18 Apr Tax Day Panic at the Farm
Our accountant phoned me and Jill on Tax Day to review our taxes. He had never done this before but, then, we had never presented him with such a complicated return. He said, “I just want to be sure you understand the case.” I didn’t know we had a “case.” I took the call in our kitchen. Jill was sitting at the table, watching me with concern. It was about eleven in the morning, so we had all day, if necessary, to clear up “the case.”
“You’re claiming $61,000 as a charitable contribution.” He said this as if we had misplaced a comma or somehow misunderstood something vital.
The year previous we had claimed about $12,000 in charitable contributions to our non-profit, Good Contrivance Farm. Mind you, this isn’t money we had on hand—all of it came from loans, most notably a hefty second mortgage (innocuously called a “home equity loan”). We anticipated that 2017 would be our most onerous year and hereafter our expenses would diminish until the income would more or less cancel out the ongoing expenses.
“Well,” said the accountant, “it’s real aggressive to take that kind of deduction.”
By “aggressive” he meant that we were pushing the IRS–perhaps inciting it–with what may seem a flagrantly inflated claim. But there’s nothing inflated about the expenditure. Virtually untouched since 1959, the farm is a money pit. Everything that might have to be replaced, we’ve replaced. And there is a ton of stuff that has to be done. For example, we need a public bathroom, lights for walkways and parking (lots of lights, lots of electrical lines run underground), water spigots in key areas on the property (hundreds of feet of water lines underground), gravel ($270 per truckload) for driveways, paths, etc.
In other words, you can’t open to the public unless you’re ready for the public. Despite all we’ve done, we won’t be ready until next year: spring of 2019, we hope. In the meantime, we have put a new roof on the barn ($15,000), a new bathroom in the Writer’s Retreat—which is now busy with rentals—new (stone) steps up each side of the barn, and so much more.
Before he got off the phone, our accountant must have used “aggressive” three or four times. I said, “What are the chances we’ll get audited?”
“Oh,” he said, “I can’t put a percentage on that!”
“But the chances are pretty good—that’s what I hear you saying.”
“All I’m saying is that a 61,000 dollar charitable contribution isn’t common, isn’t the kind of thing that would be easy to gloss over. But I’m just the accountant–I take my marching orders from you.”
Two years ago, when we told him that we had plans to open a non-profit, our accountant narrowed his eyes at us and said, “It sounds like you just want an easy way to pay for improvements on your property.”
I said, “I don’t know that a three-stall public bathroom and parking for 70 vehicles, among other things, constitute the kind of improvements that make us look like tax scammers.”
He shrugged: “I’m just saying what it looks like.”
He didn’t believe we’d qualify for a non-profit. He said, “You’ll probably have to apply more than once. Let me refer you to a lawyer who knows how to do this.”
When we got home, Jill said, “I’ll do it.” And she did. We won approval on the first try.
Our mission is to promote the preservation and restoration of small, historic farms. Good Contrivance is to serve as a model, our way of saying, “Hey, don’t tear down that old farm, make use of it.” You don’t have to become a heavy duty farmer, for example. In preservation there’s a thing called “adaptive re-use.” That’s what our writer’s retreat is: a gorgeous writer’s residence in a barn. The rest of the barn will be a programming space, perhaps a café too. In short, the idea is to show what a cool place a small old farm can be and how it can be used in multiple ways to serve multiple needs.
Our accountant is a nice enough guy and he’s trying to be helpful but he’s not exactly motivated; and, as I suggested, he hasn’t been a fan of our project from the start. The truth is he doesn’t know much about running non-profits. That’s why he told us, on Tax Day, that we were responsible for filing a 990 with the state to keep the non-profit in good standing. As soon as we were off the phone, Jill went online and discovered that the 1090 was due last week. So she filled it out and sent it in. Not the best way to do business.
Need I add that we’re looking for a new accountant? As for the refund we’re due: it’s considerable but all of it will go right back into the non-profit because, well, there’s a lot more to fix and build. As for the IRS, we’re pretty sure an auditor will come knocking on our door, if not this year, maybe next.