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IRS today

Discussion in 'Business Operations' started by 65hoss, Jun 16, 2003.

  1. TurfPro

    TurfPro LawnSite Member
    Messages: 232

    Green in Idaho,

    1st off I'd like to say I appreciate your input to these business related threads. It's the one thing I absolutely hate about being self-employed,,ugh all the paper work.

    My question, how small of a business can still benefit from making the change from Sole Proprietor to LLC? What are the pros and cons to each? (in a nutshell)
  2. Green in Idaho

    Green in Idaho LawnSite Senior Member
    from Idaho
    Messages: 833

    The benefit from sole prop to LLC is only liability protection. A singler owner going to LLC is going to be taxed EXACTLY the same way. Same forms, same tax rates, same everything for tax purposes.

    However, some states do not allow single members to be LLC though-- most do, but a few do not.

    So for liability protection even the smallest one-man operation doing 5 accounts can benefit from it.

    The down-side is the cost. It costs to file the Articles of Organization. And some states require annual filing fees. But if it saves your bacon on one incident 4 years from now it will be well worth it.

    Other considerations are what you have at stake and what your risk is.

    Again LLC law is based on state law, just like corporate law so it is different from state to state.

    Generally, I would recommend going to LLC if your income is less than $40k, or if you have some risk (mower throwing rocks, vehicle accident) or if you have significant personal assets to protect.

    If more than $40k of income go with an S-corp (pay self a reasonable salary and pull most as nonwages).

    BUT now with the recent tax laws changes there are other planning opportunities. Sorry, I have to reserve that info though.
  3. TurfPro

    TurfPro LawnSite Member
    Messages: 232

    Green in Idaho,

    Is it wise for someone to prepare their own Taxes via programs like Turbo Tax? Are all the tax laws updated and accurate on these types of "do-it-yourself" tax programs? The reason I ask is I'm dissatisfied with my preparer and am wondering if doing it myself would save me money?

  4. Green in Idaho

    Green in Idaho LawnSite Senior Member
    from Idaho
    Messages: 833

    Is it wise for someone to do their own tax?

    It is wise to LEARN as much as possible about your taxes. Turbo Tax can help do that for you. However Turbo does not replace the professional knowledge of a tax pro.

    Remember Turbo is a TOOL. You using Turbo is the same as a homeowner buying the tools to do their own lawn. Yes, they can usually accomplish it but it takes them longer to learn how to use the hedge-clippers without butchering the shrubs, it takes awhile for them to use a ZTR, the lawn looks bad but it's mowed, and then there is the knowledge of lawn CARE. Does the homeowner know how to treat grubs, or powdery mildew. Usually not, but of course they can read to find out or they can go to a Web site like this one and learn some too. But that takes TIME. They might screw up and end up buying a new tree to replace one, or have to fix other mistakes. Just like you learning to use Turbo and learning the tax laws in order to use that tool properly. Do you have the time? Does the homeowner have the time? Or does it work best that a homeowner knows some about lawn care, like the knowing the leaves should not be brown and to call a pro. How about a homeowner buying a software program to design their new landscape? The software is a TOOL and yes it can tell shade/sun plants and how big the shrub gets--- but.... what will the result be?

    Are all the tax laws updated?

    Yes, Turbo and others do a very good job of updating their programs every year. They have to comply and meet specs set by the IRS in order to use e-file with the IRS. However, occasionally the programs do have glithes. And Turbo has been good at correcting the glitches w/updates. The programs seldom let you do something wrong, but they easily let you SKIP over something.

    As far as being unsatisfied by current preparer.

    I can understand that if you are using an inexperienced tax preparer. And many experienced preparers know just the tax return and nothing more. They are there to enter your numbers on a page NOT to advise you. Most people think of H & R Block when they think tax preparer and MANY small business people go there. But realize Block has a large employee turn-over and they teach new employees the basics and the software does most of the work. Again, their software is a tool too. And many rookie preparers are struggling with the TOOL and the procedures. Inexperienced or recent tax preparers are NOT going to be able to give you good advice for tax planning, business planning and in most cases they are likely going to miss things specific to your business. There are a few excellent business preparers in the Block organization and other similar firms. Problem is they are usually avail only in Feb-April. And they are a SMALL percentage.

    Will doing it yourself save you money?

    Probably not. It will take you many many hours to get to efficient tax work. You could be spending that time mowing and making money instead of trying to save money.

    If you were framed for a crime, you COULD represent yourself in court, right? You can read the laws, etc. And 5,000 hours later you might do as well as the $150/hr attorney. But without the experience of previous trials, you will be swimming upstream. Is is worth it?

    Instead I suggest finding a new accountant. ACCOUNTANT not tax preparer. An tax preparer is to accounting as a neighor kid mowing is to professional horticulture. They just do the task, and not much else. As you business GROWS, you will need business advice, consulting and guidance. Be eager to seek it and pay for it. It can be very inexpensive when all is said and done.

    Accountants can be CPA, non-CPA, degreed, nondegreed or just a lot of experience. When your customers look for lawn care, do they look for a license? A horticulture degree? Lots of experience?

    Look for someone who works with contractors esp LCO if possible. Include this as a question, "Can you tell me about the fuels tax credit?" If they tell about the requirements and how you can get a refund on the tax you paid for your equipment fuel, continue interviewing them. IF they stumble on it, keep looking for another. Ask other business people you know in your area, and then interview a minimum of 3 prospects. Just like getting bids. And don't automatically go with the cheapest.

    In addition to using an accountant-- pick up a book at the bookstore for something like Ernst & Young Tax Guide, or Kiplingers' or H& R Blocks. They are excellent references for you to answer some questions. Or take a class. Plus if you are well versed, you will be able to help your acct, ask the right questions, understand what they are talking about, etc. If you like, do a Turbo return at the end of the year and then have an acct do one for you and see if they save you money. Keep track of the time to do Turbo. You will know in a short while the VALUE of a good accountant.

    Your business is based on specializtion. You specialize in lawns so the homeowner can specialize in their career field. Allow others to specialize for you to accomplish those things you need done. But always utilize quality and excellent service just like you offer your customers. It is a ladder; you are the middle rung.
  5. TurfPro

    TurfPro LawnSite Member
    Messages: 232

    Great Reply,Thanks !

    I can honestly say that my motive for trying some other way to prepare my taxes,in this case Turbo Tax,is NOT to save time ,,hehe, I KNOW it would take me hours upon hours to do that.
    It's to save money,,,not in preparer fees,but in Taxes. I understand what you are saying in the difference between a Tax Preparer and a CPA,,that makes sense. The problem lies in finding someone who understands the needs of a small business.

    Thanks again
  6. Jimbo

    Jimbo LawnSite Bronze Member
    Messages: 1,093

    Thanks Green in Idaho- I dont know your background but you seem pretty smart when it come to this topic. Thanks a million!!!!

  7. Green in Idaho

    Green in Idaho LawnSite Senior Member
    from Idaho
    Messages: 833

    No problemo. I enjoy the tax stuff. My background is landscaping previously and accounting currently, much like a couple others on here. Those two element go well together.

    As far as saving $ on taxes: My #1 recommendation is Keep good records-- clean, organized and easy to understand.

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