California CPA Rides Drake Software Wave To Success

To explain how Ernest Howard of Playa Del Rey, California, became a Certified Public Accountant, this story must begin when he was 7 years old — really. A bit of patience will be required; however, the reader will be treated to a fascinating journey with an amazing result.

While Howard was growing up in New Jersey, he started flying model airplanes and modifying their engines.

“I got into a competition called combat, where two people would each fly a plane with control lines in a circle,” he says. “We’d put a crepe paper streamer on the back of the plane, and the object was to cut it off the tail of the other plane. These were very high-performance monsters, capable of 130 mph with a 36-inch wing span and a propeller about 8 to 10 inches in diameter.”

Howard discovered he had a knack for looking at something and immediately understanding how it worked. Then he wondered why somebody didn’t try to make it run better. His boyhood goal was to attend the Massachusetts Institute of Technology and be an aeronautical engineer.

In June of 1966, when he was 16, his family moved to California. His adopted father was an electronics reliability engineer working on the manned orbiting laboratory, the country’s first space station.

“I sort of lost interest in high school because it was so easy for me,” Howard says. “I passed second year algebra only attending classes on the days we had tests. I started tinkering with motorcycles and opened a business with a partner building racing engines. I took some college courses in engineering and metallurgy, and we built some of the fastest drag racing motorcycles in the world.”

Life Altering Experience
On his 21st birthday he was riding home from the shop on a motorcycle. His helmet was being painted, and at the time there were no helmet laws. Howard woke up strapped to a table in intensive care with three skull fractures and amnesia. The accident caused him to reassess every choice he had made in his life up to that point. He withdrew for awhile and went through a recovery phase. Along the way he decided he needed to do something different.

“In 1972 there was a major aerospace recession in California,” Howard says, “so that profession didn’t seem very attractive. I was always good at math, and there were dozens upon dozens of pages in the classified ads with jobs for accountants. I thought, why not? I’ll see how rich people make money and then I can figure out how to make money for myself.”

He chose a new state college where he had worked as a carpenter during his recovery. The accident had also triggered a need for Howard to challenge himself to make sure he had come all the way back.

“Because of the accident, my balance was off,” he explains, “so I forced myself to work 30 feet in the air walking on beams to get it back. I also wondered if my brain was working well, so I went to two schools and took twice the credits allowed. I finished four years of college in two years with one B and earned a degree in accounting. I was so far ahead of everyone in almost every class that I completely wrecked the curve. I had to prove to myself that there was nothing wrong with me mentally, too.”

In time he developed a photographic memory. Howard could read something once and remember it. Later in his career when he was with national CPA firms, he’d be at a seminar and the lecturer would say the technical standard for a tax law was “A-B-C,” for example. Howard would correct him and cite paragraph 43-b on page 97, where the standard actually said the opposite, and he’d quote it. The people in the room would be stunned.

On His Own
After working for several national accounting firms, at 9:14 a.m. on Aug. 5, 1978 Howard opened his own business. Today he has more than 600 individual clients, and about half are self-employed. His firm prepares tax returns for 100 corporations, partnerships and limited liability and trust companies.

“By virtue of who I am,” he says, “I tend to attract very intelligent, self-employed people who are extremely good at what they do. I have a large number of clients in the entertainment industry, including movie stars and producers. They recognize my ability to be creative. I take complex, arcane tax topics and make them understandable in everyday language, and relate it to what they do in a way that makes sense.”

The office, which Howard has been operating from since 1982, employs five people full time and two part time. One is a retired Internal Revenue Service audit division territory manager. Howard has known him for more than 20 years.

“I am very involved in the CPA society’s tax committee,” he says. “We often invite the IRS heads to our meetings, and I have been his sponsor at these events.”

When Howard was with the large accounting firms, he did corporate and partnership tax work, but almost no individual taxes. When he went on his own he had never done his own tax return.

“So here I am in business, advertising that I do taxes,” he says. “It was the people in my Masters in Taxation discussion group who taught me technically how it all works. Now I’m a part-time professor teaching them. I’ve become the teacher after being the student.”

Howard also saw the big firms using huge, expensive software packages that were very complex.

“I had to learn each company’s logic to understand the program,” he explains. “When I went on my own I asked, why? I looked for smaller software companies that had products that were very intuitive. Logic pulled you into them to make better choices and reduce dramatically the amount of time it took to do things.

“That was one of the things that attracted me to Drake software,” he continues. “It is an intuitive program that really works and is strategically priced. When you call, you’re not getting someone on another continent who you can barely understand. You’re getting a real down-home Southerner in Franklin, North Carolina, who will bend over backward to give you the right answer. I started using Drake’s tax preparation software full time for 1998 returns, and I haven’t looked back. They also have the most user-friendly electronic filing system.”

Giving Back
Howard is very involved in his profession. He has been chairman of the Hollywood/Beverly Hills sub-chapter discussion group of the California Society of CPAs for more than 16 years, as well as media coordinator for the Los Angeles chapter of the California CPA Society. He is widely recognized as a National Federation of Independent Business “Guardian.”

“I get referrals from the top criminal and tax controversy lawyers in California to help them with support for people who have gotten themselves in trouble,” he says. “I helped a former drug dealer who plea bargained, admitted he screwed up and wanted to change his life. I solved his tax problems so he could finish his prison term and get back to a normal life with his wife and children.”

Many people come to Howard with seemingly impossible tax problems. Because he knows how to deal with the IRS, he lays all the cards on the table and offers solutions.

“I have many examples of people struggling with personal issues who hadn’t filed tax returns for five or 15 years and had absolutely no records,” he says. “In some cases the IRS thought they owed hundreds of thousands of dollars or more in taxes. I find a way to get rid of these issues so they can get back to a normal life. I learned how to interview people to get the minute details of their personal finances, find bank statements or supporting documents, file tax returns, work out payment plans and, in some cases, do offers and compromises or file bankruptcy. A very prominent construction company in Beverly Hills is owned by an individual who had these issues. I helped him out, and today he’s worth millions.

“It’s a joy to see people free of these problems,” he continues. “For them, it’s like falling into a briar patch, having all the thorns pulled out, getting healed and their life underway again. My attitude is that you can always do something. I help clients understand their rational choices, and within those are ranges of risk. I get to know them and understand how much risk they’re willing to assume, and help them focus on the path with the level of risk they’re comfortable with and the return they’re hoping for.”

One More Sidelight
For most stories, this would be a logical place to stop, but not with Ernest Howard. Let’s pay a short visit to his side business, which is restoring antique watches. He has been doing this since the early 1990s and owns several hundred watches.

“Because of my mechanical talents, there is a frustrated engineer inside me,” he says. “By virtue of where I’ve lived, condos with parking structures, there is no place to tinker with bigger things. Since I got into accounting (with the exception of rebuilding an MG Midget with a Mustang engine), this is what I have done.”

Howard has 100-year-old watches that he’s restored which, when measured by an atomic clock, are accurate to within 2-1/2 seconds a week.

“I try to exceed the railroad watch standard of the late 1890s,” he says. “A watch had to be accurate to within 20 seconds a week, or three seconds a day. In those days, train wrecks happened because the engineers’ watches were inaccurate. Watch standards were a matter of life and death. Watch makers rose to the occasion and made watches that were as good as or better than anything we can buy today in the mechanical sense.”

So ends the story of Ernest Howard — so far. More chapters are sure to be written.

From January 2007

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