Good Ol' Uncle Sam

[precisionlawn]

Please tell me if I'm on the right track. And remember these are only examples not real figures:
Lets say I had 40 weekly accounts @ $30 each = $1200 G.P.
And lets say my my variable expenses per each account (gas, weed whip string, bags, etc.) was $2. Because I am operating alone. So that is $80
And my fixed expenses (phone, answering service, advertising, insurance, and rent.) is broken down into $147.50 weekly.
So thats:
$1200 (G.P.) Gross Profit
-$80 (V.E.) Variable Expenses
-$147.50 (F.E.) Fixed Expenses
$972.50 Net profit (before taxes)

Now what I want to know is what percent of that does Uncle Sam take. I figured 30%???:confused:

Which would take my actual net profit down to $680.75 N.P.
Am I right? And remeber These figures are only examples!!!
Thank you in advance for your input.

[ladibugg]

I am not sure where you are headed with this....but, Sam gets about 55%. Thats right. I am not sure how all these guys do it, but I pay my self about 5 bucks an hour. The best advice is tax shelters like mortgage interest and retirement plans.

[bruces]

It depends, is the figure for 20 weeks or 52 weeks. You will pay self employment tax of 15.3%, income tax will depend on total income, other deductions, other income, filing status, dependents, etc.

Spend a little and get some tax advice specific to your situation.

I'd ask a tax preparer, not LCO's.

[walker-talker]

Does that $2 a week also include equipment operating cost? That does not sound like much income, IMO. Get into the add on services as well, this will help boost income. Get a job in the winter if needed. Get a helper and double your accounts, then double your accounts with another crew. Get your pesticide license and make some serious money.

MATT

[dklawncare]

Make sure you include any purchases you have made through the year... Also, if you kept up with your miles then you can get 36.5 cents per mile. So if you traveled 10000 miles, then you have a big deduction right there.

[Ed Ryder]

Yo Precisionlawn,

Da*n, I thought you were a big guy. When you asked us to critique your promotional piece, your writing in the piece represented your operation as established with many customers. Why the deceit? There's nothing wrong with being a one man operation. For me it's a strength. In my humble opinion, you're much better off not bullshi*ing in your marketing pieces. Some people want to deal with a little guy and not a crew of strangers.

You should absolutely emphasize your strengths as a sole operator. To clearly paint a different picture: i.e established, big, many customers and using words like "we" is a scam. I'd feel tricked.

[e-RoK]

Just A Lawn Guy,
You do sound hurt. How did you take the Milli Vanilli scandel? Just teasing. I think the way he was marketing himself is pretty much the norm. Gives a nice professional impression I think. And it sounds as though you thought so too. Also keep in mind he never stated any numbers, he said he was an established business with many costumers. I don't see the deceit. What I think was you took those words and added your own numbers to them. I think that's good marketing. I think 30 lawns is many costumers for a solo op. You were just thinking he is bigger than he is.

[juststarting023]

you left out allot of possible deductions there truck,trailer,mowers,etc i suggest you get an accountant to help you out.keep good books and all your receipts


just a thought:eek:

[65hoss]

Originally posted by ladibugg
but, Sam gets about 55%. Thats right. I am not sure how all these guys do it, but I pay my self about 5 bucks an hour. The best advice is tax shelters like mortgage interest and retirement plans.

What????

[paponte]

That is one of the reasons I am incorporated. My accountant handles everything. There are business costs, equipment depreciation, deductions, write offs etc.! Sam is no uncle of mine, cash is cash. The only thing that goes down as a profit are checks and credit cards. What Sam doesn't know about he can't tax you on. I would seriously consider sitting down with an accountant. after I was incorporated, it opened a new door of opportunity for me. Taxes were different, the "company" was actually something totally separate than my personal account. Not only that, but I got a grant from the state since i was a new business. That's right, a $30,000 revolving line of credit to spend in whatever way I wanted. What "revolving" means, is if you spend only $10,000, thats all you get taxed on. You still have $20,000 available. Also Inc. protects your @ss. If something should happen, you personally can't be liable.

[dougaustreim]

In 2003, the IRS mileage rate has been reduced from 32.5 cents to just 32


Doug
Austreim Landscaping

[bruces]

Originally posted by dougaustreim
In 2003, the IRS mileage rate has been reduced from 32.5 cents to just 32


Doug
Austreim Landscaping

Actually, rate has been reduced from 36.5 to 36.

[dougaustreim]

Sorry, should have looked at my note on this before I typed it in. Was trying to make the point that it went down half cent. Should have verified the number first though.

Doug

[lsylvain]

precisionlawn,

I'm assuming you are wanting to know this so that you can set back enough cash to meet your tax liability so here ya go. I'm also assuming you are single.

Take your $972.50 "per cut" times your estimated number of cuts for the year. for example 25 cuts

972.50 * 25 = $24,312.50

To figure your SE tax multiply that amount by .92

24312.50 * .92 = $22,367.50

Multiply again by .153

$22367.50 * .153 = $3,422.23 this is what you owe for SE Tax

Then to figure you income tax:

take you income $24,312.50 less half the SE Tax $1,711.11

$22,601.39

Now, if you don't have a job that makes more than $7,700 subtract $7,700 (standard deduction and 1 exemption)from 22601.39. If you do have another job do not subtract the $7,700 because your other job will used up the deductions.

22601.39 - 7700 = $14,901.39 This is your taxable income

Multiply the first $6000 by 10%
the remainder upto $27,950 by 15%
If it is over that you can afford an accountant.

6000 * .10 = $600
(14901.39 - 6000) * .15 = $1,335.21

total income tax = $1,935.21
plus SE tax = $3,422.23

total tax = $5,357.44

then divide by the number of cuts (25)

= $214.30 is what is cost you in taxes per "cut"

972.50 - 214.30 = $758.20 Net Income per cut

hope this helps

[precisionlawn]

isylvain,
Thanks alot that helps very much! So in other words my net profit after taxes would be 758.20, give or take. after all expenses and everything. That sounds very good.

[MPhillips]

sounds like you got most of the info you need...if you go Inc., or LLC tax rates are a little different...ususally figure something like 40% on profits, if you're a sole P. taxes would be lower, Fed should tax as personal income after you pull out your expenses, so it's usually pretty favorable.

[bruces]

Originally posted by MPhillips
sounds like you got most of the info you need...if you go Inc., or LLC tax rates are a little different...ususally figure something like 40% on profits, if you're a sole P. taxes would be lower, Fed should tax as personal income after you pull out your expenses, so it's usually pretty favorable.

How do you figure?

Individual rates and lower corporate rates are very comparable.

Hard to generalize, all depends on other income, filing status, other deductions, etc.

In total social security and self employment taxes should about offset.

Total social security will be approx 15.3% whether in the form of self employment tax or employer and employee social security.

Also, unless the LLC is more than one person, it is taxed as an individual, just a schedule C.

[KenH]

Originally posted by paponte
Not only that, but I got a grant from the state since i was a new business. That's right, a $30,000 revolving line of credit to spend in whatever way I wanted. What "revolving" means, is if you spend only $10,000, thats all you get taxed on. You still have $20,000 available.

I thought a grant did not have to be paid back?? What do you mean if you spend only 10K that is all you get taxed on??

Are you confusing a grant with a credit line?? I have a credit line where I pay interest only on what I borrow, but I do have to pay everything back.

Not knocking you, only trying to understand. This is the second time I have heard you mention this.

[LAWNGODFATHER]

Time for you to hire a CPA.

[outrunjason]

I have a question now. Lets say when it is all said and done that I owe the IRS $3,000.

Now I had driven over the year 5,000 miles. Now that is a deduction I guess of .36 x 5,000= $1,800. So now I owe the IRS

$1,200?

Jason

[LAWNGODFATHER]

No you need to contact a CPA, you may have deducted miles a different way.

[dougaustreim]

No that is not correct. The mileage is just another expense that is deducted before arriving at the adjusted gross income that the tax is based on. It is what is called a deduction that reduces taxable income. Somethings like fuel tax etc are credits. Credits are subtracted from the actual tax or added to the refund.

Might want to see a CPA or at least get a good tax software program./

Doug

Austreim landscaping

[outrunjason]

Ok, so If I grossed $25,000 that year I would deduct $3,000 from that?

Jason

[bruces]

Originally posted by outrunjason
Ok, so If I grossed $25,000 that year I would deduct $3,000 from that?

Jason

Yes, the mileage deduction comes off of your gross income, along with all of your other deductions to determine your net schedule C income and self employment income

It will save you self employment tax (15.3%) and income tax (probably 15%) depending on what bracket you are in.

So the total tax savings will be 1,800 x 30.3%, or $545.

You are confusing deductions with credits, a deduction reduces your income, and as a result reduces your tax by the tax rate times the amount of the deduction. A credit comes directly off of the tax.

[precisionlawn]

There is a public auto auction close to my house, I always go and buy and sell cars. They have everythinbg from junk ($50) + fees
to decent cars maybe $1500.
Anyway, when you buy these cars from the auction you are able to redonate them. Then you get the blue book value of the car as a tax deduction.
So let's say I bought a $200 car, with fee it would be around $350. And I redonated it and got it was worth $1200 (blue book)
And lets say I grossed $30,000 for the year. I would subtract $1200 from that $30,000?
Is it even worth it or not, (paying $350 out of pocket, to get a $1200 deduction.)?
What if i payed $350 and it was worth $2000? Worth it now?

[bruces]

Originally posted by precisionlawn
There is a public auto auction close to my house, I always go and buy and sell cars. They have everythinbg from junk ($50) + fees
to decent cars maybe $1500.
Anyway, when you buy these cars from the auction you are able to redonate them. Then you get the blue book value of the car as a tax deduction.
So let's say I bought a $200 car, with fee it would be around $350. And I redonated it and got it was worth $1200 (blue book)
And lets say I grossed $30,000 for the year. I would subtract $1200 from that $30,000?
Is it even worth it or not, (paying $350 out of pocket, to get a $1200 deduction.)?
What if i payed $350 and it was worth $2000? Worth it now?

Generally speaking, you can not get a deduction for more than your basis for donated property. In this case, your basis is $350. That will be your tax deduction.

Remember, generally when you here something that seems too good to be true regarding taxes, it generally is.

[Fvstringpicker]

Bruces is correct. You cannot take appreciated value on short-term capital gain type property. You are limited to cost/basis of the property.

[LAWNGODFATHER]

Originally posted by dougaustreim
No that is not correct. The mileage is just another expense that is deducted before arriving at the adjusted gross income that the tax is based on. It is what is called a deduction that reduces taxable income. Somethings like fuel tax etc are credits. Credits are subtracted from the actual tax or added to the refund.

Might want to see a CPA or at least get a good tax software program./

Doug

Austreim landscaping Depends how you dedecut or credit.

I don't get milage if I deduct 100% of the others.

If I could I would be double dedcuting something.

[LAWNGODFATHER]

Originally posted by dougaustreim
In 2003, the IRS mileage rate has been reduced from 32.5 cents to just 32

According to you I would be (insert proper tax word here) $25,600 more, above and beond the 100% I am deducting now?

[dougaustreim]

For vehicle expense, you have the choice of deducting actual expenses or the standard mileage rate. For company owned vehicles used 100% for business use, one would ordinarily deduct actual expenses. The standard mileage rate is most useful for mixed use vehicles for example when one uses a personal vehicle for business use.

Actually I misspoke on the rate, its was reduced from 36.5 to 36

Doug
Austreim Landscaping

[outrunjason]

Well my next question is how do you keep up with that mileage. I have just been writting down the mileage at the begining of the day and then at the end of the day. But someone told me that I would have to write down every stop that I make.

Jason

[Hodge]

Well if your truck is company owned the actual expense as it is 100%. For your personnel truck that is 75 personnel and 25 business, or what ever, then the miles for each job. Record all miles for the specific job such as picking up supplies and the time going to the job. I include my miles for gas refill between a job under the previous property miles.