One-man operation and paying taxes

Discussion in 'Business Operations' started by mdemarco, Nov 24, 2003.

  1. mdemarco

    mdemarco LawnSite Member
    Posts: 3

    How many of you out there are one-man operations and also pay federal income tax each year? How do you pay this tax? Do you put away a certain amount of money throughout the year and pay one lump sum at tax time?
  2. twins_lawn_care

    twins_lawn_care LawnSite Senior Member
    Posts: 932

    hey mdemarco,
    I am in the same boat, and am wondering the same.
    I pretty much have all the money in an account right now, and am waiting for a lump sum at tax time. Going to pretty much break even, so not expecting too much. Never been through it before though, so not too sure.
  3. Aproct

    Aproct LawnSite Member
    Posts: 63

    THere are a couple of things that you need to becareful with in paying the taxes. I am assuming you are running the business on your personal tax return via a schedule C. If so, then if your company has a profit you can expect to see a 15% self employment tax on page two of your tax return (half of the tax will be on the front as a deduction). If you have to becareful because if you are not safe habored in regards to your tax liability, you may owe a penalty for under paying the tax over the year. SOme food for thought, if you know what your general income is going to be over the year, sometimes it is worth wild to pay estimated tax payments over the year rather than paying an entire amount all at once. Also, paying state taxes will assist as a deduction on your schedule A "itemized dedutions".

    If you have a loss, then you be able to take the losses on your federal return. Some states will not allow you to take losses on the state return, so watch for that.

    I hope this helps. Let me know if I can give you some other advise.
  4. rodfather

    rodfather LawnSite Fanatic
    Posts: 9,501

    I do estimated quarterlies.
  5. KerryB

    KerryB LawnSite Senior Member
    Posts: 661

    If you keep up with your income, expenses and all assets you purchase on a monthly basis you can figure if you will owe any taxes or not. Pretty close anyway.
    If you see towards this time of year that you might owe taxes because you will show a profit then buy more assets.
    You can write off I believe this year its $25,000 worth. A 100% deduction.
    Sure helps keep your equipment new and you keep adding to the types of equipment you own and can use during the up coming year.
    Why pay it in taxes when you can put it back into your business.
  6. Aproct

    Aproct LawnSite Member
    Posts: 63

    You have to becareful with making purchases all in the forth quarter of your tax year. The IRS has guide lines to Section 179, expensing new equipment. I know because I am a Tax Accountant. The IRS reviews when assets are purchased via the Form 4562. On there you complete when the asset wass purchased, cost basis and so forth. So if you go out and purchase all your assets in the forth quarter and then expense then off, you can pretty much be expecting a "love note" from the IRS upon filing your tax return. Also, the purchases will affect your tax deprecation calculation by changing your method.

  7. rodfather

    rodfather LawnSite Fanatic
    Posts: 9,501

    Ah, fellow joysee guy. Do you have your CPA, btw? And you live where? Welcome to LS too...
  8. tiedeman

    tiedeman LawnSite Fanatic
    from earth
    Posts: 8,745

    last time that I knew it was 15% of your net income you have to pay in. Things might have changed though. That is what I have an accountant for:)
  9. Rustic Goat

    Rustic Goat LawnSite Bronze Member
    Posts: 1,194

    There are so many rules and regs about this subject, what you really need to do, if you don't already have one, find a good CPA.

    Set up an appointment with this person, and pay for at least an hours worth of consultation. It's deductible.
    Before you go, write down questions and concerns, take notes while you there.

    This can be the best financial hour you've ever spent.
  10. Aproct

    Aproct LawnSite Member
    Posts: 63


    In response to your email, I live in Southern NJ. I am a practicing tax accountant awaiting my results for my CPA credentials. I started a LCO this summer and things worked out really well. I am incorporating this winter and working towards my application license. I have a lot of down time in the summer, so what else is there to do. I love being outside and making a yard look great! Now, if I cou;d just find some "good " employees!!!!

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