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New Business....Tax Righ-Offs??

Discussion in 'Business Operations' started by rutwad, Sep 30, 2006.

  1. rutwad

    rutwad LawnSite Member
    from Alabama
    Messages: 179

    Being a new business owner, I am constantly running across situations, expenses, and questions that I never thought of. Is it right that if someone pays me $600 or more that I have to get a 1099, and the same true if I pay someone that same amount? This will lead to a question later depending on it's answer.

    Also, what about security? I am a home based sole prop., so many expenses are dually personal and business. Such as the one room in the house that is my office. Doesn't this allow me to take a percentage of utilities as a right-off for my office? Would the same be true about security protection, a partieal right-off since I keep my equipment outside at home. Can I count of some of the expenses of my outdoor security system? Equipment is EXPENSIVE and I need to build a garage for it soon, but until then....

  2. Az Gardener

    Az Gardener LawnSite Gold Member
    Messages: 3,899

    You need a good tax guy and I emphasize good because like any trade there are those who just barely passed the test and have not learned a thing since. Then there are those that live to get over on the government by finding every deduction and loophole. They read the new tax code cover to cover every year, network with other tax professionals and are on top of their game.

    As far as the 1099 if you subcontract someone to do work for you and pay them you have to get them to fill out a 1099 for you. If you don't it will just show up as pure profit on your bottom line so you want the expense to go against the income. You will also need their insurance info and license number as well but some of that may vary from state to state. If you are subcontracted by another company they will most likely have you fill out a 1099.
  3. DBL

    DBL LawnSite Silver Member
    Messages: 2,219

    in addition to a good tax guy or accountant KEEP EVERY SINGLE RECIEPT FOR ANYTHING..a pack of gum counts
  4. rutwad

    rutwad LawnSite Member
    from Alabama
    Messages: 179

    gum, what about my security system that monitors and protecs my equipment that is kept outside at my house?
  5. Josh.S

    Josh.S LawnSite Bronze Member
    Messages: 1,085

    your best bet would be to hire a accountant or whatever.. but if your cheap like me.. then here is my advice..

    the rule of thumb is, would you have this expence if you DIDN'T own the business? if the anwser is yes, then it is definatly a write off

    as for your security system write the whole thing off...

    IMHO if i were you, i would write everything off that i could possibly connect to the business... the government is a rip off anyhow...
  6. RyanD

    RyanD LawnSite Member
    Messages: 178


    Sorry, it has to be used exclusively for the business. If you go in the room to use the internet to search for a gift for your wife, the use is no longer exclusively for the business. Teh IRS site says
    As far as the security system goes, the IRS web site says
    Go to the site. http://www.irs.gov/businesses/index.html
  7. rutwad

    rutwad LawnSite Member
    from Alabama
    Messages: 179

    I'll have to check out that site. Our office is just that, an office. And the security system deduction was sorta a joke I had with my wife, telling her I was going to count our "watchdog" expenses off on taxes.
  8. MarkintheGarden

    MarkintheGarden LawnSite Bronze Member
    Messages: 1,133

    I suggest you look into the Small Business Association, they give cheap seminars that answer these kind of questions. Business use of the home is deductable but you can loose your one time capital gains tax exemption from sale of your first home by claiming a business use of the home deduction.

    My accountant has me set a percentage for personal use vs. business use and claims a deduction accordingly. For example my computer is a 50/50, I use it half for personal use and half for business use, so he claims half the cost as a business expense.

    The SBA is a lot of help, but a good accountant is also worth his fees.
  9. rutwad

    rutwad LawnSite Member
    from Alabama
    Messages: 179

    But if I were to pay John Doe $220 for a detailed equipment cleanup, then is that a write-off?
  10. indy2tall

    indy2tall LawnSite Senior Member
    Messages: 417

    For all you youngsters (not a slam, I wish I were young again) who haven't paid taxes that many years and now that you have your own business think you will screw over the government by taking every possible deduction no matter how flimsy it might be, I just have two words for you. TAX AUDIT.

    By all means take every legitimate write off your allowed but just remember the IRS has a mighty big computer system and certain deductions (historically known to be abused) automatically throw up red flags and once you reach a certain threshold on these red flags you get audited. A tax audit is a big negative even if you don't owe additional money because it will last anywhere from a few hours (if you are extremely organized) to several days if your record keeping is shoddy. This doesn't count the lost time driving to the nearest IRS office. To top it all off this will likely happen in April or May during your busiest season. Of course there is also the fact that you are now under their microscope and if you are doing something like hiding cash payments you stand a much greater chance of being caught. :nono: Not that any LawnSite members would do that. :laugh:

    Now for the disclaimer! :laugh:

    I am not an IRS agent, I am just one of the many who have been unfortunate enough to have been audited.
    For the record they ended up owing me more money on my refund. Would I have traded that in return for not being audited? In a HEARTBEAT.

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