Discussion in 'Business Operations' started by RyGuyusMaximus, Jan 25, 2008.

  1. RyGuyusMaximus

    RyGuyusMaximus LawnSite Member
    Messages: 88

    So LCO's lets talk about write offs.

    What constitutes a write off in this business?

    Just list your past write offs that were approved by your CPA.

    Thanks in advance.
  2. deereequipment

    deereequipment LawnSite Senior Member
    Messages: 370

    I usually write off expenses.
    Can't really seem to get by with more than that.
  3. Richard Martin

    Richard Martin LawnSite Fanatic
    Messages: 14,699

    I take the usual, direct expenses.

    Let me make note of something.

    It doesn't matter whether your CPA approves of them or not. It's whether the IRS approves of the deductions.

    I've seen some people take some wild expenses. Christmas lights on their houses. Complete office deductions for rooms in their houses including paying rent to themselves on those rooms.

    There are certain deductions that get an automatic review from the IRS. Home office deductions are one of them.
  4. yamadooski

    yamadooski LawnSite Senior Member
    Messages: 434

    The best thing is find an accountant that is really old and been doing this his entire life from the age of 2.
    They know all the loopholes and will tell you deductions that you never thought of.
    And when you find a real cheap one run away as fast as you can.

    I can tell you some of my deductions that would make you scratch your head.
  5. wooley99

    wooley99 LawnSite Senior Member
    Messages: 269

    Go ahead. We'll listen and scratch.
  6. TSG

    TSG LawnSite Senior Member
    Messages: 444

    The bottom line is that even if an acct does your taxes,
    you are responsible for the content.
    Short version: You are responsible regardless
    You take what you want.
    You will have to explain the expense if audited
    The acct can explain how it was prepared
  7. AI Inc

    AI Inc LawnSite Fanatic
    Messages: 26,801

    When you go out to dinner , eat at a hotel restaurant. It will show up on your CC as a hotel. Lodging is a 100% deductable as opposed to a meal wich is entertainment and a lot smaller deductable.
  8. JimLewis

    JimLewis LawnSite Fanatic
    Messages: 6,872

    Just normal everyday business expenses are the main write-offs you want to use. Shop rent, machinery, fertilizer, tools, business phone line, cell phone, repairs, uniforms, advertising, labor, office supplies, etc. Those are no-brainers. You always take the write-off for those things.

    Where people start to get into trouble is taking deductions for things that are questionable. For instance, if you don't have a dedicated business line but try to claim your "home" phone line as a tax deduction then that is going to get you in trouble. If your family only owns one vehicle, and you're trying to claim that vehicle as a 100% write-off that's going to get you in trouble too.

    Similarly, if you're claiming write-offs for 25 meals each month and 3 hotel stays each month but your company only made $150,000 last year, the IRS is going to call your bluff on that one too. They know from experience that most lawn mowing companies don't have to take clients out to lunch and don't have THAT many hotel stays for business.

    Just plain common sense thinking will avoid most problems with deductions. If you want to write-off your phone line, fine. Just make sure it's a dedicated business line separate from your home line. If you want to write off 100% of your pickup truck, fine. But make sure it's a dedicated work truck. If you're taking off the magnetic signs every week and driving to church or the beach every week when you're not working, then that's something the IRS could find out about and you'll be risking that write-off.

    One thing to always keep in mind is how the vehicle-related expenses work. Basically, it works like this; if you have only one company vehicle, you can use the standard mileage deduction, which is currently 48.5 cents per mile. It's much easier to keep track of mileage than it is to save every receipt for gas, repairs, tires, breaks, oil changes, etc. So if you own one vehicle only, this is the way to go. If you have more than one company vehicle on the road at one time, then you CANNOT take the standard mileage deduction. You have to save receipts for all vehicle related costs. So save every receipt for every tank of gas you buy, every oil change, every part, every tire, breaks, even car stereos. Anything bought for those work vehicles are a write-off.

    Deductions for home-office and garage are common too, but they are also a little suspect sometimes. The IRS has been a lot more forgiving on these deduction in recent years. They don't automatically audit you for this deduction, like they used to. But still, if you're going to take this deduction, it needs to be legit. If you have a separate room in your house that is ONLY an office, you should write it off. If your garage is ONLY used for storage of your equipment, you should be able to write off that percentage of your house too. You also get to write-off a percentage of utilities for said house as well. But you really need a good CPA for all of this.

    But again, the main thing is stick to usual business deductions. Don't try to get clever and claim that your dog is a write-off because he protects your equipment at night. Don't try to write-off the $200 water bill you get each month at your house because "I'm a landscaper and I need to keep my grass green in order to look professional". Don't try to write off that weekend trip to the coast with your family when it's obviously not related to business. Don't try to write off your weekly massages at "Lucky Seven" salon because your "back hurts from mowing."

    But at the same time, save every receipt whenever you buy gas, stamps, paper, printer ink, car parts. And be sure to think of EVERY legitimate expense. If you have a company website, that's a deduction. If you have company email, that service is a deduction. If you need internet in your office, that's a deduction.

    Just be smart. And a good, experienced CPA is your invaluable guide. He'll help you think of all these things and help prevent you from taking deductions that will get you in trouble.

    And btw, yamadooski is right. A good CPA will help you come up with some awesome LEGIT deductions that you would have never thought of before.
  9. Lawnworks

    Lawnworks LawnSite Fanatic
    from usa
    Messages: 5,407

    I think it makes life a little bit easier if you make a majority of your purchases on your credit cards... eliminates the need for reciepts.
  10. JimLewis

    JimLewis LawnSite Fanatic
    Messages: 6,872

    Ummm....I don't think so.

    What are you going to say when the IRS audits you in 3 years and says, "So...you went to Capital Chevrolet and spent $1300.00. And you say that's for your Chevy Pickup. But we couldn't help but notice your wife also drives a Chevy Avalanche. How do we know you spent the money on your truck and not souping up her rig? We're going to need to see the receipt for that one."

    This could happen with lots of different "purchases". They might notice a $145 transaction for the US Post Office and say, "We couldn't help but notice that you sell stuff from time to time on eBay. How do we know that $145 was for stamps and not for shipping off your eBay items? We're going to disallow this deduction unless you can provide us some proof here."

    Same goes for Office Max. When the IRS agent is in your house for a week doing the audit he might say something like, "I see a lot of purchases on your card from Office Max. And you say these are all for your business. But I couldn't help but notice that your wife has a lot of nice desks, computer, printer, and materials in her 'scrap book' room. You sure some of these purchases at Office Max weren't for her?"

    IRS Agent, "So we also see a lot of 'sales' here from Lowes and Home Depot. This on in particular is for $2900.00. And we noticed you guys have a nice new washer and dryer here in the house. You sure the 'business' didn't purchase those for you? I think we're going to need to see both the receipt for this transaction AND the receipt and purchase date on the new washer and dryer units."

    I don't know about you. But if and when I get an IRS audit, I don't want crap like this coming up.

    Even if they are legitimate write-offs you're purchasing with your credit cards, they need to be substantiated with receipts, I am pretty sure.

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