Whole bunch of questions from the new guy....

Discussion in 'Business Operations' started by Jon99, Dec 16, 2002.

  1. Jon99

    Jon99 LawnSite Senior Member
    Posts: 375

    Starting up a business in the spring, have already bought a trailer, mower, trimmer etc this fall...

    1. Can I take these deductions on the 2002 year even though there was no income from the business????

    2. What do I, as a new sole prop., need to file with the IRS??? Do I need a tax ID???

    Any other info regarding setting up a business for tax purposes would be deeply appreciated, even though I have an MBA, the tax part of the business is leaving me clueless....

    Thanks
     
  2. walker-talker

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

    I would use those deductions off your 2003 income. I used my social security # as my tax ID #.

    MATT
     
  3. Jon99

    Jon99 LawnSite Senior Member
    Posts: 375

    Thanks... So even though I purchased the equipment in 2002 I can dedeuct it in 2003???? My reasoning for wanting to deduct in 2002 was because with me working full time our income will probably be higher in 2002 than in 2003...
     
  4. MOW ED

    MOW ED LawnSite Fanatic
    Posts: 5,028

    MBA or not, I would secure a decent accountant that deals with small business. My accountant is great, even though I have to pay him, he has actually made me more money by knowing the answers to questions and knowing the tax laws.

    I actually look forward to seeing him because I learn something every time. I am a small lco like you (me and my wife), it works for us. Good Luck
     
  5. GroundKprs

    GroundKprs LawnSite Bronze Member
    Posts: 1,969

    Suggestion on accountant is the best you'll get. Especially since you are not versed in self employment taxes. Get to one SOON, so you can manage your business properly from the beginning.

    For a little assurance, equipment cannot be expensed until it is put in service, as far as federal taxes are concerned.
     
  6. stslawncare

    stslawncare LawnSite Bronze Member
    from DE
    Posts: 1,484

    i would like to add to this thread if you dont mind. at what point in time should a new lco get an accountant? would i have problems since i am underage? i want to make my business as legal as possible and not be a scrub or whatever you want to call me. in order to get into this stuff must you be making a certain amount of money?
     
  7. Sean Adams

    Sean Adams LawnSite Gold Member
    Posts: 3,597

    Take your time when looking for an accountant. Interview several. They are providing a service just like you. Just as your prospects receive estimates from several companies, you should as well. Find out what they do, if they have references, etc... Choosing someone to give you financial and tax advice is a big decision. Make it wisely. Look for someone with small service business experience. Look for someone who is going to treat you the way you should be treated, and not pass you off to a tax preparer. The more you learn about these services the more you can involve yourself with and understand your accountant - who is providing you with advice that could affect your livelihood.
     
  8. bruces

    bruces LawnSite Senior Member
    Posts: 648

    Assets are depreciable property when placed placed in service.

    To quote from the Commerce Clearing House Master Tax Guide:
    "depreciation begins in the tax year that an asset is placed in service".

    You don't need a tax id number if you are a sole proprietor with no employees. You will file a schedule C with your 1040 to report your business income and loss.

    Consult a CPA. Whether or not you are in business this year and your expenses are deductible this year or accumulated as start up costs is a matter of interpretation based on the facts of your particular situation.
     
  9. KerryB

    KerryB LawnSite Senior Member
    Posts: 661

    I would be careful what I included with my startup cost.
    Start up cost including equipment in that figure can only be amortized over a period of years.
    However, most equipment can be depreciated in the year bought or placed in service under section 125.
    Up to a set amount of course. lol
    If you deduct the equipment in 2002 with no income the Irs will probably consider it startup cost.
    Or worse as a hobby expense.
    Although I have a degree in accounting I still use an accountant due to the everchanging tax laws.
     
  10. I think lawndoctor was talking about section 179 depreciation. It was $24,000 limit for 2001 taxes, it may be increasing. But 179 is limited by business income, so no income = no 179 this year, you would need to carry it over.
    Another type of depreciation should allow for expensing equipment this year but would be on a 3-15 year schedule depending on what was purchased. If you're not sure what to do see an accountant-see them early before they get busy.
     

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