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Tax Write offs

Discussion in 'Business Fundamentals' started by DBL, Feb 21, 2006.

  1. DBL

    DBL PlowSite.com Addict
    Messages: 1,310

    everytime i buy something someone says oh go write this off on your taxes. how do i qualify for this and/or how do i apply or get this bennefit
     
  2. mike33

    mike33 Senior Member
    Messages: 335

    Bobcatservice

    How long have you been in Business?
     
  3. Mick

    Mick PlowSite.com Veteran
    from Maine
    Messages: 5,546

    The answer to how to take business deductions is way too involved for a forum like this. Go to the IRS site and study the Business Deduction section.
     
  4. mmwb

    mmwb Senior Member
    from wyoming
    Messages: 114

    If your doing much business, the services of a competent (there are plenty of the other kind--don't go with H&R block) accountant is worth a few hundred bucks. They will generally be able to save you more than you pay them and avoid alot of IRS hassels following mistakes made.
     
  5. SLSNursery

    SLSNursery PlowSite.com Veteran
    Messages: 140

    Everyone gets that benefit

    When someone tells you it is a write off they mean 1 of 2 things.

    1. Normal business expense - which decreases your net profit - these are things like the cost of goods sold, repairs, payroll, insurance, rent on a backhoe, interest paid on loans etc.

    2. Depreciation - fixed assets can be bought, but only a portion can be written off. When you make payments on a truck, only the interest and depreciation are "write-offs". Any extra principal comes out of profits, and is subject to tax.

    Here is a (really) quick example so you can't claim that no-one on the forum answered your question -

    Say you collect 100,000 dollars in sales revenue.
    Then, you pay a guy 50,000 to work for you (including taxes),
    and you use 20,000 to buy materials pay for insurance, etc..
    That leaves 30,000.

    The 70,000 is written off as expenses, and the 30,000 is net profit, subject to taxes.

    If you take the 30,000 and go pay cash for a vehicle, you'll think that you are in good shape, however, this is where you'll need an accountant. Usually, only a portion of the acquisition cost gets written off each year for the useful life of the asset. Check the IRS rules for this, and go look up 'depreciation'. Without accelerating the depreciation, you'd be able to "write off" about $6,000 of the 30,000 truck against that Original $100,000for the sample tax year. Remember the 30,000 net? Take the $6000 off of that (again, as a write off), and you are left with $24,000 in net profit.

    Uncle Sam is looking for his income taxes on the $24,000 on income regardless of whether you kept the money or spent the money.

    Bottom line is - go talk to an accountant soon. But, what your associates are saying is that all things that you consume should be written off against income if they are used for business purposes, rather than retaining excess profits without "write offs".

    Good Luck. The more you make, the more you write off.
    At some level, this translates into it takes money to make money
     
    Last edited: Feb 22, 2006
  6. hickslawns

    hickslawns Senior Member
    Messages: 619

    Listen to these guys about getting a good accountant. They are on the money. There are a few people you don't want to piss off and the IRS is one of them. The bank is another. Your spouse would be another good one to keep happy! Oh yeah, and let's not forget payroll.

    Now about this "You can write that off" line from people. That is one thing that strikes a nerve hard with me. What most don't realize is just because you can write something off doesn't mean you didn't have to pay for it up front. It also doesn't mean you don't have to pay taxes. It also doesn't mean we are getting away with something and we (self-employed) people don't make tons of money contrary to popular belief. Tax write offs are simply a way to make things a little more manageable. If I had to pay taxes on the gross income of my business, I would be making $50-60k per year working with the idiots on the assembly line at a factory job. I would not be self-employed. Hell in the end, I may well be more financially stable in one of those jobs. Just couldn't live with myself punching a timeclock and listening to a bunch of whiners complaining about the taxes taken out of their check when they make $25-30/hour and talking about starting their own business so they could write off everything and "get rich". Enough venting for the day, hope it didn't bore you. lol
     
  7. MBB

    MBB Senior Member
    Messages: 129

    been their done that, well said!
     
  8. Mdirrigation

    Mdirrigation Senior Member
    Messages: 408

    If you take the 30,000 and go pay cash for a vehicle, you'll think that you are in good shape, however, this is where you'll need an accountant. Usually, only a portion of the acquisition cost gets written off each year for the useful life of the asset. Check the IRS rules for this, and go look up 'depreciation'. Without accelerating the depreciation, you'd be able to "write off" about $6,000 of the 30,000 truck against that Original $100,000for the sample tax year. Remember the 30,000 net? Take the $6000 off of that (again, as a write off), and you are left with $24,000 in net profit.


    ==========================================================

    actually if the vehicle weighs over 6000 lbs empty you can take 25,000 off the first year and the remainder over the following 4 years .
     
  9. ynvvbr

    ynvvbr Member
    Messages: 68

    you are allowed to write off up to $125,000 in equipment expenses.... Like EVRYONE said get an Accountant Tom. They may cost you $800.00 a year (includes payroll reports) but he will get you that $125,000 write off if you need it.
     
  10. DBL

    DBL PlowSite.com Addict
    Messages: 1,310

    yeah i guess you guys are all right i would end up paying that $800 to the gov if i didnt have a good accountant to help me write all of this off so thanks guys and either tomorrow or monday im going to be making some phone calls
     
  11. SLSNursery

    SLSNursery PlowSite.com Veteran
    Messages: 140

    I tried to stick to the real basic stuff

    I guess I could have explained accelerated depreciation, but this seemed like write offs 101, maybe we could save that for the next semester.
     
  12. Mick

    Mick PlowSite.com Veteran
    from Maine
    Messages: 5,546

    I agree. That's why I gave the answer I did. Which may have seemed evasive, but talking about classes of deductions, Section 179 (and limits) etc would really have been pointless.
     
  13. groundbreakers

    groundbreakers Senior Member
    Messages: 824

    HEY ..... watch who you call (idiots on the assembly lines at a factory job) i know a few people who make more then average college proffesor does on the line workin .. i was one of them ... $88,000 a year .... how many indepent contractor's on this site make that in a year ??????? OH YEAh one more thing WHO DO YOU THINK MAKES THE TRUCKS ALL OF US DRIVE TO PLOWWWWWW WITH !!!!!!!!!! .. YEAH were IDIOTS ...
     
  14. Grunt0311

    Grunt0311 Member
    Messages: 79

    I agree! I think you owe an apology hicks:salute:
     
  15. mike33

    mike33 Senior Member
    Messages: 335

    Bobcatservice

    If your in the landscaping business, how long? I cant believe the original question! Havent you ever filed a tax return before for your landscaping business. Schedule C
     
  16. ynvvbr

    ynvvbr Member
    Messages: 68

    the guy asked a question Mike 33 how bout we cut him some slack and answer it rather then criticzing it.
     
  17. hickslawns

    hickslawns Senior Member
    Messages: 619

    grunt and groundbreakers take it easy. Those weren't comments generalizing every factory worker. Bottom line is this: I have worked with idiots. I have worked for idiots. Now I am the idiot with his name on the trucks (and paychecks).

    Now you all know there are idiots out there. If you fall into that category I am sorry. If you don't fall in that category, then you know the misinformed kind of person I am talking about. They don't all work in factory jobs and not all factory workers are idiots. Some bag groceries, some wait tables, some work at my bank, some (maybe a lot) are in political office. Point is, the ignorant idiot that thinks because you are self-employed you are filthy rich can be anywhere. Who knows, maybe some of my employees or former employees think I am an idiot. I know a couple that thought they could go in business for themselves and fell on their faces. I have hired some guys that USED to have their own business. Going on 10 years here and picking up momentum. prsport

    The question was about write-offs and I vented one of my pet peeves.:yow!: I am not out to start a war against factory guys. Everyone plays their role in society. I feel my role is to hire guys and give them a chance to learn something or maybe just give them a stepping stone into their next job. Pretty much the same as I am doing for my kids. Maybe teach them a trade. Maybe they just need a paycheck. Most importantly I try to teach them honesty and humility, and how to put in a hard days work for an honest paycheck. I try to educate my guys (and kids) on all aspects of the business from mowing and string trimming, to sweeping parking lots or plowing, to preventative maintenance, to business finances or customer relations. They will be informed people when they move on if I am successful. Maybe I will be successful if they stay with me for many years after learning something. Otherwise they may turn out to be idiots that think their boss is making too much money because "he can write everything off". :dizzy:
     
  18. groundbreakers

    groundbreakers Senior Member
    Messages: 824

    hicklawns - ... yes you have a point ..... no biggy i was half asleep the other morning when i read your message .... i guess in a way i took it the wrong way .... but after rereading your last message i get your point .... and yes its true !!
     
  19. PORTER 05

    PORTER 05 Senior Member
    Messages: 449

    in about 4 billion yrs the sun is going to grow to a huge size and burn and melt the entire world, whos cares if someone called another person an idoit, just enjoy life and be happy, and try not to do any harm to people or the enviroment.....+ how long have you been in the landscape buieness, u have 3 trucks and looking for another, have you ever filled taxes???????i dont understand....
     
    Last edited: Feb 25, 2006
  20. mike33

    mike33 Senior Member
    Messages: 335

    Bobcatservice

    Porter, Thats the exact point i was tying to make !