Monday, January 22, 2007
Tax Time Beckons
Karl the wonder dog is in for the night (I hope!), and I just filled up the woodstove. It's a very dependable Vermont Castings stove which Gail aquired long ago when she worked in Randolph. The temperature outside is 14.7 and it is slowly dropping a fraction at a time so the stove's warmth and the smell of buring wood makes for a pleasant evening. Tonight's weather report suggests Thursday and Friday daytime highs of 4-10 degrees so I guess tomorrow will be a good time to bring in some more wood to get us through the weekend.
In our house, we leave the Christmas tree up til the weekend after New Years. That's just the way it's always been. I recall when we moved to Vermont in 1952 my parents couldn't believe Vermonters tossing their trees the day after Christmas. It made no sense to us. Many Vermonters still follow that plan but we follow our own design and we like it that way. As soon as the tree is out, we clean up needles for about a week and then we start our income taxes. I'd rather pick balsam needles out of my socks than start the taxes but this time of year these are two jobs you have to do.
Taxes by themselves are not popular with me You have to do them, I understand they have to be done and I dislike them. I resent the changes in depreciation schedules which I do not understand and the annual changes to charts and rates. I resent having to hire somone to take my work and apply all the new rules and then charge me too much money. There has to be an easier way to fund government, I believe there is an easier way and I am amazed that no matter who we send to Washington, they complain but can't figure out a new way.
Taxes for any business require some forethought. Taking a shoebox full of receipts to an accountant and saying "Here" just doesn't cut it any more. You have to be a smarter business person in today's world where every single penny counts.
If you're thinking about a horticultural business, I really recommend you start to think about taxes long before you sink the first shovel in the ground. I've mentioned the need for a good business plan first, so you understand the relationship between assets and liabilities and how much money you need to get going. No matter how well you have planned, it's likely you've missed something. Bet on it!
Owning a business means that you bounce to the IRS1040 form and its associated schedules. I recommend that first you work your way through all of the Small Business Administration's tools for designing and building a business. The SBA website is very good and it lays out methods of counting money and product that are important. When you're comfortable with a business plan, move on to the latest IRS 1040 instructions.
At some point, you'll get to the page that says it will take at least 52 hours to complete the required forms for your business. Don't fret, the IRS can't count either, and it will clearly take more than 52 hours, especially if you haven't done your homework all year long. This is another reason to get organized, either the old fashioned way with files and a calculator or with some software and your computer. The earlier you start this, the less time it will take to complete the forms.
I've become a little obsessive over the years and I maintain about 50 categories under which I collect receipts. I try to track change in prices of various supplies and that helps me decide when to buy more, buy less, or buy on sale even if I shouldn't stock pile something. The nursery business uses many items which require petroleum to produce and since they all have to be delivered to Vermont, petroleum issues affects our bottom line.
Years ago our potting mix was $9 a 3.8 cubic foot bale. Delivery was free. In recent years the price has moved to $18 and there is a surcharge on the delivery. I can get it cheaper but I have to buy by the tractor traier load. This same example carries to most products so it's worthwhile to establish a good tracking system. Every product you buy or sell has to appear someplace in your tax return so why not have well organized information that can make you a more educated buyer and manager?
Gail has done the final organizing for me and I have begun to put things in their proper place. I don't have any reports from our banks yet so I know there's still time on my end to pull things together. I always like to have our work completed and off to our accountant by the first week of February. That way she can get through our work before the tax onslaught begins.
Sometimes I have questions and I need some help. I call or write IRS and I have to say I have always been treated courteously and have received answers I can understand. I've been doing taxes since the mid sixties and so far I haven't been audited although I know that's always a possibility. In this year's tax manual there is a mission statement. It says "Provide America's taxpayers top quality service by helping them understand and meet their tax responsibilities and by applying the tax law with integrity and fairness to all." They do what they say, but you know, in the years I have filed taxes, never once did anyone say thanks for getting them in on time, thanks for double checking the math, or thanks for doing what the instructions say to do. Here at Vermont Flower Farm we say "thanks" to everyone who comes, even if it's just for a visit. Maybe I should suggest that approach to IRS Commssioner Everson.......better still, maybe I should get going and finish the taxes. Thanks for bearing with me tonight!!
Writing from the mountain above Peacham Pond where advice is free, opinions vary, nights are cold.