Start-Up Tax Questions

Discussion in 'Starting a Lawn Care Business' started by True Green, Feb 15, 2010.

  1. True Green

    True Green LawnSite Member
    Posts: 1

    I am planning on starting my own lawn care business next year, and will of course be consulting a CPA before and during the process. At this point, however, I would like to get a very general feel of what I will possibly be able to write-off in terms of the start-up costs I will be encountering. The following is a list of things I will be buying to start the business:

    - Used truck (probably 2002-2005 Ford or Chevy) - Used for business purposes only 95% of the time
    - Enclosed trailer
    - Several lawn mowers, Blower, trimmer, various other tools

    Other things which will be needed:

    - Advertising (probably around $2,000-2,500 budget, door hangers, direct mail, etc)
    - Insurance
    - Licenses (each city/town where I will conduct business is roughly $50 for a business license)
    - Insurance
    - Accounting fees

    My question is, in general, which of the above necessities will I be able to deduct from my taxes? The only thing that I know for certain is that I can deduct vehicle use by the mile (at about 45 cents/mile), or for actual expenses (gasoline and maintenance).

    I have also heard about "Start-up Cost Deductions" where you are able to deduct up to $5,000 in start-up and $5,000 in organizational costs for the first year of business. Have any of you guys ever heard of this and have any of you ever done it?

    Thanks in advance for any help you may be able to provide.
  2. 360ci

    360ci LawnSite Senior Member
    Posts: 992

    From what I know, if you buy new and lease, you can write off the lease. If you finance, you can write off a percentage only, along with mileage. Keep all your receipts for tools and the trailer. You have to be careful that you don't write off more than what you make, or you might send off some red flags. In Ontario at least, you can forward unclaimed expenses, such as tools, the following year once you build up more profit.

    I've always done my own accounting (software can be deducted!). Anything business related, is considered an expense. If you grossed $50K, spent $25K on the business between equipment, office supplies, insurance, additional staff, etc. Then take the $50K you grossed, minus your taxes on that, subtract the $25K and you'll have an estimated net profit. Now, when you do your taxes you might be able to save some based on what your expenses are. If you paid tax on the truck, trailer for example you can deduct that (again, Ontario here). For insurance, there is no tax on it here, so you can't deduct that, but you can still claim the total amount as a business expense.

    I didn't mean for it to sound confusing, but when you go to register your business name, a small business center (at city hall, or another gov building) can supply you with a TON of info on operating a small business. It's a LOT of reading and researching and making phone calls, but it's worth while in the end as it'll save yourself some dough.

    Other guys will chime in here with their ideas, suggestions and even facts. More so because I know Canada and US regs are so different.
  3. xclusive

    xclusive LawnSite Bronze Member
    Posts: 1,052

    Definitely go see a CPA, but for the most part any expenses related to your business is deductible. I also know that if you buy a vehicle in NJ that has a higher gvwr than your typical half ton like a 13000gvwr then you can get a bigger deduction at least in NJ. Like 360 said keep all your receipts for 3 years incase you ever get audited by the IRS.
  4. KeystoneLawn&Landscaping

    KeystoneLawn&Landscaping LawnSite Senior Member
    Posts: 774

    Find a CPA first, then use their expertise to guide you. I found my CPA using one of Dave Ramsey's endorsed local providers. CPA's will charge more for their services than a regular tax preparer, but are well worth it. Always remember, professionals may be expensive, but not as expensive as someone who doesn't know what they are doing! Good Luck with the business.:usflag:
  5. 360ci

    360ci LawnSite Senior Member
    Posts: 992

    Well said. Just be sure to check background on anyone you entrust with your books. I've had some bad 'professionals' in the past. I hired one guy from word of mouth (my uncle). Anyway, my uncle didn't know how badly this guy dealt, only knew him slightly on a personal basis hence the referral.

    I was busy, two service stations operating 24/7/365 and didn't have time for books that year due to the second station. I hired this guy, and didn't check his particulars. He was the EXACT same price as another guy I had phoned before I talked to my uncle to do my year end, plus sales taxes, etc. Total hours I'd have to spend to do it for both locations would be in the 12-16 hour range. I wrote him a cheque in full, after he was working in my office for two hours. I left to tend to the other station.

    I came back, and on VIDEO camera, he stole 4 cheques (I counted later) and tried to cash one for $25K that afternoon with a falsified signature of yours truly. He still hasn't been caught by police. If he hadn't gone to the bank branch that I normally deal with, where the ladies know me (don't think like that!) and my business name, I'm sure he would've gotten the money and have disappeared before it was too late.

    Not only that, but he had full disclosure of my business finances and at least only a couple of my accounts. it's free for me to phone my local tax office if I have a question, but for now, I'll do my taxes myself.
  6. DA Quality Lawn & YS

    DA Quality Lawn & YS LawnSite Fanatic
    Posts: 8,899

    If you are a small solo op, I'm sorry, but you needn't spend big money on a CPA.
    Just keep track of all your business expenses, sort in an Excel spreadsheet, and at the end of the season consult the IRS website to see what is deductible (most all business expenses are at least to some degree). Simple stuff for the solo guy.

    Now if you are going big, then by all means..........
  7. DoetschOutdoor

    DoetschOutdoor LawnSite Bronze Member
    from S. IL
    Posts: 1,818

    Some of you guys must be getting ripped when you go see the tax business is relatively small (45 accounts) but it takes my guy all of about 20 minutes to punch my numbers into his high dollar program. I take him one piece of my book with all of my year end figures and he just punches them in. Under $100 bucks as well, which was a business expense. Going to a CPA is not a big deal. Its 2010 and they are everywhere. Unless you have tons of other revenue, investments, rental property, etc, a CPA can handle most of the businesses on here in just a few minutes. Original poster, you will be able to deduct all of the expenses you listed plus any depreciation, cell phone bill, office supplies, t shirts, college tuition gives you a BIG deduction (which is added back in to your net at the end), etc.

    360ci, it might been the way you typed it but you said gross 50K, pay your taxes on that, then subtract your expenses? That could very well be the proper way for canada but here we take gross revenue, subtract business expenses, then your tax liability is due on what you made after your expenses. So if you grossed 50k, minus your 25k expenses, then you would pay taxes only on 25k. I mighta misunderstood ya though.
  8. LawnBizCoach

    LawnBizCoach LawnSite Member
    Posts: 38

    A good CPA is worth every penny......
  9. Stevegotcrabgrass

    Stevegotcrabgrass LawnSite Member
    Posts: 248

    As far as start up/ org cost, there is a limit of $5000 which you noted above. The rest of the cost is amortizable of 180 months. An example:
    If you incur 6500 of start up cost you can deduct $5000 in year one plus the amortization of the remainder in year one. Amort. of the remainder is done on a straight line method. 1500/180 so about $100 for a total start up deduction of $5100 in year one. In year two you can deduct another $100 as start up and 100 every year over the next 14 years....
    Start up and org cost are different from your everyday operation expenses which MAY be deductible like advertising expense, fuel, labor, taxes, insurance etc.
  10. KeystoneLawn&Landscaping

    KeystoneLawn&Landscaping LawnSite Senior Member
    Posts: 774

    All due respect to those who say you don't need a CPA, but a CPA is the way to go!! The CPA will do your amortization and keep track of it year to year. CPAs are required to continue education, therefore they will know about any new rules, laws ,etc. My CPA learned of a few tax credits for landscapers I bet some of you who do your own taxes don't know about (regular tax preparers probably don't know about either). A CPA knows how to do things that avoid audits. If you are audited, the CPA knows how to prepare correctly for the audit. My CPA will be there with me. Be smart, not cheap, hire a CPA!

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