"writing off"

[Fmenvironmental]

Hello everyone! New member here, this site looks awesome. I am looking for some financial help. I have been cutting lawns for 5 years now. This year I received two jobs where the customer is going to want to do a "1099 form" (not even sure what a 1099 form is for). I have never done anything as far taxes go for the business, so this year I am not sure what i need to do. I do have a DBA, and insurance. Also I am not sure what "writing off" business expenses mean. Everyoone says to me "you can just write that off at the end of t he year", I do not know what that means. What would the benefit of that be? What could be the down fall of that also? I could use any advise for both questions, as I am new to doing pretty much any of the paper trails of owning a landscaping business.

Thanks Again
Frank
Buffalo NY

[MarcSmith]

1o99 is about like the W2 form you get form the employeer from your full time job around tax time. basically the 1099 form tells the IRS that XYZ company paid you X number of dollars over the last fiscal year and did not take out any taxes. Which means you need ot pay taxes on the money. if you fail the IRS may start knocking on your door with rubber gloves and vaseline....

write- offs- is an expense, just about everything you buy for the business to function is called a write-off or expense. fuel, tools, supplies, business lunches, ad space, ect. these items help reduce your income level.

so if you grossed $10,000 last year, that means you collected $10,000 prior to paying any taxes or calculating any expenses so your press profit was 10k

that number really doesn't mean squat. Net numbers is what counts. IE how much money do you have leftover after paying all your bills. Thats your Net profit. thats the important number.

Most landscape companies run around 30-40% net profit. Ie if you grossed 10K your $ in pocket ended up being around 3-4K.

Its a shame that it has taken you five years to pay taxes and be a legitmate business DBA and insurance are only part of the equation...and even then if you clients were not doing the 1099 on you its doubtful you be asking these questions.

Pick up a copy of quickbooks pro and go see an accountant. you have much to learn....

you should also start thinking about paying estimated quarterly taxes. nothing stings more than getting a big tax bill in April and not having enough ash to cover itl...

[pclawncare]

You can say that again. I did that last year had a huge bill and that was due on the 15th of april and then i started paying quarterly this year and first quarters taxes were due on the 16th mean while i am not making any money that was a hit to the pocket book good thing i had enough money set back

[TSG]

Chances are, if you are doing this PT, you may have actually lost money when you started up. That can go against personal income. A cpa may agvise you to go back and ammend
2 years of taxes.......could mean $$$$$$$$$ in your pocket
Alan

[MarcSmith]

Chances are, if you are doing this PT, you may have actually lost money when you started up. That can go against personal income. A cpa may agvise you to go back and ammend
2 years of taxes.......could mean $$$$$$$$$ in your pocket
Alan

good point. In fact most business don't make any money their first year since they are saddled with the debt of buying equipment, and such, thats a big hump to overcome...

[TSG]

Stats show that most businesses take 3 yrs to really make money and the IRS
usually allows losses for that time, before they look at you as a hobby.
This is a benefit to staying a sole prop and buying a little more liability Insurance.
Just a thought
Form 196 ( think that is the form) is your friend....it allows you to write off
new equipment 100%.
Example,,it is possible to spend 16,000 in equipment and get back 11,000 refund
Thus the cost of that equipment is really 5000.00
A good acct keeps $$$$$$$$$$$ in your pocket
Alan

[bluflame1914]

what about used equipment? truck? trailer?

[TSG]

what about used equipment? truck? trailer?

You really need an accountant to help you with this as the laws continue to change, many things can be depreciated,,,,vehicle expenses can be taken by the mile or actual expense. A good acct will pay for himself 5x's, especially in the first couple years.
Don't be penny wise, dollar foolish.
It isn't how much you make, it is how much you keep
Alan

[hoyboy]

Stats show that most businesses take 3 yrs to really make money and the IRS
usually allows losses for that time, before they look at you as a hobby.
This is a benefit to staying a sole prop and buying a little more liability Insurance.
Just a thought
Form 196 ( think that is the form) is your friend....it allows you to write off
new equipment 100%.
Example,,it is possible to spend 16,000 in equipment and get back 11,000 refund
Thus the cost of that equipment is really 5000.00
A good acct keeps $$$$$$$$$$$ in your pocket
Alan


Alan -

Depreciation is good, but not that good. You won't ever get a 11,000 refund on a 16000 purchase using a section 179 deduction. Remember, it's a deduction...not a credit. Also, section 179 merely accelerates the depreciation to the current year...it doesn't actually give you "more" depreciation. Still, the time value of money is important and 179 is a fantastic benefit.

[bohiaa]

So with all this "new" information I now have....

do you guys think I should have a TAX man, or get a CPA...?

[bluflame1914]

and what's the cost to get one.

[TSG]

Alan -

Depreciation is good, but not that good. You won't ever get a 11,000 refund on a 16000 purchase using a section 179 deduction. Remember, it's a deduction...not a credit. Also, section 179 merely accelerates the depreciation to the current year...it doesn't actually give you "more" depreciation. Still, the time value of money is important and 179 is a fantastic benefit.

If you are a sole prop you can take it against your household income.
Since your first years Lawncare income is usually lower it is possible to get
that amount back.
Just another example of an account earning his income.
Alan
:usflag:

[TSG]

and what's the cost to get one.

my tax guy get around 700.00 to prepare Household (1 joint, 2 indiv,) and buisness
forms

[Fantasy Lawns]

Run to a CPA ....

price ....much like lawn care will vary from state to state & the size of business

[hoyboy]

If you are a sole prop you can take it against your household income.
Since your first years Lawncare income is usually lower it is possible to get
that amount back.
Just another example of an account earning his income.
Alan
:usflag:

Please give an example. I can think of no scenario where that could happen. The top tax rate for 2007 is 35%, and that is for people with taxable income of over $349,701...most people on this board wouldn't qualify. Even if they did, the benefit doesn't come anywhere close to what you mentioned.

If I'm wrong, please tell me how. I want those kind of deductions for myself!

[TSG]

Dan
I should have been a little clearer,,,,,I was trying to state how important 196 is.
If you are married filing jointly.
If you both have other jobs equaling 100,000
Own a house ect.
Start a PT lansdcape company in Oct.
Little income, but you put ALL your equipment, that you financed "in service"
Take all buisness deductions
Take a huge loss.
It is easily possible to receive 10-12k back on taxes,,,,,,depending on your other jobs withholdings.
Hope this help.
If you have any specific questions, I can ask my advisors.
Alan

[hoyboy]

It's not possible to spend 16,000 and get 11,000 back in tax benefits. No way, no how. But I will agree with you that this man should get an accountant.

[MarcSmith]

tax laws are pretty screwd up....I over contributed to my IRA this year....If I had NOT contributed at all....Iwould have gotten 3k back from the feds. as it turns out I only got back 1k. I over contributed by 2500 bucks....doen't make sense, but that life....Use teh tax laws to your benefit....