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get rich
01-10-2006, 03:54 PM
I just started my business last year, although i've been in the industry for about 12-13 years as employee. Iearned about 18,000 maybe before expenses. Not that great of a year, this year i hope to atleast double that. Anyways i did register for a business liscense, but registered soleproprioter and used my ss# even though i paid sales taxes on everything i purchased. I also purchased some new equipment like trailer 1500 and exmark mower....5000. Ifailed to pay any taxes on my earned income because i needed every dime i made last year. I have no employees. And don't need unemployment. I did get insurance that only costed 250 a year. I have large family to support...three kids and wifewho just started working as i stopped for the year(midwest) i still do snow removal although we've had very little. My question is how any of you handled your first year taxes, i know it wasn't smart to not pay quarterly, but when you have three little kids and wife to support i needed every penny. This was done kinda on a whim, because my former boss found out i was doing extra work on the side and said one or the other. And i had already spoken up for taking care of four or five lawns and landscapes. Iwasn't about to tell them i couldn't do it because my boss said so. I'm liscensd to apply fertilizer and very expirenced at all aspects of lawn and landscape installs and maintenance. I actually feel as though for starting on the drop of a dime in late march i did rather well. I'm sure i'll grow leaps and bounds this year and with the wife having a steady job i can actually do everything the right way(paying quartely taxes).But last years tax debit worry's me. I here everyone say there first couple years they claim a loss, even though i spent a small fortune on gas, mulch, small tools and materials....how can i say it was a loss?? Isupported the family pretty good all the way up till thanksgiving. I'm very curious to hear everyones thoughts on this. And since every dime i earned ran through my business checking account do i use that as my total earned income?? In past years i always recieved a very good income tax return is this mistake gonna effect it drastically?? Thank you all in advance for your response.

tiedeman
01-10-2006, 04:19 PM
Once you become self employeed, basically say good bye to any returns....most of the time. Expect to pay on average about 35% of your net.

I personally would go and spend the $100 to $150 to see an accountant. She actually might save you more money in the long run. My accountant charges $180, and one year I thought that I would just try to figure out how much I would save by doing it myself, to find out, the account was going to save me approx $700 to $800 more.

grasswhacker
01-10-2006, 04:26 PM
Once you become self employeed, basically say good bye to any returns....most of the time. Expect to pay on average about 35% of your net.

I personally would go and spend the $100 to $150 to see an accountant. She actually might save you more money in the long run. My accountant charges $180, and one year I thought that I would just try to figure out how much I would save by doing it myself, to find out, the account was going to save me approx $700 to $800 more.

With his particular income and no employees there is no reason for him to need and accountant. Just get a good tax software program like Turbo tax deluxe or TT premier and start using Quicken for your books which can be transferred to TT (same co.). When you start getting into much higher income brackets then you may want an accountant but if you can stay current on tax law you should be able to do it yourself.

tiedeman
01-10-2006, 04:27 PM
that is what I thought as well. I tried the Turbo Tax thing to see whether I would save, but my accountant was saving me a lot more.. like I stated $700 to $800 more. The accountant can also set you on your fed/state quarterly estimates for the year as well.

grasswhacker
01-10-2006, 04:31 PM
that is what I thought as well. I tried the Turbo Tax thing to see whether I would save, but my accountant was saving me a lot more.. like I stated $700 to $800 more. The accountant can also set you on your fed/state quarterly estimates for the year as well.

Look at his income? Based on that he should not have any problem filing qtrly or knowing tax laws pertaining to sole prop owned business. He need not spend $$ for an accountant.

tiedeman
01-10-2006, 04:36 PM
Thats fine, that is your opinion and I respect that. I just think that it would be better in the long run to talk to an accoutant and have them do it. Ask all question. I still today ask questions all the time.

It just feel that it is less stressful. Some people are not good with numbers and might not know when certain quarterlys are due. Or like when you have to send out W-2's to employees, or what forms you need for filing your taxes, the long form or the EZ form. He might not know about how to properly do equipment purchases and depreciation.

For a long term outlook and sometimes for the short term as well, spend the money for the accountant.

grasswhacker
01-10-2006, 04:45 PM
Thats fine, that is your opinion. I just think that it would be better in the long run to talk to an accoutant and have them do it. Ask all question. I still today ask questions all the time.

It just feel that it is less stressful. Some people are not good with numbers and might not know when certain quarterlys are due. Or like when you have to send out W-2's to employees, or what forms you need for filing your taxes, the long form or the EZ form. He might not know about the how to properly do equipment purchases and depreciation.

For a long term outlook and sometimes for the short term as well, spend the money for the accountant.


The deductions for Sch C is pretty easy to figure out by reading the instructions for most situations. He has 0 employees, and Sec 179 for first year expensing of more equipment than he will ever need as a solo operator.
One thing I would exhort him to do is keep a separate checking account for his business and personal uses.

tiedeman
01-10-2006, 04:51 PM
I do agree with your points

get rich
01-10-2006, 05:16 PM
I kinda agree w/ the accountant thing myself. I have a buddy who's aunt does his taxes. He's a siding contractor and he swears she'll wipe all the debt away with write off's and i wouldn't owe a dime. He's done it in years past where he made less than 25-30 k. She's very knowledgable and work for our local township as the treasurer. But i do agree w/ soon my own personal CPA. And my business acount is used for just that except i did use it a couple time too make my vehicle payment. But do any of you have expirence with the way fedral does child tax credit? Man in the past three years they give you like 1500-2000 dollars per child. i thought that would definetly help with the tax debit. Thanks for your input though, much appreciated! Have a good one!

walker-talker
01-10-2006, 07:18 PM
I am sort of in the same boat. Showed a loss for the last 3 years until this year. Remember one thing, you can file extentions all the way to Oct. 15th. That will buy you some time to collect the money you need.

BCF
01-20-2006, 06:20 PM
I would agree on getting an accountant. I good one will find deductions the average guy could never find, and letting you know the best way to file certain things as to not put up a red flag to the IRS. The $200 I pay my accountant each year has saved me many times that amount. He can advise you on different ways of doing things that are more beneficial to you at tax time.

topdog
01-20-2006, 07:30 PM
i think to answer his questions....no you didn't do anything wrong.

if you run as sole prop. or as an l.l.c. you don't have to pay quarterly taxes.

you do it at the end of the year after they minus your expenses then you will have to pay taxes and even social security on your profit. most of the time it will be very low. if you start to make too much profit...it's time to buy some more equipment basically.

if you are incorporated, or if you have payroll then you will have to pay quarterly ...i.e. federal taxes/state taxes/ unemployement for both state and federal/ double social security....basically all that stuff that was with held on your last job's pay stubs....now you have to pay those....basically you will with hold them from your employees pay.

best advice for you from me is go talk to an accountant that you can trust.
get a business checking account/save all your reciepts/get quickbooks & quickbooks payroll ( payroll if you do start paying employees).
those will save you a lot of time and money in the end.
they also allow you to keep better track of how your business is doing through out the year.

you probably wont get your big tax checks anymore, but you shouldn't owe a big amount either.

i have done both sole pro. last 3 years, but switched to incorp. this past october. btw...i had to pay last quarters stuff this week isn't as much fun as keeping it in the bank all year...=)

anyways just my 2 cents.

CLARK LAWN
01-20-2006, 09:54 PM
topdog you have o have 90% of your taxes paid by jan 15. of the next year or you pay a penalty. thats 90% of net not gross with right deductions it may not be very much but i woukd rather pay quarterly than have to come up with it in the middle of winter

Roger
01-20-2006, 10:06 PM
Clark -- I agree with your commets to topdog. I think there is also some provision regarding paying at least what was paid the year before, lest a penalty be assessed (either the 90% or at least what was paid the year before). Being a sole proprietor does not mean you don't pay quarterly taxes. If everybody chose to wait and pay all taxes in a lump payment in the following year, the governments would have no revenue stream to function. Your accountant should be preparing vouchers for you to submit the quarterly payments. This year's quarterly payments are based upon taxes from last year. But, if you know your income will be significantly more this year, then you need to be prepared to add something to the quarterly payments, so that you don't get caught in the 90% trap.

topdog-since you are using QuikBooks to keep track of finances through the year, then you will know very well if the quarterly estimates are valid.

MMLawn
01-20-2006, 10:35 PM
if you run as sole prop. or as an l.l.c. you don't have to pay quarterly taxes.

Very, VERY, VERY incorrect and bad advice! Even if you are a sole prop or an LLC (not filing as a Corp) then you DO still have to self employement quarterly taxes.....and if you think different just check www.irs.gov IF your accountant told you that a) it's time for a new one and if they did b) and the most important reason why you NEVER hire an "accountant"! You always want to use a CPA. Anyone by law can calle themselves an "accountant" with no licensing and no formal training in finance at all. However a CPA has received a detailed formal education in in the field of finance AND has had to pass rigorous State (and sometimes Federal) Exam & Licensing requirements.

But to answer the question at hand, based on what you said, you'll be okay this year as between that many kids and the business start-up cost you should break okay.

6'7 330
01-20-2006, 11:32 PM
if you run as sole prop. or as an l.l.c. you don't have to pay quarterly taxes.
.

Totally incorrect, and if you didn't estimated tax payments,3 things apply to your situation.

1-You either were taking cash under the table,running a illegal operation.

2- you were paying penalties for underpayment of estimated taxes two of those 3 years.

3-If you were a legal business you were operating at a net loss.

best advice for you from me is go talk to an accountant that you can trust.

If an accountant relayed the advise about quarterly 1040-Es payments,he is ******ed and you better follow your own advice and get a good accountant.

topdog
01-21-2006, 07:54 AM
well, i guess i am a liar even though i didn't run an illegal opperation.

man no wonder no one ever post on here. i did in fact run that way, and yes i did claim a loss. as i am sure almost every business in u.s.a. does the first few years it is in business.

just like i said if you start to get to where you are gonna owe too much you need to buy more equipment to counter balance your debt to income.

anyways, sorry i even voiced, but i guess i did something right because the i.r.s. accepted it at the end of each year, and i didn't have to pay a penality, but what do i know i am just a ******. thanks for setting me straight all you cpa on the forums!

Roger
01-21-2006, 09:36 AM
The strategy of buying more equipment to minimize (eliminate?) taxes is not a good business strategy. If the equipment is needed to sustain and/or grow the business, that is one matter. But, to buy equipment for added expenses is quite another matter.

Most of us are looking for a net profit from the business, gaining money so that we may live and buy other things outside the business (e.g. groceries). If you are running your business only to have a net of zero (income = expenses), then you have a strategy much different than most business owners. Consider yourself unique. You must have an income separate from the business to sustain your livelihood.

CutApproved
01-22-2006, 09:59 AM
This to me is a very good topic.

I thought you could only right off your equipment once (1st year)

Hiring a CPA seems to be the right decision. I honestly think everyone has at least one CASH job per year. That alone could pay for your accountant/cpa. Its not recommended but common we all do it here and there.

I would think in this situation you would want or need to wait to pay your taxes at the end of the year and heres why,,
You start out with X accounts but a month or 2 months later you have doubled your accounts. Now you have to go back and recalculate your taxes.

The other side is like this situation,, what if you did very poorly the first year. He made $18,000 the first year. Well wouldn't you subtract the cost of all the equipment + gas + maintenance etc... ???
** Also I thought it was a good idea to pay yourself weekly.. $x.xx per week. but I guess it depends if the money is there too. **

I like this post but I think every situation seems a little different. I would speak to your friends aunt whos doing his taxes.. if she really knows her stuff you can at least get a break on her fees until your business picksup.

JUST MY OPINIONS..

vntgrcr
01-22-2006, 04:22 PM
Totally incorrect, and if you didn't estimated tax payments,3 things apply to your situation.

1-You either were taking cash under the table,running a illegal operation.

2- you were paying penalties for underpayment of estimated taxes two of those 3 years.

3-If you were a legal business you were operating at a net loss.



If an accountant relayed the advise about quarterly 1040-Es payments,he is ******ed and you better follow your own advice and get a good accountant.
I guess I have been totally illegal and immoral for the last 13years as well. I was a S.P. for that time, never filed quarterly, just at the end of the year and have NEVER has

vntgrcr
01-22-2006, 04:22 PM
Totally incorrect, and if you didn't estimated tax payments,3 things apply to your situation.

1-You either were taking cash under the table,running a illegal operation.

2- you were paying penalties for underpayment of estimated taxes two of those 3 years.

3-If you were a legal business you were operating at a net loss.



If an accountant relayed the advise about quarterly 1040-Es payments,he is ******ed and you better follow your own advice and get a good accountant.
I guess I have been totally illegal and immoral for the last 13years as well. I was a S.P. for that time, never filed quarterly, just at the end of the year and have NEVER had

vntgrcr
01-22-2006, 04:26 PM
Totally incorrect, and if you didn't estimated tax payments,3 things apply to your situation.

1-You either were taking cash under the table,running a illegal operation.

2- you were paying penalties for underpayment of estimated taxes two of those 3 years.

3-If you were a legal business you were operating at a net loss.



If an accountant relayed the advise about quarterly 1040-Es payments,he is ******ed and you better follow your own advice and get a good accountant.
I guess I have been totally illegal and immoral for the last 13years as well. I was a S.P. for that time, never filed quarterly, just at the end of the year and have NEVER had a problem. If it is so wrong, why never a problem? If the IRS is monitoring this site, I did have to incorporate this year and I really am not looking forward to writing those checks every 3 months and letting the goverment use my money to support all of the BS out there. But those are the rules and if you are making too much money, they try to take as much as possible. But that is another subject for another time. Let's be carefull about the blanket statements.

DynaMow
01-24-2006, 09:54 PM
you have to pay quarterly estimated payments based on prior years income. The IRS wants your money in there hands. They do not want you saving it until the end.
there is no gray area there, all must do it. Solo business, employers and employees. The difference is that if you are an employee, the employer does it for you.
This is a blanket statement because it definetly covers all of us.

Envision
01-24-2006, 10:51 PM
I guess I am illegal as well, and so are my parent's businesses. You don't have to pay quarterly taxes if you are a Sole Prop, can't speak for a LLC or above. Yes, there is a small penalty involved but there is nothing illegal about it. If you don't expect to make a profit, then you won't have any taxes to pay, therefore you wouldn't need quarterly payments. However, if it starts to look like you are going to make a larger profit, you may want to look into quarterly payments.

With this gentleman's small profit, minus expenses and vehicle mileage, and standard deductions I would imagine he wouldn't have to pay a dime.

Flame away.

DynaMow
01-25-2006, 08:14 AM
If you don't expect to make a profit, then you won't have any taxes to pay, therefore you wouldn't need quarterly payments. However, if it starts to look like you are going to make a larger profit, you may want to look into quarterly payments.

man I wish people would read before discussing

estimates are made off of last years income, if there is a penalty then would that not make it law to do. think about it.

Envision
01-25-2006, 09:01 AM
To clear this up:

Who Must Make Estimated Tax Payments?

If you had a tax liability for 2004, you may have to pay estimated tax for 2005. You must pay estimated tax for 2005 if both of the following apply.

You expect to owe at least $1000 in tax for 2005 after subtracting your withholding and credits.

You expect your withholding and credits to be less than the smaller of;
90% of the tax to be shown on your 2005 tax return, or
100% of the tax shown on your 2004 tax return. However, if your 2004 adjusted gross income exceeded $150,000, or $75,000 if you will file a separate return from your spouse for the year 2005, then your tax withheld and credits must total 110% instead of 100% of your 2004 tax. Your 2004 tax return must cover all 12 months. For 2004, AGI is the amount shown on Form 1040, line 36; Form 1040A, line 22; and Form 1040EZ, line 4.

Also, there 'may' be a penalty. Sounds like a grey area to me.

daveintoledo
01-25-2006, 12:58 PM
i dont claim to understand it.... feb 17th i am scheduled with a local cpa,...... thank god he understands it.... i am soel proprioter finished my first year.... after expenses and all id say on paper i made some profit....now im worried that i did something wrong by not filing quarterly.......:dizzy: :dizzy: :dizzy:

i just want to mow man....:)

Royalslover
01-28-2006, 03:10 AM
All I know is I'm changing my username to 5'8 240. AND, I'm donning a skirt for my new Avitar.:gunsfirin

mtdman
01-30-2006, 10:57 PM
My first few years I did not make estimated payments. I did make a profit, which should be the goal of any business. I did get assessed penalties for not paying enough throughout the year. If you don't make the payments the IRS won't come after you through the year, but when you file your income taxes, you will be penalized. And there is a big difference between making withholding quarterly payments and personal income tax estimated payments.

As far as the original post goes, the irs doesn't care if you have to feed a family. If they don't get their taxes, they will come after you. Make your payments. You'll probably have to pay a penalty when you file. And I'd definitely get a cpa.

morturf
02-01-2006, 12:48 AM
I copied this from the IRS website. It is easy to find. www.irs.gov on the first page there it is....self-employment guidelines.

Filing Requirements for Self-Employed Individuals

Self-employed individuals, sole-proprietors, independent contractors and persons who have net earnings of $400 or more are required to pay self-employment tax by filing Schedule SE (PDF), attached to their Form 1040, U.S. Individual Income Tax Return. Employees of a church that receive income of $108.28 or more, but do not receive a Form W-2 for the earnings must also file pay self-employment tax by filing a Schedule SE, attached to Form 1040, U.S. Individual Income Tax Return.

As a self-employed individual (someone who owns an unincorporated business) or an independent contractor, you are required to report income and expenses on a Schedule C (PDF) or C-EZ (PDF) and calculate your earnings (scroll down to Figuring Earnings Subject to Self-Employment Tax) subject to SE tax. The completed Schedule SE will be attached to your Form 1040, U.S. Individual Income Tax Return.

As a member of a partnership that carries on a trade or business, or as a member of a Limited Liability Company (LLC) that chooses to be treated as a partnership, your distributive share of its income or loss from that trade or business is included in your net earning from self-employment. These entities must report the business income and expenses on Form 1065, U.S. Return of Partnership Income, along with a Schedule K-1 reporting each partner's net income or loss. You must file a completed Schedule SE attached to your Form 1040, U.S. Individual Income Tax Return.

If you have employees, you must pay employment taxes, including Federal income, Social Security, and Medicare taxes.

If you manufacture or sell certain products, operate certain kinds of businesses, use various kinds of equipment, facilities, or products, or receive payment for certain services, you may need to pay excise taxes.

Estimated tax is the method used to pay (including SE tax) on income not subject to withholding. You generally have to make estimated tax payments if you expect to owe taxes, including self-employment tax, of $1,000 or more when you file your return. Use Form 1040-ES (PDF) to figure and pay the tax.

morturf
02-01-2006, 01:06 AM
Now the second part about who had to file.

Estimated Taxes

Estimated tax is the method used to pay tax on income that is not subject to withholding. This includes income from self-employment, interest, dividends, alimony, rent, gains from the sale of assets, prizes and awards. You also may have to pay estimated tax if the amount of income tax being withheld from your salary, pension, or other income is not enough.

Estimated tax is used to pay both income tax and self-employment tax, as well as other taxes and amounts reported on your tax return. If you do not pay enough through withholding or estimated tax payments, you may be charged a penalty. If you do not pay enough by the due date of each payment period you may be charged a penalty even if you are due a refund when you file your tax return.

Who Must Make Estimated Tax Payments?

If you had a tax liability for 2004, you may have to pay estimated tax for 2005. You must pay estimated tax for 2005 if both of the following apply.

You expect to owe at least $1000 in tax for 2005 after subtracting your withholding and credits.
You expect your withholding and credits to be less than the smaller of;
90% of the tax to be shown on your 2005 tax return, or
100% of the tax shown on your 2004 tax return. However, if your 2004 adjusted gross income exceeded $150,000, or $75,000 if you will file a separate return from your spouse for the year 2005, then your tax withheld and credits must total 110% instead of 100% of your 2004 tax. Your 2004 tax return must cover all 12 months. For 2004, AGI is the amount shown on Form 1040, line 36; Form 1040A, line 22; and Form 1040EZ, line 4.
Who Does Not Have To Pay Estimated Tax

If you receive salaries and wages, you can avoid having to pay estimated tax by asking your employer to take more tax out of your earnings. To do this, file a new Form W-4 with your employer.

Estimated tax not required
You do not have to pay estimated tax for 2005 if you meet all three of the following conditions.

You have no tax liability for 2004
You were a US citizen or resident for the whole year
Your 2004 tax year covered a 12 month period
You had no tax liability for 2004 if your total tax was zero or you did not have to file an income tax return. For additional information on how to figure your estimated tax, refer to Publication 505, Tax Withholding and Estimated Tax.

Estimated tax requirements are different for farmers and fishermen. Publication 505, Tax Withholding and Estimated Tax, provides more information about these special estimated tax rules.

When to Pay Estimated Taxes

Your first estimated tax payment for 2005 is due April 15th. You may pay the entire year's estimated tax at that time, or you may pay your estimated tax in four payments. The four payments are due April 15th, June 15th, September 15, 2005 and January 17, 2006.

Using the EFTPS system is the easiest way to pay your federal taxes for individuals as well as businesses. Make ALL of your federal tax payments including federal tax deposits (FTDs), installment agreement and estimated tax payments using Electronic Federal Tax Payment System (EFTPS)


Ok...having found these easily on the website...I think it is pretty obvious that ignorance is not an excuse. Eventually it will catch up to you and the IRS will catch you and the fines are heavy. Get an enrolled accountant, the enrolled part means that they are accepted by the IRS as agents to represent your tax return to them. Hope these have helped....it is up to you to follow the law. No wonder the IRS likes to audit lawn care companies...get legal!!!