him, and see what he has to say.” Now, both of them were attorneys, so I knew I couldn’t just ask, “Joseph, is David an alcoholic?” I knew in a day and age in which we think “calling” someone an alcoholic is defamatory I had to word it in a non-threatening way. So I got Joseph on the phone and asked, “By the way Joseph, how long has David been drinking?” Joseph responded in an exasperated tone, “Oh, too long. It’s becoming a real problem.” Hello! If there’s a problem that can be linked to drinking, drinking is the problem.
Drinking or using by itself is not something with which we should be concerned.
There are plenty of nonalcoholic users of the drug alcohol. There are many non-addicted users of the drug heroin when it’s in pharmaceutical form, as in oxycodone, Vicodin or Oxycontin. We should be concerned, instead, with the particular person on the drug. This person could have caused me a lot of grief had I argued with him or done anything to incite even greater anger. He might have sued me or blamed me for the problems he was bound to experience with the IRS, so I just shut up. You don’t argue with chemistry. You don’t negotiate or say anything, especially when they’ve got you in their headlights.
Walking on eggshells
If someone is walking on eggshells around someone else, that someone else is probably an alcohol or other drug addict. Volatile mood swings are a great clue to likely alcoholism. Could it be bipolar disorder? Sure, but what’s the relative incidence of bipolar disorder versus alcoholism? The former might be one percent of the population, while the latter is found in about ten percent of Americans. What are the odds? Ten to one in favor of alcoholism! I cite a tremendous amount of research in my first book showing that seventy to eighty percent of recovering addicts who were diagnosed with a personality disorder such as bipolar disorder, borderline personality disorder, sociopathy and narcissism, could no longer be so diagnosed after three or four months of sobriety. It probably increases to ninety percent or more after two or three years of sobriety. On rare occasion a recovering alcoholic is found to have a true personality disorder, but I suspect alcoholism often triggers or greatly exacerbates such disorders. However, most of the time these dissipate in recovery, and we find that the addict is usually a decent, often wonderful human being.
Using charm in a manipulative way
Nothing matches the charm of a practicing addict when they want something from you. That’s why so many of them are successful adulterers and serial Don Juan types. If you see someone who is overly charming and find even one other clue to egomania, the likelihood of alcoholism must be considered.
Those occupations allowing the use of power tend to attract more alcoholics. Also those in which the boss is not peering over your shoulder and especially where all the employer cares about is results, such as outside sales, tend to attract addicts. The same can be said for occupations where it's almost accepted, such as music and entertainment, and those in which it's common, such as construction.
We don’t find addiction unless we suspect it.
It doesn’t mean we're going to run our lives thinking there’s an addict everywhere. There’s not. It's one out of ten, and they're not all acting badly all the time. (We’d all be dead if they were.) But we’ve got to look for it just to protect ourselves because if there is an addict, there's a far greater probability we're going to be suffering at their hands. Ten percent of the population commits eighty percent of serial, unethical, and felonious behaviors.
Protecting Ourselves and our Practices
Reasons to spot the client who may be alcoholic and to know when we need to cross every “t” or screen them out as early as possible:
1. We’ve all had clients ask, “We can just say I spent this money, can’t we?” Who are we likely dealing with? The odds of criminal or unethical behavior being committed by an addict vs. non-addict are about five to one.
2. The addicted client is far more likely to blame us for something that goes wrong.
3. Does making a false accusation give you power over the other person? Absolutely. Therefore the odds are if there’s a false accusation, there’s an addict and if there's an addict, false accusations are far more likely. And addicts are really good liars. We’ve always got to keep such issues in mind when preparing tax returns.
4. We may never get paid.
5. Have you ever had to reinvent the wheel with a client? Something spread out over months and months increases the odds that a client's life is in disarray. It could be someone closeI’ve had clients procrastinate in ways that didn't make sense and I learned later they were dealing with a drug-addicted child. Disarray in one’s life can lead to extreme procrastination or worse.
6. A client who pulls a "no-show." Although innocuous, this gives a terrific early clue to something going on.
7. Divorce is a clue and is something we need to be especially careful with. Even one divorce ups the odds to about forty percent that one or the other if not both are alcoholics. The odds increase to about eighty-five percent for someone who has been through four divorces. (This is crucial to keep in mind when required to have both parties sign a “conflict of interest” waiver. You’d better have that waiver!)
8. Financial disarray. A clue to such disarray even if you didn't see it anywhere else is late filing of tax returns. When I began researching alcoholism, before most of my addicted clients left me for greener pastures (“Oh, that Thorburn, he must think I’m some sort of an alcoholic so I’m not going to go see him anymore!”), I had thirty people on what was, back then, third extensionyou know, after October 15thand absolutely positively confirmed alcohol or other drug addiction in fifteen of those thirty. When might such disarray cause us problems? How about audits?
9. You can satisfy your curiosity and answer the otherwise vexing questions: “How the heck did that client get into this mess? Why has he been divorced three times? Why did he build a business and then have everything blow up?” While there are things that “just happen,” the greater the number of bankruptcies, divorces or black and blue marks from fights or beatings, the greater the odds of addiction nearby.
10. We need to identify the client who might be thinking, “I’m more powerful than the U.S. government.”
Avoid becoming a victim
We can help clients avoid becoming victimized by, shall we say, smooth talking investment counselors and smooth talking tax preparers. We can look at a tax return and spot the fraud: $15,000 dollars of employee business expenses for a secretarycome on. The more important question is, is our client complicit? Is our "victim" also an alcoholic?
The criminal justice system is filled with addicts on all sides
We obviously want to avoid preparing tax returns for a client who commits tax fraud. Sharon Kreider's ten greatest tax scofflaws are Wesley Snipes, Richard Hatch, Leona Helmsley, Chuck Berry, Richard Pryor, Spiro Agnew, Willie Nelson, Pete Rose, Heidi Fleiss and Al Capone. How many addicts among them? There's no question about five of them. Those are really high odds and probably out of the other five, because information is so hard to come by in uncovering addicts, at least a couple of them are addicts, probably seven or eight out of the ten. Not every one, it's not 100%; none of this is 100%. But boy is that useful information, which can help protect us from being dragged in front of the criminal investigation division. If you still want to do business with a suspected addict (1) collect a sizeable retainer up front and (2) spend extra time, far more than you would with a trusted client, dotting every “i” and crossing every “t”.
Protect yourself from problem payers
I had a client who called after a seven year hiatus. I had written several books on alcoholism in the interim and somehow it came up and I mentioned it to her. She said, “Oh how interesting, my seventeen year old son may be having problems,” and we continued talking and then she said, “you know it's so funny that you talk about all this because when I drink I really don’t want to stop after I have even one.” I told her, “That indicates alcoholism.” I pulled her old file and found that while she always paid, she was three, four, five months late every time. I asked her if she remembered that she never paid on time. She was shocked. I said, “The fact that you weren’t paying your bills timely suggests your life was out of control, which is indicative of alcoholism. You may want to take a look at yourself.” A year later she called and asked “Is rehab deductible?” and I said, “Yes! So, you got your son into rehab?” She responded, “yeah, himand me.” Alcoholism confirmed. Note that all I had was one relatively innocuous clue.
Potential for problems with employees
Understanding the behavioral clues to alcoholism can help us screen employees. We have more than a few Social Security numbers in our offices. Who is more likely to commit identity theftan addict or non-addict? Who’s more likely to sell Social Security numbers with a whole lot of other informationan addict or non addict? Non-addicts don’t do these things, but addicts might. This is especially true of meth addicts. For some reason, and nobody knows why, the best estimates suggest that fifty to seventy percent of identity theft is committed by methamphetamine addicts. Remember Jodi Sweetin? Even her LAPD cop husband didn’t recognize it. The cop wasn’t stupid; addicts are that good at hiding what they need to hide to protect their perceived “right” to use.
A couple of Enrolled Agents had likely non-addicted employees who committed rather heinous acts. They later figured out the spouses of these employees were alcoholics.
I have identified likely addicts on seven occasions only to find later I had diagnosed the wrong spouse. The addicted spouse is able to smooth out his emotional state. The non-addict spouse can’t. The latter may look and act crazier than the addict. Because addicts can be such smooth talkers, they can convince the non-addict to do things they otherwise would never do. While we don’t always know who, misbehaviors point to the possibility there is an addict nearby. To protect ourselves, we need to more carefully watch those in committed relationships with addicts than we might otherwise.
The difficulty of confirming alcohol and other drug addiction
To confirm alcoholism, we need evidence of addictive use, which somebody has to see. To give an idea of how challenging this can be: journalists don’t even report it when obvious. I predicted back in 2001 that the anthrax killer would prove to be an alcoholic. How could I know that when I had no idea who he even was? Easy: he committed murder! Ninety percent of murderers are alcohol or other-drug addicts. When we learned that Bruce Ivins, the scientist, was the likely anthrax killer, I read all the reports I could find on him over the five days following his suicide looking for proof of addictive use. Not one mentioned anything about drugs other than the fact that he committed suicide with prescription Tylenol. Now, prescription Tylenol includes codeine, a synthetic opiate, which any heroin addict will use in a pinch. But that still doesn’t mean he’s an alcohol or other-drug addict. I kept on looking. In the twenty-eighth paragraph of the thirteenth article, I found all the proof I needed: he’d been in alcohol rehab twice earlier that year.
Aside from protecting ourselves when dealing with likely alcoholics, what sort of advice can we offer to clients who may be dealing with addicts?
Protecting the Client - Sometimes from Himself
Charles Ponzi was an alcoholic. So was Danny Pang, Tom Petters and Samuel Israel, lll. So are, probably, Robert Allen Stanford and Bernie Madoff. We can help spot the badges of financial fraud that are consistent with a diagnosis of alcoholism and, in doing so, have a shot at protecting our clients. Friends and family members who don’t repay their loans are more often than not addicts. Many of these simply "disappear" (“non-business bad debt, Joe Smith, whereabouts unknown”). What are the odds of alcoholism in someone who just disappears? Virtually one hundred percent. We can help our clients understand that many of our friends and family members so desperate for money they can't get it from a bank are very possibly alcoholics.
If there’s divorce or pending divorce we've got to have both parties sign a "conflict" release. The divorce itself increases the odds of alcoholism.
If one of the two remains and the other goes away and the client that remains is not the likely addict, we can say things like, “you might want to file separately because we don’t know what the other spouse is hiding. There may be hidden income we don’t know about. You might want to disengage financially by separating credit cards, taking him off your life or other insurance and getting separate auto insurance. If they get a DUI, you've got an insurance payment of $3,000 a year for several years instead of $1,000 a year."
Protecting Yourself from the Addicted Spouse
Seek competent legal, insurance and tax assistance for direction and approval regarding some or all of the following:
1. Filing separate income tax returns.
2. Remove or copy all tax and financial records. These include: Bank and credit card statements; Receipts supporting deductions claimed on current and prior returns; Calculations of income; Insurance policies; Deeds; Paid bills; Tax returns as far back as you have; Marriage and professional licenses, passports and birth certificates.
3. Cancel joint credit cards.
4. Close joint bank and investment accounts, separating assets per legal counsel's instructions.
5. Separate real property if possible, or re-title from joint to tenants-in-common.
6. Change beneficiaries of life insurance policies, annuities, IRAs, Keoghs, 401-Ks, profit sharing and all other pension plans.
7. Change your will and amend your trust.
8. If appropriate, set up a survivor's trust to support your addict if and when he is in advanced recovery.
9. Transfer title to all cars, motorcycles, boats and airplanes to the appropriate spouse.
10. Purchase separate insurance coverage, especially motor vehicle.
11. Obtain additional liability insurance on those items not put in separate names.
12. Remove collectibles, jewelry and any other valuable or easily saleable property that you feel is yours.
13. Remove any property that holds sentimental value.
I used to tell clients “the biggest problem with partnerships is it’s kind of like being married to someone you're not in love with." Now I know it can be far worse: the partner might turn out to be an addict. In my first book, I tell two stories of partnerships that blew up. In one, the addicted partner embezzled $30,000 before my client realized what was happening. In another, the partner didn't do his share of the work and it was driving my client crazy.
The stories of some stockbrokers during investment booms partying it up with coke are epic and legend. They don’t care about clients. While there are some good stockbrokers who provide a valuable service, the addicted ones will provide far less value and possibly harm your clients.
If a lot of money could be bequeathed to an alcoholic, you might want to suggest that your client set up a special needs trust. The heir may be sober but relapse is all too common. I’ve had clients where addiction runs in the family who gave children thousands of dollars. I've commented, “are you sure you want to do that when addiction runs in the family?” A few have said, “Thank you very much, I reversed it.” Let the kids sue them. So stop the gifting and control where the money goes.
Early stage alcoholism is characterized by a sense of invincibility, a Supreme Being complex and a "rules don’t apply" to me attitude. We all have a bag of tricks that we use occasionally, even if rarely. For example: the two-year rule on selling a house back when houses went up in value. Many of us have had clients who thought they could sell two houses within two years because they lived in them for two years. Oops! Being able to spot possible alcoholism can be an even bigger life-saver. It’s not going to be useful all the time because most of our clients are normal people, ninety percent of them are not addicts and the ten percent who are aren’t necessarily going to cause us problems. However because we don’t know which one is going to affect us adversely, we want to be on alert for them. Remember, we never find early stage alcoholism unless we suspect it. There are times when this kind of information could be invaluable.