PDA

View Full Version : tax questions and write offs


Mikol87
12-01-2009, 09:17 PM
This is my first year operating a lawn care business. I will be enjoying my first income tax deduction as well. I will probably gross only about $15,000 this year. (good thing I have another full-ime job) So my question is-Any helpful advice, tips, do's/don't to watch out for? I am trying to compile all my deductions so if I missed any, which im sure i did, please fill me in. THANKS!

gas
oil
reapairs
equipment purchases
mileage
advertising
cell phone
internet
laptop
parts
weed eater string

topsites
12-01-2009, 09:23 PM
Although this should probably go under Business Management (http://www.lawnsite.com/forumdisplay.php?f=20), but you'll want to speak to an accountant / cpa about it,
and I'm not trying to down talk any tax experts here, but if you go wrong they will hound you to the edge
and beyond, so I highly recommend start working towards retaining a cpa's services.

Richard Martin
12-02-2009, 03:46 AM
You need to be careful with the cell phone, internet and laptop deductions. Those are grey areas and the amount you can deduct is dependant on how much those items are actually used for business. Surfing Lawnsite is not considered a business use. Like topsite said, consult a legitimate CPA that is looking out for your best interests. You want to minimize your tax liability while also minimizing the chances that you'll be audited.

unkownfl
12-02-2009, 08:28 AM
It depends on the type of business you have.

ALC-GregH
12-02-2009, 08:32 AM
There's a happy balance in there somewhere. :)

chuckcintron
12-02-2009, 08:34 AM
I've had some experience in this area (I work at nights as a tax preparer during tax season, and have also nearly completed my Enrolled Agent testing). The best thing you can do is organize your data as best you can so when you sit with your CPA or EA it will be a productive meeting. You don't want to be that guy that brings a mess of paperwork stuffed into a shoebox, or the guy with no documentation whatsoever who sits there with a pencil and blank sheet of paper, trying to remember all his expenses throughout the year.

You should be prepared to show him/her all of your income, and all of your expenses - including capital purchases (like trucks, trailers, mowers, computers, etc.). If you are running payroll you need to have your quarterly reports for that as well, and any estimated taxes you've paid throughout the year.

A good CPA/EA will analyze your situation and lay out a plan for the best tax advantage possible. If they talk in general terms and say things like "I always put down $1200 for misc. tools and $1000 for charitable contributions" then pick your stuff up and leave. Nobody likes sending the IRS any more money than absolutely required, but by the same token no CPA or EA should be advising clients about ways to lie on their tax return.

Fleur De Lawn
12-02-2009, 09:06 AM
Go to an accountant and the audit percentage is like less than 1 percent. Do the best you can with your deductions and you will be fine. Go to an accountant, it is cheaper than you think and they will be able to tell you what is a little to risky to deduct.

LewisLawn
12-02-2009, 10:44 AM
some things that I know I am able to write off that I didn't see mentioned in your post...clothing...if it is work specific..say you buy a pair of boots for work....travel with your vehicle after the first job of the day...so the miles accumulated after the first time you take your equipment off of the trailer...anytime you drive to the store to buy something business related..ie you go to Home Depot to buy oil for your 2cycle gas you can write off the trip even if you purchase something for the garage or house while you are there...for me the HomeDepot has a grocery store next to it so I make sure to get groceries when I take a trip into town for oil etc....My wife also wanted to go to LLBean Factory store in Pittsburgh PA a 2 1/2 hr trip for me the travelling was a write off b/c I purchased work related items while we were there....what I have learned is don't estimate such as 500.00 for gas be specific 483.00 for gas 167.53 for clothing and count everything or nothing the auditors look for general statements...if they see you spent the time to track items then they will think you did your part and be less likely to do a full audit....as for things like mowers and other expensive equipment purchased you can write it all off at once or choose to depreciate it over a period of time(years) your accountant can be more helpful here..also cellphone if it is directly related to the business you can write it off but you need to be able to justify it in a day when we all have cellphones and would likely have one even if it wasn't business related

Richard Martin
12-02-2009, 11:05 AM
....travel with your vehicle after the first job of the day...so the miles accumulated after the first time you take your equipment off of the trailer...anytime you drive to the store to buy something business related..ie you go to Home Depot to buy oil for your 2cycle gas you can write off the trip even if you purchase something for the garage or house while you are there...for me the HomeDepot has a grocery store next to it so I make sure to get groceries when I take a trip into town for oil etc....My wife also wanted to go to LLBean Factory store in Pittsburgh PA a 2 1/2 hr trip for me the travelling was a write off b/c I purchased work related items while we were there....

I don't know where you got your info on deductions, especially concerning vehicle mileage, but if you get audited the IRS is going to tear you a new one. Your very first statement proves that you've never even read the rules regarding mileage deductions.

And a 2-1/2 hour trip to buy spark plugs is going to be highly suspect.

Richard Martin
12-02-2009, 11:31 AM
The reason a lot of people get caught by the IRS is simple. Most people think they're going to pull a fast one or trick the IRS in some way. I have bad news for you. No matter what you come up with the IRS has already seen it before and they know what to look for. So you say you want to increase your mileage deduction by buying a quart of oil while you're at the store getting groceries and call it a business trip. Snce you're a sole proprieter the IRS can and probably will audit all of your personal finances. They'll have access to your credit card bills and your bank account records and will know where you've spent money unless you've paid cash. "So Mr. Lewis, we see that your wife bought $2,000 worth of furniture at Ikea in Pittsburgh while you were there buying spark plugs. Would you care to explain the mileage deduction?" or "We're glad you were able to bring in the mileage from your non-business vehicles. We're just wondering how you're able to get groceries and other household items without putting any miles on your vehicles."

If you don't believe me read this...

http://www.allbusiness.com/banking-finance/banking-lending-credit-services-commercial/10206817-1.html

Oh, and never come on the Internet and brag about illegal deductions. They are watching.

HOOLIE
12-02-2009, 12:01 PM
Just to give yourself a good overview of what's 'fact vs. fiction' go to a bookstore and buy a decent tax guide...I like Ernst & Young's guide which is around $20. While there can be a lot of (self-inflicted) grey areas, a lot of it is pretty straight forward. Regardless of whether you hire a CPA, or DIY, it's your business and you shouldn't just blindly rely on anybody for advice.

silverado212
12-02-2009, 09:07 PM
I have learned over the years of being an electrician and working away from home that: tools, chlothes, boots, rent, mileage job searching and airline fares to return home are all deductible. I am sure some of these apply to this industry as long as it is work related. Also continuing education. First year in this business so I will find out soon.

unkownfl
12-02-2009, 09:10 PM
Silverado were you a lineman?
Don't forget any taxes you have already paid. Your property taxes licenses health, auto, and liability insurances. I also write off fliers shoes for walking clothes cameras and suits I have bought dress shoes and all the sales tax I have paid. You shouldn't be taxed twice so If you spent 1200 bucks in sales tax on a car or new mower etc.

kemco
12-02-2009, 10:45 PM
Just remember that during an audit the burden is on the taxpayer, not the irs, to prove the legitamacy of deductions. Just make sure you have the paperwork or receipts to back it up. Most everything that can be deducted falls under a percentage of use rule - not the technical term but I think you get the idea. And vehicles are no exception. You get to either take the milage deduction (for work related miles) or actual expenditures on gas, oil changes, up keep, etc (but again, only for the percentage used for business. And you get one or the other, not both. And if taking actual expenditures, in order to prove a percentage of business use, you really need to keep up with total milage and business milage anyway. When the IRS asks to prove you used your truck 78 percent of the time for business, it's your responsibility to be able to prove that.

silverado212
12-03-2009, 05:55 PM
unkownfl, not a lineman. I am an Inside Wireman.

unkownfl
12-03-2009, 09:56 PM
Just curious with the traveling you mentioned.

richonsa
02-22-2010, 09:31 AM
While the IRS is adept at trying to trick you into telling on yourself, they do not have as much access to your information as you have stated. (how do I know? I am a CPA nearly complete with a Master of Tax degree from Georgia State-I wrote an extensive research paper on IRS audit techniques utilized in fraud cases). With that said, business expenses are deductible. BUSINESS expenses are deductible. Big losses on Schedule C, or from a partnership or s corp K1 is a potential audit target. With that said, sometimes businesses have tons of expense, especially during startup. If you are able to justify your expenses, you have nothing to worry about. However, there are gray areas in the code in which the envelope may be pushed with the IRS. IRS agents (there are revenue agents, CID agents, etc etc) can be pretty smart, but most follow a certain game plan when asking you for information. If you know what they plan to ask and how they will ask it in advance, you can be ready. I don't suggest you cheat on your taxes, but I KNOW how their process works, their limitations, and their weaknesses.


The reason a lot of people get caught by the IRS is simple. Most people think they're going to pull a fast one or trick the IRS in some way. I have bad news for you. No matter what you come up with the IRS has already seen it before and they know what to look for. So you say you want to increase your mileage deduction by buying a quart of oil while you're at the store getting groceries and call it a business trip. Snce you're a sole proprieter the IRS can and probably will audit all of your personal finances. They'll have access to your credit card bills and your bank account records and will know where you've spent money unless you've paid cash. "So Mr. Lewis, we see that your wife bought $2,000 worth of furniture at Ikea in Pittsburgh while you were there buying spark plugs. Would you care to explain the mileage deduction?" or "We're glad you were able to bring in the mileage from your non-business vehicles. We're just wondering how you're able to get groceries and other household items without putting any miles on your vehicles."

If you don't believe me read this...

http://www.allbusiness.com/banking-finance/banking-lending-credit-services-commercial/10206817-1.html

Oh, and never come on the Internet and brag about illegal deductions. They are watching.

Richard Martin
02-22-2010, 10:01 AM
If you are able to justify your expenses, you have nothing to worry about.

That was the point I was trying to make. The anecdote I referenced was in fact true. There was a guy that came on here and bragged about taking his wife on a shopping trip several hundred miles from home and then he purchased some little items just to justify it as a business trip. A sharp agent that doesn't mind spending the time to go over his business and personal numbers would easily see it. $3,000 in furniture and $30 in spark plugs.

SangerLawn
02-22-2010, 10:07 AM
Maybe his mowers needed a $3,000 reclining seat? Lol

Get an accountant. That’s what we did 4 years ago and I am sooooooooo thankful we did!!!!

Jay Ray
02-22-2010, 11:04 AM
If you have not established a commercial bank account with a business debit card or debit/credit card, do so. Keep the business completely separate from personal finanaces.

By using the debit card, and with all your deposits, everything is on your bank statements for your business except very small cash purchases. But keep and organize all receipts nonetheless. If in doubt, keep the receipt, and research it or get professional advice on it later. If you lost the receipt, don't take the deduction unless you can prove it from your bank statement. I treat receipts like cash money script, because that is really what they are. Every receipt you keep puts more cash in your pocket.

Entering everything into even a fairly basic program like Quicken helps too, as you can customize reports on any aspect of your business to see what is happening, and know what your cash position is at all times.

Great deal for cash on a Z come up? You know exactly how much cash you have.

The IRS allows a lot of deductions and some credits, and while it is complicated and difficult to keep up with them, there is really no point in trying to cheat them. I think they are actually pretty generous, but it is just so doggone complicated. And it is a lot of work to save documents and prepare a tax return.

But as Ken Hamblin, the unassuming colored guy says, "Pick a better country."

Hubbard's Landscape
02-22-2010, 12:51 PM
one commonly missed tax deduction is the home office. Set one up and use it ONLY for business. Measure the square feet of your house the the office find the percentage and you have a home office deduction. It's in the IRS publication google it. Best place to find out about deduction is not a CPA they are good but sometimes wrong too. I rely on them to do my taxes. I find my deductions at the IRS website!

SangerLawn
02-22-2010, 01:04 PM
one commonly missed tax deduction is the home office. Set one up and use it ONLY for business. Measure the square feet of your house the the office find the percentage and you have a home office deduction. It's in the IRS publication google it. Best place to find out about deduction is not a CPA they are good but sometimes wrong too. I rely on them to do my taxes. I find my deductions at the IRS website!

Good point however there is a reason it is commonly missed. A home office is a legal tax reduction however it will send up red flags to the IRS and will land you in a high risk area for an audit.

There are a lot of things for tax write off but many of them will set you up for an audit. This is why I recommend an accountant that will keep you legal and in the green :)

richonsa
02-22-2010, 04:10 PM
Cool to see another Ken Hamblin listener. The Black Avenger.

Jay Ray
02-22-2010, 09:51 PM
Cool to see another Ken Hamblin listener. The Black Avenger.

Loved him when we could get him here, and will never forget him. Glad to hear his voice is still out there.

JB1
02-22-2010, 09:55 PM
one commonly missed tax deduction is the home office. Set one up and use it ONLY for business. Measure the square feet of your house the the office find the percentage and you have a home office deduction. It's in the IRS publication google it. Best place to find out about deduction is not a CPA they are good but sometimes wrong too. I rely on them to do my taxes. I find my deductions at the IRS website!


that is one i leave alone and have been advised to leave alone, there are better ones that doesn't raise eyes.

richonsa
02-22-2010, 09:59 PM
one commonly missed tax deduction is the home office. Set one up and use it ONLY for business. Measure the square feet of your house the the office find the percentage and you have a home office deduction. It's in the IRS publication google it. Best place to find out about deduction is not a CPA they are good but sometimes wrong too. I rely on them to do my taxes. I find my deductions at the IRS website!

I'd trust the guidance of a competant CPA over someone who dabbles in publications. Not a slap at you, but the comment that the "best place to find out about deduction is not a CPA" is tantamount to saying the best place to find out about surgery is not a doctor. They are good sometimes. :hammerhead:

J & D Greens
02-23-2010, 06:22 PM
My wife does all the accounting for our business, she even went to college on route to becoming a CPA. before having kids derailed our finances for her to continue. But she is organized with everything I purchase (receipts and we have a totally separate Bank account to make things easier. Every thing goes into a ledger, columns for every type of purchase another for income, and so on. This year we bought Quick Books Pro 2010 and a separate computer) Even though she might be able to do our taxes right. We still go to some one who is going to look out for our best interest and stand by our side in the case of a Tax audit. Paying some one who is reputable to help you on this, is kind of like buying G.L. Insurance for your business. It is worth every penny in the event you need it!

SangerLawn
02-23-2010, 06:27 PM
My wife does all the accounting for our business, she even went to college on route to becoming a CPA. before having kids derailed our finances for her to continue. But she is organized with everything I purchase (receipts and we have a totally separate Bank account to make things easier. Every thing goes into a ledger, columns for every type of purchase another for income, and so on. This year we bought Quick Books Pro 2010 and a separate computer) Even though she might be able to do our taxes right. We still go to some one who is going to look out for our best interest and stand by our side in the case of a Tax audit. Paying some one who is reputable to help you on this, is kind of like buying G.L. Insurance for your business. It is worth every penny in the event you need it!

AMEN!!!!! And you are going to love QBpro….we have been using it for several years and its awesome!!

richonsa
02-23-2010, 07:15 PM
I have quickbooks proadvisor and it is terrific. I'll be using it for my lawn care venture.