tax questions and write offs

Discussion in 'Starting a Lawn Care Business' started by Mikol87, Dec 1, 2009.

  1. Mikol87

    Mikol87 LawnSite Member
    from Iowa
    Posts: 93

    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
     
  2. topsites

    topsites LawnSite Fanatic
    Posts: 21,654

    Although this should probably go under Business Management, 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.
     
  3. Richard Martin

    Richard Martin LawnSite Fanatic
    Posts: 14,700

    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.
     
  4. unkownfl

    unkownfl LawnSite Gold Member
    Posts: 3,838

    It depends on the type of business you have.
     
  5. ALC-GregH

    ALC-GregH LawnSite Fanatic
    from PA
    Posts: 7,053

    There's a happy balance in there somewhere. :)
     
  6. chuckcintron

    chuckcintron LawnSite Member
    Posts: 54

    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.
     
  7. Fleur De Lawn

    Fleur De Lawn LawnSite Member
    Posts: 197

    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.
     
  8. LewisLawn

    LewisLawn LawnSite Senior Member
    Posts: 482

    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
     
  9. Richard Martin

    Richard Martin LawnSite Fanatic
    Posts: 14,700

    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.
     
  10. Richard Martin

    Richard Martin LawnSite Fanatic
    Posts: 14,700

    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-...ng-credit-services-commercial/10206817-1.html

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

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