I work for an 18 month old construction company, a partnership between Max and Manuel, 2 brothers whose single mother raised them and who have worked together always. Max’s wife is our office manager. On a good day, Max’s nickname is Gordo; on a bad day, it’s Cabezon which means “pig-head”. Manuel’s nickname is Borrego, Spanish for sheep, since he has a habit of looking straight ahead when he walks or works, not left or right, in direct locomotion to his destination. Max and Manuel have never known anything but hard work; their kids’ graduations from college were family firsts.
I have an enviable job because I don’t have to “sell” anybody on the company. All we have to do is get our foot in the door, do one small job for a potential client, and we have a shot at future work. Max and Manuel are fast and good at their work. They depend on Max’s wife and me to take care of the office, to estimate and project management work since they have zero know-how in that department. That’s the drawback to the job. Am I up to that challenge? Can I cover the bases, observe the jobs, make sure we are making a profit and that our books reflect reality? Diana’s amazing but she has never kept books. This has been a learning experience for her. We are lucky to have a good CPA, but she’s an end of the year presence.
We’d been in business for about 3 months when we ended our first calendar/fiscal year on a loss. Both brothers got some money back on their tax returns, sharing the loss when they filed. “Do you think we’ll make money this year?” Max asked after he filed his 2010 tax return. (“I hope so. We should if we can stay busy.”) The truth is that 2011 in south Texas was a growing year with investors tentatively putting out small projects. Bonding power limited what we could bid and contract, but we got our share of work and stayed busy for most of the year. And ended the year with a profit.
It wasn’t until this week that the CPA worked up tentative tax figures for last year and gave Diana the estimate of taxes owed. For me as an individual, owing $1,000+ in taxes at the end of the year is upsetting. Diana’s upset level is higher at maybe $6,000. As a partnership our tax rate is 28%, more or less, and the taxes owed are considerably higher than $6,000. We had a good year, but we aren’t GM or GE or Apple. Diana got the news while she was at the office alone. When I came back from the jobs, she told me the estimated tax in a whisper. “Could this be right? Could we owe this much money?” (It was and we did.)
Too late to do anything except get indigested, I agonized over what I hadn’t known about taxes on partnerships. My lack of curiosity had probably caused the tax man to cometh with a bigger bag. The CPA recommended using something called a SEPP investment account which reduces the amount Max and Manuel have to pay the IRS and gives them something toward their retirement. That mitigated but didn’t absolve my guilt.
The first thing Max said after he got the news that he would have to write a sizable check to the IRS was an explosive “What did you do, Diana?” He was sure that she hadn’t booked invoices or checks. “Did you put in the gas receipts?” After being assured that the books were correct, the Dios mio’s started flying. A series of That damn Obama‘s followed closely. In the end, we went over changes we need to make for 2012 to prevent sticker shock at the end of the year. We incorporated this year which should help. I expect Max to ask, at least a few more times, if I am “sure that Diana put in all the expenses”. I hate learning experiences, finding out that what I thought I knew is not what IS.
After the tax crisis, I met a friend for lunch so we could open a bank account for our AA group. Our Jaywalker group was small and we were able to keep it on a cash basis. It is well past that time; going to the service desk at HEB to get money orders and handing the clerk a Ziploc bag with $1,000 in one dollar bills does not guarantee a smile. In fact, it freezes the friendly look into something that looks like a zombie imitation of joy.
I have never had to set up an AA group’s bank account. I’d made tentative approaches about setting up an account, but the first question was “Do you have a tax ID?” (“No. And we’ve never had to have one to set up an account before”…I answered without anything but apocrypha and hear-say.) My friend uses a local bank and we decided it might be easier and quicker to use her bank which has branches all over the country. I use a credit union with one branch in Corpus Christi, so it isn’t convenient for our Portland group.
With our sack of ones in hand, minutes from our AA business meeting that gave us authority to open the account, and our letter from AA World Service saying we are a real AA group, we walked into the bank with the assurance that we would walk out with an account. And found that we had to have a tax ID. “At least at this bank,” the woman added.
My friend and I left with the intention to find another bank that would take our money without “that stupid tax ID BS.” A call to another friend reassured us that we would have to get the ID. He added that it wasn’t a big deal, that his wife’s Alanon group got one to open their account.
And it wasn’t a big deal. In fact, the IRS has a category for folks who just need an EID to open an account at a bank.
If true Justice is blind, true Ignorance is blind, deaf, and very, very loud. Someone once said that “The extent of a person’s ignorance is not measured by what he does not know, but in what he refuses to learn.” I can make a jackass out of myself defending what I think I know. I am so glad I talked to my friend before every bank in Portland, Texas had my photo and a restraining order at the customer service desk.
There’s a prayer that gets used at AA and NA workshops sometimes. It goes like this: God, please set aside everything I think I know about myself, the twelve steps, this book, the meetings, my disease, and you so I may have an open mind and a new experience with all these things. Let me see the truth.
I should say that prayer every day about everything that I come across including tax ID’s and taxes. It might save me an amends or two.