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Tax question...kind of confused.

Discussion in 'Business Operations' started by Ijustwantausername, Dec 18, 2012.

  1. Ijustwantausername

    Ijustwantausername LawnSite Bronze Member
    Messages: 1,720

    Okay, I will try not to confuse you in the process. So I spent the day yesterday adding up all my expenses and my profit. Basically I want to know how expenses offset the taxes I would have to pay. More specifically, say I bought a piece of equipment for $2000 next week to offset the amount of taxes I would have to pay this year - lets say I am expected to pay $3000 in taxes. How much would that $2000 piece of equipment offset the $3000 in taxes? Would it be substantial enough to justify it? Also, let's just say my profit was $40K for the year.

    Also, I know "any business expense" will help affect taxes, I just want to know how and by how much.

    Is there a formula to plug in?

    The reason I ask is because my friends dad is a contractor and he buys a new truck every year to "offset" the taxes he would already have to pay. So what does that mean for me? Thanks a lot.
  2. JContracting

    JContracting LawnSite Bronze Member
    Messages: 1,878

    There isn't really a formula. 40k in net profit right now. Less the $2000 for a mower you buy tomorrow. You then have 38k you are liable to pay taxes on. For a rough number the income taxes you pay are 25%, so you'd be paying in to Nobongo, about $9500.
  3. rreyn1812

    rreyn1812 LawnSite Senior Member
    Messages: 444

    You would be able to apply all the cost against this years taxes if you take the total expense against this year. I believe the tax rules state that you must then use the asset for at least 5 years or you would be penalized. The other option is to depreciate the assets (mower) value over some period of time, i.e., 5 years. You would then take 1/5 the cost of the mower for each of the 5 years. If you get into multi year depreciation, I would have a tax professional do your taxes.
  4. Woody82986

    Woody82986 LawnSite Silver Member
    from DFW, TX
    Messages: 2,128

    I'd probably spend a couple hundred dollars and go sit down with a CPA for an hour and have him walk you through some things and ask him questions. You could also just sit down with some tax forms and plug in the numbers you have where it tells you to plug in those numbers and figure out the answer to your question by playing with the numbers.
  5. KeystoneLawn&Landscaping

    KeystoneLawn&Landscaping LawnSite Senior Member
    Messages: 774

    Also, if you are getting to the 40k+ in net income it may be time to form a LLC. As previously stated, time for a CPA!
  6. deschampsbrothers

    deschampsbrothers LawnSite Member
    Messages: 7

    Ask other business owners who u know who they use, ask them how pricing works for there service and what sets them apart from previous accountants they used, and don't just find one and go with them, i heard out 3 accountants before i made my decision. i found mine through my grandpas friend who was a successful business man himself. so try and find an elderly person that you know who has done things right financially in their life. it really can make or break your business. I would not attempt this on your own because if uncle sam comes knocking it seems like u would be royally screwed.
    my pops always told me to be a lawyer, accountant or politician because any successful business owner will have to pay you at some point. time to bite the bullet and just do it. better off doing it right from the beginning than getting audited and having to pay back taxes with a crazy interest rate applied, ive heard some bad stories, trust me you dont want to be that person to go buy something and find out all your accounts been froze by the government
  7. deschampsbrothers

    deschampsbrothers LawnSite Member
    Messages: 7

    and any accountant that is going to charge you for the first sit down meeting for you to hear him or her out is not the person you should use. thats there time to sell you on their service, they are not benefiting you any when you have that first talk. if they want your business make them earn it.
  8. KeystoneLawn&Landscaping

    KeystoneLawn&Landscaping LawnSite Senior Member
    Messages: 774

  9. Roger

    Roger LawnSite Fanatic
    Messages: 5,943

    I always mow everybody's lawn the first time for free, so that the customer will know that I earned their business. It works every time.
  10. larryinalabama

    larryinalabama LawnSite Fanatic
    Messages: 19,478

    Bottom line is a 2k purchase will save you 300$ on ssi tax and likley 150$ on income tax, it will be less than 500$ and closer to 300$.

    I wouldnt buy anything that you wont be using.

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