Episode 8: Tax and the kitties

Having been in business for a whole year, I feel it is my right (if not my duty) as an American to whine about income taxes.

Back when I was a lowly employee (in stark contrast to my current exalted status as business owner and CEO), income taxes always seemed somewhat ephemeral – just some numbers on the check stub. The money was gone before I could get my hands on it, so I never really thought of it as mine.

Some of my fellow wage slaves complained bitterly about the bite the government took out of their pay. I chose instead to focus on other, more tangible, manifestations of outrageous fortune such as the lady in front of me at Kroger's who waits until all her groceries are bagged before fishing in her purse for the checkbook. ("Sorry! I didn't realize you were going to ask me to pay for those!")

I really didn't mind having my tax dollars foster the American way of life by funding the many crucial products and services that our federal government provides, such as the Susquehanna River Basin Commission, BLU-82 Daisy Cutter bombs, and Trent Lott.

So, I never used to get bent out of shape about income taxes. However, I have since learned that in business, taxes become considerably more tangible.

The stark reality of taxes rears its ugly head when you have to reach into your own pocket to pay them.

We're talking actual cash money that was in my possession, sometimes long before it has to be paid to the government. In the old days, I thought of cash as "spending money," earmarked for such essentials as food, the house payment, and casinos. Once money actually gets into my bank account, however, it's really hard to get used to the idea of writing checks payable to the United States Treasury. I mean, the Treasury already has tons and tons of money, whereas I have only a few ounces.

When you are in business for yourself, the way you have to pay taxes is not a just little bizarre. As an employee, you pay "as you go," paycheck-by-paycheck. Yet, as a small business, you are required to pay in advance on a quarterly (sort of) schedule. Estimated taxes, based on estimated future earnings, are due on April 15, June 15, September 15, and January 15.

You may well ask, how can you possibly know how much your business is going to earn before it earns it? It's easy. You just use the worksheet on page 4 of FORM 1040-ES Estimated Tax for Individuals. Simply enter the amount of adjusted gross income you expect in 2002 on line 1, enter your estimated total of itemized deductions on line 2, subtract line 2 from line 1, enter the number of personal exemptions on line 3, multiply $3000 by the number of personal exemptions on line 4, subtract line 4 from line 3, figure your tax on the amount on line 5 by using the 2002 Tax Rate Schedules, add lines 6 and 7, and so on.

It couldn't be easier.

And, to make it even more fun, there's a built-in penalty for success. If you earn more than you estimated, you therefore didn't pay enough in advance. Which means you will have to pay a penalty. Is this a great country or what?

The good news is that there's a boatload of things a business can claim as tax deductions. Virtually any business expense – for example, the cost of lap dances to entertain clients – is deductible, as long as you get receipts.

So, I'm deducting such things as my 2002 Bentley Azure Mulliner convertible (company car), a dozen cases of Glenmorangie single malt scotch (office supplies), the Penthouse Private Collection (research), lottery tickets (retirement plan), and my new Sony PlayStation2 with game pack (computer equipment and software).

And, because my four vice presidents are cats, it stands to reason that I should be able to deduct the cost of their food, litter, toys, and catnip, right? These are clearly legitimate business expenses – and that doesn't even include the costs and labor involved in dealing with hairballs and a whole host of other feline effluents.

My cats are also dependents, so, I can deduct them twice. (Just kidding, Mr. Taxman! I would never try something like that unless I was so advised by my tax advisor, Arthur Anderson.)

Despite all these deductions, however, the IRS still has the nerve to insist that I pay at least some taxes. I suspect this is really just a not very clever plot to turn all business owners into Republicans.

Don't worry, though, that won't happen here. My vice presidents and I will always remain staunch Democats.