Tuesday, September 29, 2009

They own us.

Well, it looks like all those 'profits' I was talking about belong to the IRS. You know how I was so proud of myself for paying off all the credit cards and lines of credit?

Well, that was profit, even though I didn't 'see' any of it.

Went to see our accountant yesterday, and between us, Linda and I owe a bunch of money. Pretty much wipes out the savings. The taxes are due on October 15th (these are 2008 taxes).

I swore when I started the store that I wouldn't get worked up over taxes. They are what they are. I wouldn't try to avoid them by exaggerated expenses or try to minimize my income. I didn't want to play games. I want my ethical life simple and straight forward. (I've tried the same approach to my blog -- straight-forward and as honest as I can make it.)

A profit is a profit.

It still hurts. I still suspect that small businesses bear a unfair percent of the burden. But I'd rather just take my lumps and move on.

I still have Christmas to try to make a profit. But I really need to slow down my buying of product.

I've got 18 boxes of material coming in this Wednesday -- about 3 times the normal. Most of it is the 'sale' stuff I was buying earlier in the month. I also have a few hundred new books coming in any day now.

I pretty much blew out my budget this month. Spent over twice what I originally intended to spend. Typical 'feel good' peak buying. Usually punctuates the end of a good cycle.

I'd like to say that I knew the month would be good, but when I made the orders I really didn't. As it turned out, about 2/3rds of the overspend was actually covered by the results.

I'll still be carrying debt through the end of the year. But manageable debt. Should have it all cleared away by January 1.

I figure it's better to have three months to try to sell this stuff than one month.

But I need to get back to thinking about just maintaining again.

There is a weird sort of pride in how much I owe in taxes -- because it reflects a couple of businesses that have actually begun to generate some money. Linda is going to try doing a monthly stipend to the IRS, instead of quarterlies. I'm thinking of making a monthly stipend as well, but to my own savings account. We still haven't pulled very far ahead in our earnings -- but our debt is down, and our taxes are caught up, so that's better than most of our career.

Strange how the last two years have been the best two years we've ever had. It seems like our stores reached maturity just as the economy went into the tank. Wonder how we would've done without the downturn.


RDC said...

For accounting purposes I would track expected 2009 taxes as debt today. If paying your 2008 taxes basically wiped out your savings and you had good profits in 2009 then you are currently in the hole for your 2009 taxes. I have seen several successful small business die because they did not save for taxes as the profits were being realized.

Just think of how well the federal government makes use of your tax dollars. Or atleast it seemed to be your position concerning tax increases on the wealthy. Must pay your fair share after all.

Duncan McGeary said...

Hey, don't rain on my parade. I'm current.

Duncan McGeary said...

Well, RDC,

I've had a longterm plan to get financially healthy.

First of all, remember that 15 years ago, we probably had a net worth of minus 100k or something. Nobody locked our doors, so we kept going.

I've had a series of goals, which obviously are more concurrent than sequential.

1.) Keep the stores profitable and cash-flow positive. Growing, if possible.

2.) Pay off all debt.

3.) Build a rainy day fund and cash-flow reserve.

4.) Get current on taxes. For most of my career, my main goal was to never owe more than one year of back taxes at a time. Fortunately, the IRS is very good about taking payments.

So getting within the current year -- even if it's the last legally possible date is actually an improvement. Penalties aren't really that bad, compared to the other options. (Debt, etc.)

5.) Start making full IRA contributions, which have to be paid before taxes to get the full benefits. Only on my third year of this -- had a late start. I'm going to try to get at least ten years worth.

6.) Pay off the house early, so that it's paid just as we retire.

Basically, I've managed to get started on the first five goals.

I have 6.5 months to try to save up for 2009 taxes, though it's more likely I'll make the IRA contributions and try to pay off the taxes in Summer or Oct. again.

Still, I can see us making steady progress.

Again, as little as 10 years ago we were struggling just to make rent payments, so....

Duncan McGeary said...

How could we have been 100k in debt?

Credit cards were the big one. I tried to keep the sportcard bubble alive for too long.

So...something like 60k. How much we actually paid doesn't bear thinking about.

Then had a loan from the bank I was trying to pay off. 20k there.

Then I fell behind to my main distributor, about 20k there.

And finally, back taxes -- probably another 10k.

Why didn't I just go bankrupt?

Because I could see the store was viable. I had just fucked it up. I could see a path out, if we just put our nose to the grindstone.

Plus, I didn't want to work for anyone else.

I worked everyday for 7 years, we canceled everything -- cable, even home garbage (I'd take it to the store...). We lived on nothing.

When I told my sister what we were living on, she didn't believe me.

So...this current slowdown? A walk in the park, I tell you.

(Obviously, I wasn't enticed by the latest bubble to accrue overhead and debt....)

Anonymous said...

Nice idea on eliminating the cable. Bet you were able to get a lot of reading done. I'm always looking for ways to reduce my monthly "burn": no cell phone, limited basic cable, slow internet. I never thought of taking my garbage to work, though!

Unknown said...

"Just think of how well the federal government makes use of your tax dollars. Or atleast it seemed to be your position concerning tax increases on the wealthy. Must pay your fair share after all."

Cheap shot RDC. You could have made your point without making it personal. Mean spirited.

Tough day for you Duncan, my sympathy. I'm not sure if you see inflation or deflation over the next few years but if the SBA is giving out cheap money it might be a good time to consolidate debt and set up a rainy day fund. Just a thought, you know what you are doing.

RDC said...

Not sure why you consider it to be a cheap shot. Duncan has been pretty consistent in his stand concerning tax rates on the wealthy. As far as making it personnel I do belive that Duncan's blog is basically personal in that it is about him, and his business. As such it is pretty difficult to comment without it being "personal"

Interesting how the perception of tax load changes when it applies to you instead of applying it to someone else.

Running ones own business has significant tax advantages compared to that is working for a salary. However, it also has the requirement to pay both sides of the Social Security and Medicare payments that are normally split between employer and employee.

As such small business is a very good place to see the direct impact of tax policy and the impact of increases upon the business community.

Duncan McGeary said...

Everyone used to tell me that when I finally owned my own house and had to pay property taxes, that my stance on tax measures would change.

It didn't.

I'll gladly pay the higher taxes if I get rich.

The tax rate used to be much higher, even as far back as Reagan it was 50%.

Lots of loopholes, of course.

Now there is a shitfit if the tax goes from 37% to 39%.

Maybe I'd change my mind if I made that much money.

I wouldn't mind finding out.....

RDC said...

Of course the breadth of people paying taxes was also much wider when the rates were higher. When you had tax rates over 50% (and more loopholes and deductions) you also had a much higher percentage of the population paying taxes (80%+) instead of less than 60% today.
Part of the problem with using the tax system for handouts. When you have a increasing percentage that is not impacted by changes in the tax rates it become pretty easy for them to support increases.

I can support increases, if they are coupled with a corresponding increase in the breadth. So for every increase in rates, there should be an increase in the percentage of those paying taxes. Even if the amount paid is a small amount. It still serves as a reminder that they also have an obligation in funding government services and are not in the situation of only receiving benefits.

RDC said...

At the current rate the government is spending money and the current level of deficits I would not be surprised if you are not in the category of being rich in a few years. Of course it would not be because your standard of living and realtive income compared to CPI has increased, but more because the definition of rich has been dropped to your income level.