"writing off"

Discussion in 'Business Operations' started by Fmenvironmental, Jul 12, 2007.

  1. Fmenvironmental

    Fmenvironmental LawnSite Member
    Posts: 1

    Hello everyone! New member here, this site looks awesome. I am looking for some financial help. I have been cutting lawns for 5 years now. This year I received two jobs where the customer is going to want to do a "1099 form" (not even sure what a 1099 form is for). I have never done anything as far taxes go for the business, so this year I am not sure what i need to do. I do have a DBA, and insurance. Also I am not sure what "writing off" business expenses mean. Everyoone says to me "you can just write that off at the end of t he year", I do not know what that means. What would the benefit of that be? What could be the down fall of that also? I could use any advise for both questions, as I am new to doing pretty much any of the paper trails of owning a landscaping business.

    Thanks Again
    Frank
    Buffalo NY
     
  2. MarcSmith

    MarcSmith LawnSite Fanatic
    Posts: 7,157

    1o99 is about like the W2 form you get form the employeer from your full time job around tax time. basically the 1099 form tells the IRS that XYZ company paid you X number of dollars over the last fiscal year and did not take out any taxes. Which means you need ot pay taxes on the money. if you fail the IRS may start knocking on your door with rubber gloves and vaseline....

    write- offs- is an expense, just about everything you buy for the business to function is called a write-off or expense. fuel, tools, supplies, business lunches, ad space, ect. these items help reduce your income level.

    so if you grossed $10,000 last year, that means you collected $10,000 prior to paying any taxes or calculating any expenses so your press profit was 10k

    that number really doesn't mean squat. Net numbers is what counts. IE how much money do you have leftover after paying all your bills. Thats your Net profit. thats the important number.

    Most landscape companies run around 30-40% net profit. Ie if you grossed 10K your $ in pocket ended up being around 3-4K.

    Its a shame that it has taken you five years to pay taxes and be a legitmate business DBA and insurance are only part of the equation...and even then if you clients were not doing the 1099 on you its doubtful you be asking these questions.

    Pick up a copy of quickbooks pro and go see an accountant. you have much to learn....

    you should also start thinking about paying estimated quarterly taxes. nothing stings more than getting a big tax bill in April and not having enough ash to cover itl...
     
  3. pclawncare

    pclawncare LawnSite Senior Member
    Posts: 991

    You can say that again. I did that last year had a huge bill and that was due on the 15th of april and then i started paying quarterly this year and first quarters taxes were due on the 16th mean while i am not making any money that was a hit to the pocket book good thing i had enough money set back
     
  4. TSG

    TSG LawnSite Senior Member
    Posts: 444

    Chances are, if you are doing this PT, you may have actually lost money when you started up. That can go against personal income. A cpa may agvise you to go back and ammend
    2 years of taxes.......could mean $$$$$$$$$ in your pocket
    Alan
     
  5. MarcSmith

    MarcSmith LawnSite Fanatic
    Posts: 7,157

    good point. In fact most business don't make any money their first year since they are saddled with the debt of buying equipment, and such, thats a big hump to overcome...
     
  6. TSG

    TSG LawnSite Senior Member
    Posts: 444

    Stats show that most businesses take 3 yrs to really make money and the IRS
    usually allows losses for that time, before they look at you as a hobby.
    This is a benefit to staying a sole prop and buying a little more liability Insurance.
    Just a thought
    Form 196 ( think that is the form) is your friend....it allows you to write off
    new equipment 100%.
    Example,,it is possible to spend 16,000 in equipment and get back 11,000 refund
    Thus the cost of that equipment is really 5000.00
    A good acct keeps $$$$$$$$$$$ in your pocket
    Alan
     
  7. bluflame1914

    bluflame1914 LawnSite Member
    Posts: 55

    what about used equipment? truck? trailer?
     
  8. TSG

    TSG LawnSite Senior Member
    Posts: 444

    You really need an accountant to help you with this as the laws continue to change, many things can be depreciated,,,,vehicle expenses can be taken by the mile or actual expense. A good acct will pay for himself 5x's, especially in the first couple years.
    Don't be penny wise, dollar foolish.
    It isn't how much you make, it is how much you keep
    Alan
     
  9. hoyboy

    hoyboy LawnSite Senior Member
    from Chicago
    Posts: 346


    Alan -

    Depreciation is good, but not that good. You won't ever get a 11,000 refund on a 16000 purchase using a section 179 deduction. Remember, it's a deduction...not a credit. Also, section 179 merely accelerates the depreciation to the current year...it doesn't actually give you "more" depreciation. Still, the time value of money is important and 179 is a fantastic benefit.
     
  10. bohiaa

    bohiaa LawnSite Fanatic
    Posts: 5,220

    So with all this "new" information I now have....

    do you guys think I should have a TAX man, or get a CPA...?
     

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