The Emotional Guide to Taxes

How to deal with doing your taxes

Dear Sonal

It’s tax time, and the government is totally going to audit me and send me to jail and I haven’t done anything wrong! At least, I don’t think I have. I wasn’t trying to mess it all up, but these goddamn %@#&&@! forms! I am going to fuck this up and they are going to punish me for it.

I’m a writer, not an accountant—witness the lack of money in my bank account. If I knew how to do numbers, do you really think I’d be trying to make it as an artist? How the hell am I supposed to do this?

Help!

Sincerely.
Taxes Will Be The Death of Me

Dear Taxes Will Be The Death of Me,

Astute readers will probably wonder why anyone is writing to me about taxes, since in addition to not being a therapist, I am also not an accountant.

Clever reader, I was looking for an excuse to talk about taxes so I made this letter up, but it’s my newsletter and I can do that. Around this time of year, at least in North America, I start seeing all kinds of panic and dread among writers—and to be fair, other people too—about taxes, and I’m hoping that I can help at least some of you calm the fuck down.

You see, I am a weirdo who likes doing my taxes. No really, I do! My ancestral lineage of accountants manifests in strange ways. But I promise, this will not be boring or full of numbers and stuff. Well, at least not full of numbers anyway.

At this point, I should probably add a few disclaimers so that no one sues me. First, I am Canadian, and my tax experience is all Canadian. As far as I can tell, much of what I’m about to say applies to the USA and the IRS, in spirit at least, but like, you check things. (My apologies to the rest of the world for being so North American-centric this month.)

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I have a couple of theories why taxes seem to really bring out the dread in creative people, not the least of which is that our taxes are generally more complicated than your average, gainfully employed person. We may have jobs but we are also self-employed in our creative work. Our incomes come from multiple sources and are highly variable. We spend money for our work too, in the form of classes and workshops and websites, and if we’re lucky we might make money from grants and residencies and publishing income. Many of us freelance and many of us teach. Many of us are just getting by and really hoping that we’ve put aside enough for taxes, assuming that we’ve been able to put aside anything at all.

But I think also, to some degree, being able to live a creative life—for those who manage to make it work—sometimes feels a bit like we’re getting away with something. We’ve found a way out of wage-earning in the traditional (I might call it soul-sucking but that’s just me) nine-to-five-but-more-realistically-something-like-eight-to-six-thirty life and have eked out a little bit of freedom for ourselves. And now we have to tell the government that we’re doing it.

This feels a bit like telling the Warden all about the escape tunnel we’ve secretly been slowly carving out behind the movie poster by annually reporting on its progress. (Are you all catching the movie reference here?) Like, is it my imposter syndrome talking, or am I actually an imposter and now I have to convince the government that I’m legit?

In some sense, this is why I like doing my taxes… it’s my annual, official confirmation that yep, I am a writer, even if I didn’t make any money from writing this year. There is an official government form attesting to this fact. The first time I published something and was paid a big $50 for it, I couldn’t wait to declare it on my taxes, yes I know, we have already established that I am a weirdo.

There’s also the fact that taxes involve a lot of administrative bullshit, and scrounging around for that one piece of paper that’s somewhere, and then kicking yourself for not being more organized.

The standard advice is to keep a big envelope somewhere, and stick all your receipts in it all year, but do I do this? No, I do not. Instead, I go trawling through all my bank, Paypal and credit card transactions for the year to find all the ones that have to do with writing or teaching, write them on scrap paper, add them up and enter them. (Every accountant in my family has now fainted in horror.)

As such, doing my taxes effectively becomes something of a year in review for me, which is kind of nice, especially given the whole time-blindness thing I have happening. It gives me a chance to look at everything I did writing-wise this year—at least, everything associated with a financial transaction.

It’s true that I should go dig up the receipts, but I don’t bother, simply because I know that I can find the receipts somewhere on my computer, or download them from whatever organization, or contact the organization and ask them to send me a receipt, so I will hunt them down only if CRA tells me they need to see them, which typically, they don’t. At a worst case, I can show them the transaction record and see if they will accept this… and if they don’t, I will have to pay the difference in taxes. I can accept that. Given how low my taxable income is, it’s not going to be a huge amount of money.

Basically, give them whatever you’ve got, and see if they’re okay with it.

If you work with an accountant, they probably won’t go for an approach like this, simply because your accountant wants to verify that you have the records before filing them, but this is another reason why I do things myself, I do not want to argue with an accountant about accounting things.

My other theory is part of a lifelong soapbox, but I will try to sum up quickly… I’ve long felt that at some point in time, most of us decided we were numerate or literate. Math people or Arts people. Nerds or Normies. Pick your own words for it.

But along with that, many people have developed a kind of mental block around math. “I am not a math person” turns into fear anytime anything to do with numbers comes up, and suddenly people freeze. And of course, taxes come with a lot of numbers, and it’s hard to think through them with a frozen brain, even though most of the actual arithmetic part of it all gets done for you by your tax software of choice.

Math is difficult to teach well, and it’s likely that many people don’t have the kind of grounding in math that makes them feel comfortable with numbers, even if they know how to add and subtract and such. Still, I believe that many such people have let fear get in the way of something they are perfectly capable of doing, or at least learning how to do, and before I go off on a long and very unrelated tangent, a lot of this applies to how I feel about writing too.

Don’t let fear get in the way. You can do this.

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But Sonal, what if I get audited? In fact, last year I was audited!

First of all, a pet peeve. Most of the time when writers tell me that they were audited, they were not actually audited. CRA sent them a letter saying they wanted to review. This is not an audit. (From what I can tell, the IRS does something similar, except the IRS does put the word ‘audit’ on the letter…. they have more than one level of audit, and this is typically the very minimal kind where they send you a letter saying “send us the receipts on this one thing” and you send them and it’s all done.)

In any case, this is generally not the kind of audit you see on TV, where they are looking for reasons to send you to jail. This is more like your friend going through the restaurant bill to figure out who should pay what and asking “Hey, who ordered the shrimp?” They aren’t looking to screw you over. They just want to confirm who’s paying for the shrimp.

More to the point, a review is not a punishment for having done your taxes wrong. One more time: A review is not a punishment.

Do you know someone who is proud of the fact that they’ve never been reviewed/audited? Weird flex, bro, because it’s entirely meaningless as to your ability to write numbers in tax forms. At best it means you have boring taxes, and that’s saying something.

A review is simply a double-check. It’s the fact-checking of taxes. Sometimes, this is triggered because there’s something statistically different about your numbers versus other writers and the Big Tax Computer said “Review this one”. But sometimes, it’s entirely random. Literally. It’s part of how they ensure people are generally filing correctly without asking for paper proof for every single person.

It’s probably safe to say that anyone who is self-employed, and particularly if their incomes are all over the place—read: pretty much anyone earning money through a creative practice—is going to be reviewed at some point. Don’t panic. Send in your paperwork and most of the time, it will be “okay, cool, thanks for confirming” and then the odd time, it will be, “okay, sorry, that doesn’t work, here’s what you owe us.”

And if you disagree that you owe them this, you can tell them so, and go through the whole, annoyingly slow process of sending paperwork back and forth to the tax people (either on your own, or with the help of an accountant or tax attorney) and eventually it will work itself out, just like you’re friend going through the restaurant bill with everyone claiming they did not order the shrimp. It may take a minute, but the bill will get sorted out and paid.

In some ways, it’s a bit like publishing. You do your best and send your work out there, and eventually they will get back to you with a decision. It’s slow, and annoying, but there’s little you can do except wait.

Even a full and complete audit, where the tax person comes to see you and goes through all your paperwork, is not necessarily a punishment for having done something wrong. Some of this is done at random. Some of this is that they’ve decided to look into some particular type of transaction for wild accounting reasons.

None of this necessarily means they think you’ve committed tax fraud and are looking for ways to find you out and toss you in jail.

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Speaking of jail, it seems like for many people who have made some kind of mistake with their taxes, or forgotten to file, they immediately jump to the conclusion that they are going to jail.

Let me clear this up; you are not going to jail. Once again but slowly: You. Are. Not. Going. To. Jail.

Even if you are convicted of tax evasion—which is also not going to happen, I’ll get to that in a second—you are not going to jail.

Even in the US, where the IRS is more empowered to try and convict people than the CRA is here in Canada, you are not going to jail. Being sent to jail for tax evasion is a very rare circumstance. Go Google the number of people incarcerated for tax fraud. I’ll wait. It’s a very small number.

Oddly enough, I happen to know people who were convicted—yes, trial and everything—of committing hundreds of thousands of dollars in tax evasion. They did not go to jail. They had to pay the taxes owing plus financial penalties and interest and fines and such, and they have an actual conviction on their record, but no jail.

Now if they didn’t go to jail with a whole-ass house’s worth (okay, a whole-ass condo’s worth in Toronto) of unpaid taxes that they deliberately lied about and hid, you aren’t going to jail because you don’t know if you have all your $5 submission fee receipts together.

So, breathe.

Even if you forgot to pay your taxes, or were too scared to do your taxes, or lacked the executive function, the time, the energy, the knowledge, etc, to do your taxes… Even if you have forgotten for a few years, even if you didn’t realize that some pittance you earned for publishing a story in a literary magazine should have been declared, or you don’t feel like you are officially a writer enough to be put writing income (and write-offs) on your taxes.… the government isn’t interested in throwing you in jail.

Frankly, the tax authorities are much more concerned about getting the money owed to them than they are about spending money incarcerating tax cheats.

For that matter, the government also isn’t interested in charging you with anything. This is expensive and time-consuming for them; they only pull this out for people who are actively trying to deceive them.

“But Sonal,” you say. “What if they think I’m trying to deceive them? What if they think my failure to pay taxes last year, or the fact that I can’t find my receipts for that conference I went to last year, or that I don’t remember how much I was paid at the reading I did last year because they just handed me some cash and I ended up spending it somewhere…. what if they think I’m trying to evade taxes?”

They don’t think that, but even if they did, it doesn’t matter. So long as any tax owing eventually gets paid, they are perfectly happy to carry on. (If the mistakes you’ve made mean that you’ve overpaid your taxes, you can amend that and now the government owes you money.)

Do you all remember that scene in Breaking Bad, when Skylar’s douchebag boss Ted is committing tax evasion, and Skyler gets him off the hook for criminal charges by dressing all cleavage-y and pretending to be incredibly stupid? TV doesn’t always represent real life accurately, but in this case, it’s not far off… making mistakes, being ignorant, being forgetful, being completely disorganized, not completely understanding how tax things work—none of that is tax evasion. (I mean, Ted was actually committing tax evasion, it’s just that Skyler convinced the IRS auditor guy that it was all a bunch of mistakes that she made because she pretended she was an airhead. And then Ted thanked her by buying a fancy car instead of paying the money owed to the IRS because douchebags gonna douchebag.)

Just so no one sues me: don’t go evading taxes and trying to get out of it by pretending to be an airhead. That is wrong.

Still, the CRA and the IRS know that most people are not accountants and that people will make all kinds of errors and forget things and not have their paperwork together. They don’t immediately jump to the conclusion that you’re trying to hide something, and they’re not out to get you.

All they want is their money owed. Be straightforward with the person on the phone, and pay what’s owing. If you can’t afford to pay that, you can usually work out a payment plan. They will give you many, many chances to pay up whatever is owing—especially if you communicate with them—before taking their most drastic, last resort-type action, and frankly, that isn’t criminal charges but is instead starting a process that will eventually allow them to take money straight out of your bank account.

So yeah, if it came to that, it would suck, and will be incredibly inconvenient, but a) still no criminal charges and b) this is generally avoidable by talking to them and making some attempt to pay what is owed.

Just remember that these are people doing a job, and they have absolutely no interest in trying to get you.

Of course, all this assumes that you are not actively trying to defraud the government—which is wrong and you shouldn’t do it—but like, you actually have to know a fair bit about tax to do that well. That’s not most people.

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At the end of the day, it’s an annoying task that needs doing, but so is folding laundry, renewing your passport, booking a dentist appointment, etc. You can make it as pleasant as possible by putting on some music and breaking out the good cake, you can just power through it and get it over with, or maybe you can find some satisfaction in just getting it done.

Try your best. Don’t let fear of numbers cloud up your brain; you are capable of doing this. There are lots of resources out there to help you understand what you need to do; even if they are written in accounting-speak, these are words, you can work out what they mean. Even if you are working with a tax professional, it’s still a good idea for you to understand what they did and why.

It’s okay to be disorganized and it’s okay to make mistakes; there is a process for fixing those mistakes, even if it can be slow and possibly annoying.

No one is trying to punish you for not being a math person.

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Readers, what do you think? I’m not qualified to give you tax advice, but has this helped you feel a little better about this annual chore? Any other weirdos like me who look forward filing their taxes? Anyone? Anyone? Bueller?