taxes on earned income

Discussion in 'Business Operations' started by get rich, Jan 10, 2006.

  1. get rich

    get rich LawnSite Member
    Posts: 195

    I just started my business last year, although i've been in the industry for about 12-13 years as employee. Iearned about 18,000 maybe before expenses. Not that great of a year, this year i hope to atleast double that. Anyways i did register for a business liscense, but registered soleproprioter and used my ss# even though i paid sales taxes on everything i purchased. I also purchased some new equipment like trailer 1500 and exmark mower....5000. Ifailed to pay any taxes on my earned income because i needed every dime i made last year. I have no employees. And don't need unemployment. I did get insurance that only costed 250 a year. I have large family to support...three kids and wifewho just started working as i stopped for the year(midwest) i still do snow removal although we've had very little. My question is how any of you handled your first year taxes, i know it wasn't smart to not pay quarterly, but when you have three little kids and wife to support i needed every penny. This was done kinda on a whim, because my former boss found out i was doing extra work on the side and said one or the other. And i had already spoken up for taking care of four or five lawns and landscapes. Iwasn't about to tell them i couldn't do it because my boss said so. I'm liscensd to apply fertilizer and very expirenced at all aspects of lawn and landscape installs and maintenance. I actually feel as though for starting on the drop of a dime in late march i did rather well. I'm sure i'll grow leaps and bounds this year and with the wife having a steady job i can actually do everything the right way(paying quartely taxes).But last years tax debit worry's me. I here everyone say there first couple years they claim a loss, even though i spent a small fortune on gas, mulch, small tools and materials....how can i say it was a loss?? Isupported the family pretty good all the way up till thanksgiving. I'm very curious to hear everyones thoughts on this. And since every dime i earned ran through my business checking account do i use that as my total earned income?? In past years i always recieved a very good income tax return is this mistake gonna effect it drastically?? Thank you all in advance for your response.
     
  2. tiedeman

    tiedeman LawnSite Fanatic
    from earth
    Posts: 8,745

    Once you become self employeed, basically say good bye to any returns....most of the time. Expect to pay on average about 35% of your net.

    I personally would go and spend the $100 to $150 to see an accountant. She actually might save you more money in the long run. My accountant charges $180, and one year I thought that I would just try to figure out how much I would save by doing it myself, to find out, the account was going to save me approx $700 to $800 more.
     
  3. grasswhacker

    grasswhacker LawnSite Gold Member
    Posts: 3,873

    With his particular income and no employees there is no reason for him to need and accountant. Just get a good tax software program like Turbo tax deluxe or TT premier and start using Quicken for your books which can be transferred to TT (same co.). When you start getting into much higher income brackets then you may want an accountant but if you can stay current on tax law you should be able to do it yourself.
     
  4. tiedeman

    tiedeman LawnSite Fanatic
    from earth
    Posts: 8,745

    that is what I thought as well. I tried the Turbo Tax thing to see whether I would save, but my accountant was saving me a lot more.. like I stated $700 to $800 more. The accountant can also set you on your fed/state quarterly estimates for the year as well.
     
  5. grasswhacker

    grasswhacker LawnSite Gold Member
    Posts: 3,873

    Look at his income? Based on that he should not have any problem filing qtrly or knowing tax laws pertaining to sole prop owned business. He need not spend $$ for an accountant.
     
  6. tiedeman

    tiedeman LawnSite Fanatic
    from earth
    Posts: 8,745

    Thats fine, that is your opinion and I respect that. I just think that it would be better in the long run to talk to an accoutant and have them do it. Ask all question. I still today ask questions all the time.

    It just feel that it is less stressful. Some people are not good with numbers and might not know when certain quarterlys are due. Or like when you have to send out W-2's to employees, or what forms you need for filing your taxes, the long form or the EZ form. He might not know about how to properly do equipment purchases and depreciation.

    For a long term outlook and sometimes for the short term as well, spend the money for the accountant.
     
  7. grasswhacker

    grasswhacker LawnSite Gold Member
    Posts: 3,873


    The deductions for Sch C is pretty easy to figure out by reading the instructions for most situations. He has 0 employees, and Sec 179 for first year expensing of more equipment than he will ever need as a solo operator.
    One thing I would exhort him to do is keep a separate checking account for his business and personal uses.
     
  8. tiedeman

    tiedeman LawnSite Fanatic
    from earth
    Posts: 8,745

    I do agree with your points
     
  9. get rich

    get rich LawnSite Member
    Posts: 195

    I kinda agree w/ the accountant thing myself. I have a buddy who's aunt does his taxes. He's a siding contractor and he swears she'll wipe all the debt away with write off's and i wouldn't owe a dime. He's done it in years past where he made less than 25-30 k. She's very knowledgable and work for our local township as the treasurer. But i do agree w/ soon my own personal CPA. And my business acount is used for just that except i did use it a couple time too make my vehicle payment. But do any of you have expirence with the way fedral does child tax credit? Man in the past three years they give you like 1500-2000 dollars per child. i thought that would definetly help with the tax debit. Thanks for your input though, much appreciated! Have a good one!
     
  10. walker-talker

    walker-talker LawnSite Platinum Member
    from Midwest
    Posts: 4,771

    I am sort of in the same boat. Showed a loss for the last 3 years until this year. Remember one thing, you can file extentions all the way to Oct. 15th. That will buy you some time to collect the money you need.
     

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