Thursday, April 21, 2011

Hump Day: Trying hard to make the best of a tricky tax time situation

Hump Day
By Brian Cormier
Wednesday, April 20, 2011
Moncton Times & Transcript
Editorial section

As far as the government is concerned, it's the most wonderful time of the year. No, it's not Christmas just yet. It's tax season! For people like me who wait until the last minute to do my taxes, it's far from being the most wonderful time of the year. In fact, it's pretty much the most stressful time of the year for me. Because I have a combination personal and business return, it's a bit more complicated than the days when I had one T4 slip and a few charitable donations.

Thankfully, my 2010 return is the final edition of the returns done at the last minute because I've done bought myself a brand spankin' new bookkeeper. Well, maybe I really didn't actually buy her - that would be quite wrong and illegal - but I'm paying her to put my books in order so that we can just push a few buttons come early March 2011 and send in my return nice and early next year.

So far, I've learned some great tricks, including a few deductions I didn't know I could make. I've also learned a few things that I can't do. Those are the difficult things to hear from your bookkeeper or accountant. "What do you mean I can't deduct the toothpicks I bought for my nephew's birthday party? I wrote a column about it. They're deductible. No? Are you sure?"

Well, maybe not to that extreme, but I'll look to her to keep me out of jail - or at least not have to jump off a cliff if I ever get audited by "the man" - that faceless, nameless entity who runs the country.

In the past few years, I've been lucky in that I've been very pleasantly surprised by either the size of the refund I'm getting or the small amount of money I owe. Usually, I go into tax season trying to figure out how many boarders I can fit in my basement to help pay my tax bill. When my accountant calls me to tell me to come in to sign my return, I brace myself for the bad news and it's usually not that bad.

But this year, however, I think I've met my match. The one thing you have to do when working for yourself is to ensure you put aside money from every invoice to pay your taxes. Sure, you have expenses, but the secret is finding enough deductions to cancel out the taxes you may owe. At a certain income level, though, that becomes difficult. I mean, there are only so many (legitimate) business deductions that a person can claim before you start grasping at straws and try to write off jars of pickles as a deduction in order to bring your income down.

I'm not trying to write off jars of pickles as a business expense just yet, but maybe when I get that call from the accountant after my taxes are done and ready to be signed, I may regret not having tried to deduct that bottle of dills.

I usually do all my own calculations and show up at the accountant's office with a bunch of receipts wrapped in adding machine tape, a wad of notes and a few things I have no idea what to do with. Now that I have a bookkeeper, that trip to the accountant next year will be much more orderly. She'll double check everything and make sure everything is kosher, and I'll know far in advance how much I owe.

I wasn't terribly disciplined at putting money aside for taxes last year. That is not a good thing. In order to sleep at night - and in your own bed, not on a prison cot - it's a very good thing to take a certain percentage off the top of everything you receive from clients and deposit it into an account where you won't touch it. That's what I'm doing this year. A percentage comes off the top of every cheque I receive, including the HST that I charged to a client.

It's all too tempting to see that invoice as "all yours" when, in effect, you'd better put some aside for "the man" or find yourself in a bit of pinch paying back taxes and HST. That would be no fun. So far, I've always been pretty fortunate. Like I said, I'm not so sure that it's the case this time.

So besides the boarders I'll have to take in, perhaps I could start doing laundry for people? Maybe some sewing? I could always get a job washing dishes in a restaurant. Maybe I could knock on doors of dog owners in my neighbourhood and ask if they'd like me to clean up the melting poop in their yards!

Oyyy... now I'm making myself nervous. Since I've only become really disciplined at putting money aside for taxes recently, I'd better try to see if I can write off as much as possible for 2010. Toothpicks were already shot down by my bookkeeper. How about toothpaste? I could write a column about toothpaste and make it a business expense! No, I don't spend enough on toothpaste to make the audit worth my while.

Whatever happens, I'll figure out something. I'm sure I could cram 20 or 30 boarders in my basement - skinny ones that don't take up a lot of room. We'd all be one big happy family. The minute my back taxes are paid off, however, they're out on their ear. I don't care if it's Christmas Eve or the middle of summer.

I wonder if my bookkeeper will allow me to erase a few of last year's invoices? If it worked for Richard Nixon, it'll work for me! Oh... wait...

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