On being ... back in high school

  By Ingrid Sapona 

I don’t think about high school too often, but working on my taxes this week took me right back to Advanced Placement physics. Well, it reminded me of one particular “skill” I honed in AP physics. I’ll explain in a minute. First a bit of background: my taxes are not as straightforward as some peoples’. There are two reasons for this: I’m self employed and I have to file in both the U.S. and Canada. Because of these complications, for the past 35 years I’ve had my returns professionally prepared. 

This year, however, I decided to do my Canadian returns myself. (The U.S. returns seem exponentially more complicated so my CPA friend is still doing them.) I’m using a well-known tax prep software and answering the questions and inputting the information is straightforward. To ensure that I provide information in the exact same way as I have in the past – and to ensure no details are missing – I’ve been using my CPA-prepared returns from last year as my guide. 

All was well until I got to the part about the sales tax (GST we call it) on my business services. I know my accountant always filed my GST return based on something called “the simplified method”. I’ve never really understood the calculation. My accountant simply did the math and told me whether I owed or whether I was getting a refund because I had over-remitted the sales tax. But, since I’m doing my returns myself, I knew this would be something I would have to finally understand. I read – and re-read – all the Canada Revenue guidance on the simplified method and past explanations my accountant had sent me over the years. 

I spent hours multiplying different numbers together, hoping to figure out how my accountant arrived at the amounts reported on last year’s return. It was this that brought me right back to AP Physics. To be more precise, it reminded me of cheating on physics test questions that required application of a calculation to derive a numeric answer. You see, we were allowed to use slide rules (yes, I went to high school last century!) or a pocket calculator, if we had one. My classmate Pete (who I believe went on to become an actuary) was a whiz at physics and he had a calculator. So, he would work through the calculation and then he’d send the calculator down the row of desks, “lending” his calculator to those of us who didn’t have our own. Of course, what we were really “borrowing” was the answer that Pete conveniently left showing on the screen of his calculator. 

Though I’m not proud that I borrowed Pete’s calculator, er, answers, I didn’t feel that bad because we only got partial credit for having the right numerical answer. For full credit you had to show how you arrived at the number. So, with Pete’s help, many of us learned the useful skill of how to back into a calculation. Indeed, that was what I was trying to do to figure out how my CPA applied the simplified method in years past. After an entire afternoon on a roller coaster ride that lurched between thinking I’m too stupid to figure out the method and wondering if, perhaps, my accountant had miscalculated last year – I was overcome with another sensation from AP physics: near defeat. 

It's funny the things we learn in school – and how it is they show up for us later in life. I’m sure my AP physics teacher thought he was teaching us about gravitational forces and energy and such. I only remember a wee bit of that, but I sure remember the determination needed to figure out how you get to a particular answer.   

After sleeping on it and realizing that even the most determined forensic accountant might need help sometimes, the next day I emailed an accountant friend for help. Though he said he didn’t deal much with the simplified method, he managed to re-phrase the wording on the form in a way that helped me understand what figure plugs in where. After that I was able to come up with the numbers from last year and then I simply had to plug in the respective numbers are for this year’s return. Whew. 

Though I spent a heck of a lot of time on my returns this year, it’s been kind of empowering. You see, I was audited once. An IRS agent came up from the U.S. and I spent an entire day sitting with him at my dining room table as he went through my receipts and invoices, asking me questions. The result of the audit was that he found a transposition error in one figure and I ended up owing a whopping $20. Though the audit was financially inconsequential, it left me with unnatural dread about having to justify each and every item on my returns. 

I’m happy to report that now, having taken over the task of preparing my own returns, I feel more confident. I sure hope I’m never audited again, but at least now I know I can recreate the calculations behind all the figures – even the simplified method. Thanks Pete, wherever you are… 

© 2024 Ingrid Sapona