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Pugsly
04-29-2003, 03:59 PM
I need some help in planning for next years tax return. This is my first year in business. I have a full time Firefighting job that is my main source of income. With this in mind:

1: Are the full amount of equipment deductable (my trimmer blower rakes, brooms, blah blah etc)
If i spent $300 for the trimmer, can i deduct $300?

2: How do you deduct high price items such as my mower which was $2400?

3: Are my phone bill (for business) computer (for record keeping and bought this yaer), envelopes, stamp etc deducable 100%

4: If i buy a used pickup for say $10000, is that fully deducable or do i have to used the depreciation thing (so if it's va;lue after 1 year is $8000 i deduct $2000 depreciation?) even if bought used?

5: Finally, what if the business made a loss the first year (ie i spent $10000 to get the business going but only brought in $5000) Being a sole propriator can i deduct that $5000 loss off my personal income tax to get a bigger refund? (i have always gotten a good sized refund every year from my firefighting job)

bruces
04-30-2003, 09:18 AM
First of all, if you don't have a CPA or tax preparer, get one.

You will reap the benefits many times over if you are going to stay in the business.

1. Yes you can deduct the full cost up to 25,000 per year using the section 179 allowance.

2. Same as 1.

3. Any business expense, (with the exception of meals and entertainment) is going to be 100% deductible.

4. Vehicles are subject to special rules, you can depreciate them or take a mileage allowance. See your tax advisor!

5. Yes. The loss can offset other income. See your tax advisor!

Meet with your CPA now (or soon) to get a better feel for what your situation will be based on your projected numbers will be with the lawn business. That way you won't be facing surprises at the end of the year.

Green in Idaho
04-30-2003, 10:49 AM
Section 179 is allowable only for NEW equipment. If you bought any used equip, it has to be depreciated.

Also go to www.irs.gov and seek Publication 334 to help you get a good understanding of the business expenses before your appointment with your accountant. And do that stuff NOW rather than waiting till next April. You will be able to make much better decisions, especially when it comes to pricing your services and bidding.

Mark
mark@idahoaccounting.com

bruces
04-30-2003, 11:03 AM
Originally posted by Green in Idaho
Section 179 is allowable only for NEW equipment. If you bought any used equip, it has to be depreciated.

mark@idahoaccounting.com

I don't believe that is correct. It must be purchased, but I don't believe it has to be new.

The following is a copy from the IRS depreciation publication

What Property Qualifies?
Adjusted basis
Basis
Class life
Structural components
Tangible property
To qualify for the section 179 deduction, your property must meet all the following requirements.

It must be eligible property.
It must be acquired for business use.
It must have been acquired by purchase.
It must not be excepted property.

Eligible Property
To qualify for the section 179 deduction, your property must be one of the following types of depreciable property.

Tangible personal property.
Other tangible property (except buildings and their structural components) used as:
An integral part of manufacturing, production, or extraction or of furnishing transportation, communications, electricity, gas, water, or sewage disposal services,
A research facility used in connection with any of the activities in (a) above, or
A facility used in connection with any of the activities in (a) for the bulk storage of fungible commodities.
Single purpose agricultural (livestock) or horticultural structures.
Storage facilities (except buildings and their structural components) used in connection with distributing petroleum or any primary product of petroleum.
Tangible personal property. Tangible personal property is any tangible property that is not real property. It includes the following property.

Machinery and equipment.
Property contained in or attached to a building (other than structural components), such as refrigerators, grocery store counters, office equipment, printing presses, testing equipment, and signs.
Gasoline storage tanks and pumps at retail service stations.
Livestock, including horses, cattle, hogs, sheep, goats, and mink and other furbearing animals.



The web link is

http://www.irs.gov/formspubs/page/0,,id%3D104269,00.html

Again, no mention of new or used. I believe I am correct, but wouldn't be the first time if I'm not.

Green in Idaho
04-30-2003, 12:48 PM
Well Bruce, it's a good thing I'm not a betting man, cause I would've bet a large sum that was one detail of the eligible property.

But I certainly can not find any reference for it, so I stand corrected. I must be thinking of some other issue or just not thinking at all.

That election has to be made by the due date (no amended return elections on it) so I cruise through a couple return to see if I missed any used equip and I actually took the 179 for used equip so now I'm not sure where that point crept in... :(


Mark