A follow-up on the 990-EZ nightmare

I actually had a good experience with the IRS yesterday. Readers (all two of you) may recall that a few months ago I did some pissing and moaning about the fact our small county historical society, an organization that's got barely enough members to keep going and that operates on a shoestring so thin it could be used as a trout-fishing line, got hit with the requirement to complete the 990-EZ. The 990-EZ is not particularly easy; it's multiple pages long and entails an equally lengthy attachment (Schedule A, your income, sources of income, and expenses going back 5 years) which in turn apparently leads to the requirement to complete Schedule B (a detailed list of your donors and how much they gave). Not that we actually have to deal with Schedule B -- it applies only to individual donations of more than $5,000. Still, when doing Schedule A, you get to explain why Schedule B doesn't apply. Dealing with the mountain of forms last fall was kind of a nightmare. But it got done.

Unfortunately, at some point I checked a box on the return that I shouldn't have checked. One of the things waiting for me in the pile of mail when I got back to the museum was a letter from the IRS asking for More Paperwork, including completion of something called Part III on Schedule A and submission of Schedule B, which even if it doesn't apply to us still requires an explanation of why it doesn't apply. I spent the better part of a day making little whimpering sounds and resisting the urge to just curl up in a corner while asking the S.O. to find an institution to which he could commit me for awhile. I really didn't want to have to deal with this stuff anymore.

Finally, coincidentally after consuming more caffeine than I really should have, it occurred to me to call the toll-free number given on the form. I was reluctant. I'd heard the news stories about people being placed on hold for an hour or more and then never actually getting through to a human. But I picked up the phone, went through the usual menu of choices, heard a message saying the wait time was "3 to 5 minutes," and prepared to wait much, much longer than that. Except it wasn't long at all, 2 to 3 minutes tops, and the person I spoke with was actually helpful. Unbelievable.

Bottom line: he walked me through the return we'd submitted, explained what the mistake had been, told me how to fix it, provided an address with the mailstop number for the right department so it'll go straight to Exempt Organizations Accounts instead of passing through multiple other hands first, and also gave me advice on what to do for the current tax year. Tax-exempt organizations file on a different schedule than individuals, but I'd been a little unclear on just what the dates were for that schedule. Now I know. I also know what to do if we ever get a letter again. We're such a small and poor nonprofit that we should never ever have to do a long form; the 990-EZ is a form of torture reserved for groups who have budgets over $150,000 annually. So if we get a letter saying we have to file that form the first step is to call the toll-free IRS number for the EO Accounts. I could have saved myself a lot of work last fall if I'd done that when that first letter came. Live and learn.

The silver lining, and there is one, is that thinking I had no choice but to go back to 2009 in order to complete the 990-EZ forced me (and be extension the society as a whole) to look at our budget holistically. It was an interesting exercise and should have positive benefits down the road. That may be wishful thinking on my part, but you never know. . .

It was a Harlan Ellison sort of day

I spent the afternoon at the museum alternating between cursing the Internal Revenue Service and muttering about now-deceased members of the historical society. For various reasons, known (as far as I can tell) only to some desk monkey at the IRS, the historical society has gotten stuck with the task of completing a 990-EZ. The 990-EZ is five pages long and asks for so much information that I can't help but wonder just what else they could possibly ask for on the regular 990. I hope I never get to find out because the 990-EZ is enough of a nightmare on its own.

Among other things, in addition to the five pages of questions, it asks for two attachments: Schedule A and Schedule O. Schedule A is where a nonprofit gets to break down its finances for the past five years; Schedule O is basically a sheet of lined paper where you get to lie about anything that doesn't fit neatly into predetermined categories. And when I say break down I mean exactly that: how much income did we receive in the form of grants, donations, membership dues; how much came from fund-raising efforts; how much was interest or dividends? How much in-kind support did we get from local government or other entities? How much did we spend on maintenance, rent, whatever. And lots lots more, all the way back to 2009. I really, really hate detail work, especially when I'm sure there's some sort of deadline (which I've probably missed) hanging over my head.

I have to say in all honesty that the forms would not actually be that hard to deal with if the data existed to plug into the appropriate blank spaces. Long and boring, yes, but technically difficult? No, assuming, of course, that one has actual financial records to refer to while filling in the blanks.

I managed to come up with some numbers for 2013, 2012, 2011, and 2010. The easiest year to do was the most recent -- 2013. That's the year I became treasurer and set up the Excel spreadsheet. 2012, 2011, and 2010 weren't bad either. My predecessor was well-organized. She didn't use an old-fashioned ledger or do a spreadsheet, but her monthly hard copy reports are nice and clear. The biggest problem I had with the those years it was sometimes impossible to separate out donations from other income -- the monthly treasurer's reports would occasionally do a lump sum (Sales & Donations) that aggregated data that should have been kept separate.

Keeping income streams separate, incidentally, is an issue that I've brought up at numerous meetings -- we need to draw nice sharp lines between the money we take in as admission fees, the money that gets spent in the gift shop, and the money people are nice enough to drop in the donations jar. These are distinctions that the IRS definitely draws but most of the society members have trouble recognizing. I'd been obsessing about it because I'd like us to have a nice firm visitor count but maybe if I bring it up at a meeting in the context of retaining our nonprofit status it'll sink in. But that's a minor quibble in the overall scheme of things, considering I hit a blank wall when I got 5 years back in the files.

2009 is a black hole. I can't find any treasurer's reports. Ditto bank statements. Nothing. Nada. Someone mentioned a few months back that one of the sons of the society's deceased president had a bunch of stuff he'd found in his father's house that he was planning to bring to the museum. He never did. I have this rather sick feeling that there were a whole lot of historical society records that had been sitting at the dead guy's home office and have since gone to the landfill in Ontonagon County. This is the shoe that I've been waiting to hear drop for the past 22 months. It finally dropped. I knew it was going to happen sooner or later. The deceased president had a really hard time drawing lines between the various areas of his life. He was involved in a lot of different things in the community, and they all overlapped. It didn't help that he'd been president of the historical society for so many years that to him the museum had become an extension of his own home and vice versa. I figured that out when I was going through the vertical files last year. And the more I saw of that, the more I worried that sooner or later it was going to end up biting us in the butt.

Well, it's now later, we've been bitten, and it's not fun to deal with. We're a 501(c)3. We should have been keeping meticulous records. We didn't, and as the current treasurer I get to untangle the mess. I don't think the IRS is going to do anything nasty to us, but you never know. After all, they cursed us with the 990-EZ because the 990-N (an electronic post card that basically says, hey, we still exist) got filed a couple weeks late. Maybe I should stop referring to the professional paper pushers as desk monkeys. Either that, I need to remember that even desk monkeys can bite.

It did occur to me (again) that the Tea Party types who were fulminating about the IRS the other year really had nothing to bitch about. The IRS drives everyone crazy; they're an equal opportunity annoyance.

Meanwhile, out here in the real world

I'm listening to the news this morning and once again (still, as usual) there's a lot of hot air being generated about the looming fiscal cliff and the horrible, horrible things that will happen if Federal Insurance Contributions Act (aka "payroll") taxes go back to the rates they used to be (6.2% instead of the current 4.2%). Now, I know there are some potential truly serious consequences if a budget deal isn't reached, most of which are completely unrelated to FICA, but I also know something that the inside-the-Beltway bloviating pundits and so-called experts won't acknowledge: most people either won't notice or don't care. Why won't they notice or care? I just spent a few days out in the real world out among people who do not spend their days wandering around the blogosphere. It was a good reminder that most people are not hard-core news junkies. The average person doesn't spend his or her days glued to Fox News, MSNBC, or CNN. They're not on the Internet obsessing over the latest posts on various political sites, and they're not reading multiple newspapers trying to glean the most recent bits of wisdom on current events. They may have a vague feeling Congress is busy being dysfunctional, but this isn't news. It doesn't touch them the way more immediate or local issues do, like whether or not it's going to snow enough to make it a good year for snowmobiling (tourist dollars) or if the price of gas will continue to drop.

Further, most people did not notice when their taxes dropped a couple years ago and they're unlikely to notice when they go back up again. Why? Well, although the pundits keep obsessing about what's going to happen to households earning more than $50,000 or $75,000 or some other number that allows them to say "Taxes will go up by $2000/$3000/whatever," the sad truth is that median household income in the U.S. right now is right about $50,000. That means half the households in the country have incomes low enough that any change is not going to be dramatic. Someone making minimum wage while working a part-time job might not even notice if his or her check is a dollar or two less than it might have been a couple weeks earlier, especially if the hours that person works vary from week to week -- and for a depressingly large percentage of the workforce, the hours do vary.

I can remember a few years ago when there was a lot of hype about the Bush income tax cuts. I don't recall exactly what I was earning then, but when I did the math, it turned out the tax cut worked out to the equivalent of one soda from a vending machine per week. Yep, my Bush tax cut was about $52 annually. No doubt it was nice to have a few extra coins each week, but if I hadn't been paying attention or if I worked irregular hours I might not have ever noticed. Would I have noticed if my taxes had gone up instead of down? I have no clue. Maybe, but maybe not. I noticed the Bush income tax cut because I was paying attention; the change in FICA withholding slid right past me at the time, and it involved more money.

Personally, I'm hoping FICA does go back to its old rate. Cutting it in the name of stimulating the economy was a truly stupid thing to do. FICA funds Social Security; reducing contributions to Social Security made no sense. All it did was play into the hands of the right-wing crowd that wants to eliminate old age insurance. By reducing the amount of money going into the Social Security trust fund, the right wingers positioned themselves for ratcheting up their claims Social Security is going broke. . . but that's a subject for a different post.

Membership fees

I started working on our federal income tax return a few days ago. Did the first pass through it, and had a whoa, that can't be right reaction. No refund. The S.O. and I have almost always managed to calculate withholding so that the IRS ends up writing us a check, not vice versa. Some years it turns out to be an unexpectedly large windfall, like last year when we scored big thanks to the Making Work Pay credit and a credit for the sales tax we paid on a new car in 2009; some years it's just enough that I breathe a sigh of relief that we squeaked by again. 

Let me make something clear. I don't object to paying taxes. I am not happy that a big chunk of what I pay into the federal budget goes to pay for overpriced, unnecessary, and often obsolete before it's even deployed military hardware and useless, bloody wars, but just on general principles I don't mind paying taxes. It's been said that the only thing that hurts more than paying income tax is not paying income tax, and I tend to agree. I'd rather be taxed than poor or unemployed. Paying taxes above and beyond what was already withheld means we're doing well. 

Furthermore, although maybe it's just another sign I'm still a hopeless idealist, I view taxes as the price we pay for being able to live in a semi-civilized country. As Franklin Roosevelt said, "Taxes, after all, are dues that we pay for the privileges of membership in an organized society." We pay taxes and in exchange we get to drive on paved roads, send our kids to (for the most part) decent schools, eat foods that (also for the most part) are not contaminated with anything too disgusting or unsafe, enjoy camping and recreation in public parks and forests, and so on. I'm enough an adult to recognize that a lot of the things we take for granted wouldn't exist without government dollars and oversight.

Unfortunately, it appears I'm in the minority in this country, because it seems like every time I turn on the tv I'm treated to some idiot telling me the only way to solve various problems is to cut taxes. Roads and bridges are crumbling? Solution: cut taxes so there's even less money to pay for repairs. Classrooms overcrowded? Solution: cut taxes so there's even less money to hire teachers. Feeling paranoid about crime? Solution: cut taxes so police departments have to furlough officers and reduce patrols.* There is this amazingly pervasive belief that, yes, Virginia, there is a Santa Claus. You really can have something for nothing. Just invoke St. Ronnie (who actually presided over one of the largest tax increases in history, but why let boring facts interfere with a good fantasy?), blame illegal immigrants and greedy unions, and all will be well.

[*True story: a few years ago, one of the counties in Upper Michigan was having budget woes and put a limit on how many miles per week the sheriff's department deputies were allowed to drive the patrol cars, basically one tank's worth. Local residents complained bitterly, but continued to vote down every millage request that would have helped the department's budget.] 

h/t Yikes

Economics, the invisible hand, and the free rider problem

I've been reading The Contested Boundaries of American Public Health on my lunch breaks at work. Just finished an interesting chapter on the economics of public health -- basically who pays, who benefits, and why. Public health is full of examples of publicly funded activities that benefit everyone, some more than others, but no one thinks about a whole lot: restaurant inspections, for example, and sewage treatment. I think most people, if they think about "public health" at all, assume it's basically an occasional vaccination clinic on the local level or, at the other extreme, Centers for Disease Control doctors dressed in hazmat suits a la Dustin Hoffman in Outbreak. They only really notice public health in the broad sense when the system doesn't seem to be working, like when a warning comes out about killer jalapeno peppers but no one at FDA or CDC or USDA can say definitively where the peppers came from, how many are out there, or even how many people have gotten sick.

That's usually when one of my libertarian or right wing acquaintances (not necessarily the same group; some of the libertarians are actually pretty far left but just don't realize it -- they're fiscal conservatives but social liberals) will start bloviating about the problem is the government. No, people, in this case the problem is the private sector. The data collection and reporting system on the local level, the first place any disease is going to be noticed, is so fragmented, so broken up into thousands and thousands of individual and incompatible information collection systems, that a whole lot of people have to start getting sick before anyone notices there's an epidemic.

The only time a salmonella outbreak is going to be noticed fast is if you have lots of people eating the same contaminated food and getting sufficiently sick that they all end up going to the same Emergency Room or clinic at the same time. If I buy a contaminated pepper, use it in salsa shared by half a dozen co-workers and we all get sick, if we all go to different doctors or clinics it could take two months for the various lab reports to wend their way through the system and raise the proverbial red flag that triggers an investigation. That's if the doctors decide to order lab work at all. If you're an adult who comes in with a fever and a bad case of diarrhea but aren't sick enough to be hospitalized and you're the only patient the doctor's seen that week with that particular set of symptoms, she may simply prescribe antibiotics and anti-diarrheals and tell you to come back if it doesn't improve fast once you start taking the drugs.

Bottom line is that public health is one area where more government, not less, is the solution. The government is the only entity that's ever going to come up with a way to tie all those fragmented pieces together. Private industry does not have a reason to. In fact, fragmentation is in industry's best interest because that fragmentation creates more opportunities for making money.

Granted, I am not exactly a disinterested bystander on this issue (I do, after all, work for Large Nameless Agency), but the more I learn about the way the system does and does not work and just how huge some of the gaping holes are the more I recognize just how screwed up American health care in general, not just the public health aspect, truly is. The U.S. infant mortality rate is an embarrassment, so is life expectancy compared to other industrialized nations, as a nation we pay the highest per capita costs for health care in the world, . . . it's a mess. And instead of trying to fix some of the really broken parts, the private sector health care interest groups (like pharmaceutical companies) focus on the areas with the highest profit margins, like erectile dysfunction and a nonexistent obesity 'epidemic.' Public hospitals flounder while the boutique clinics doing boob jobs thrive. Everyone wants the trauma center to be there when they're in a car accident, but no one wants to pay for it until then. It's a classic free rider problem, wanting the benefits without having to pay any of the costs, kind of like the workers in right-to-work states who refuse to pay union dues but expect the shop steward to help them with grievances anyway.

I have a number of "libertarian" acquaintances who are convinced the private sector is the way to go for everything. They don't see a role for government anywhere -- they're totally convinced that if we'd just step back and let business do what it wanted, the invisible hand of the marketplace would solve all problems. In other words, they either want to time travel back to the 19th century or move to Somalia. I'm never quite sure which, although I have a hunch they think that if they could just live in the glory days of the Grant administration they'd be one of the plutocrats riding in the posh private rail cars and not one of the poor bastards working 14 hours a day to lay the rails, despite the fact there were a whole lot more of the latter than the former.

At the same time, of course, they bitch whenever prices go up on anything. Hello? Ever hear of market forces? You can't have it both ways. There is no such thing as a free lunch.

The same group of acquaintances does a lot of pissing and moaning about paying taxes. They complain about it being "their" money and how they shouldn't have to fork over a dime. Period. For anything. Grow up. Taxes are the membership fee you pay for getting to live in a country that allows you to piss and moan about how much you hate the government.

So, I repeat -- if you think the U.S. government is doing such a crap job, and you hate paying taxes so much, move to Somalia. No taxes, no government, literally a libertarian paradise. You'll love it there. Granted, you probably won't live long (life expectancy is only 47) but the freedom from an oppressive government should make up for dying 30 years sooner than the average U.S. citizen*.

(*We may not live as long as Europeans, but we've still got most African nations beat.)