I know you asked for direct experience, which I do not have, but keep in mind that not all states may have the same laws regarding this. Just food for thought.
Keeping track of my business
- Thread starter 1930
- Start date
-
True! Mine is for PA.
Frankie
Member #9641
Yes. That is a possibility.
Hourly wages and salaries are an operating expense to the business. Operating expenses are deductible from the business's earnings.
So are tings like office supplies, rent, utilities, collected state sales tax on the products or services you sell, and the initial purchase of those products, or the raw materials to manufacture them, phone bills, vehicle and facilities maintenance and repair, etc.
Vdart's advice is spot on. talk to a good tax lawyer/Accountant, they can tell everything that is legal in your state for federal and state deductions, and what will be taxed.
They can also let you know the best way to protect yourself, and separate your personal assets from your business assets. In some cases incorporating is the answer, in others forming an LLC (Limited Liability Corp.) or LLP ( Limited Liability Partnership) is the better avenue to take.
Many start up company owners forgo drawing a salary, at first, to limit the draw against the bank account, but I do recommend that you plan on drawing a salary for yourself, and your wife if she is going to be part of the business, if not from the start, then as the business becomes more productive.
...by the way, "vacations" are not deductible, neither is personal spending. Bonuses are deductible for the company, but are still subject to income taxes ( Fed and State) at the applicable rate.
Hourly wages and salaries are an operating expense to the business. Operating expenses are deductible from the business's earnings.
So are tings like office supplies, rent, utilities, collected state sales tax on the products or services you sell, and the initial purchase of those products, or the raw materials to manufacture them, phone bills, vehicle and facilities maintenance and repair, etc.
Vdart's advice is spot on. talk to a good tax lawyer/Accountant, they can tell everything that is legal in your state for federal and state deductions, and what will be taxed.
They can also let you know the best way to protect yourself, and separate your personal assets from your business assets. In some cases incorporating is the answer, in others forming an LLC (Limited Liability Corp.) or LLP ( Limited Liability Partnership) is the better avenue to take.
Many start up company owners forgo drawing a salary, at first, to limit the draw against the bank account, but I do recommend that you plan on drawing a salary for yourself, and your wife if she is going to be part of the business, if not from the start, then as the business becomes more productive.
...by the way, "vacations" are not deductible, neither is personal spending. Bonuses are deductible for the company, but are still subject to income taxes ( Fed and State) at the applicable rate.
TrailBeast
AKA Mopars4us on Youtube
This was already mentioned but I thought I might reiterate a bit, because of it's importance.
Paying yourself out of the business is obviously a business expense right?, and if paying the two of you makes the business loose money that is a deduction the business can claim (and it doesn't affect your personal pay
)
In fact if you wanted to for some reason, you can even bankrupt a company by paying yoursef too much and claim the business loss on taxes.
Get it?
If your tax guy doesn't mention anything like this, get another tax guy.
When I started I was told to ask my accountant about how much I was going to owe at the end of the year, and if the accountant didn't ask me how much I wanted to owe, then I should get someone else.
Paying yourself out of the business is obviously a business expense right?, and if paying the two of you makes the business loose money that is a deduction the business can claim (and it doesn't affect your personal pay
)In fact if you wanted to for some reason, you can even bankrupt a company by paying yoursef too much and claim the business loss on taxes.
Get it?
If your tax guy doesn't mention anything like this, get another tax guy.
When I started I was told to ask my accountant about how much I was going to owe at the end of the year, and if the accountant didn't ask me how much I wanted to owe, then I should get someone else.
True, business can show a loss but not for too long, because it may draw attention to you (think IRS). My accountant said that 4-6 years after start up isn't out of the norm for a business to show little if any profit.
TrailBeast
AKA Mopars4us on Youtube
Something like that, but I couldn't remember for sure so I tried to er on the safe side.
Edit:
Duh,,,,I only thought I mentioned an amount of time, but didn't, sorry.
If you get a "good" accountant, he will be listing things out that you can and cannot do.
I suggest you make a list before you go visit one, so you get the most for your money. My accountant charged 95 bucks an hour for face to face consult, but he is one of the best in the county.
I don't know what business your are starting, but I would also suggest asking him about becoming an LLC, this separates your personal assets from business assets, think lawsuit. It also gives you some extra perks in regards to write offs.
There are literally hundreds of deductions that you can take legally, the more you can deduct, the less taxes you will have to pay in. Your taxes will be based on actual left over monies.
I would also suggest, when you get things rolling good, to purchase Quickbooks and use it religiously. It will let you know exactly where you stand, and when month end reports come around, and year end reports are needed, it's right at your fingertips.
Some things your accountant should tell you:
If you operate your business out of your home, part of the mortgage (if you have one) is deductible.
Part of your utilities is deductible, etc etc.
If you are traveling, and I mean anything related to business, keep track of mileage, the fed allows a pretty nice chunk of change for mileage.
Gas receipts, tolls, vehicle repairs and on and on.
Equipment repairs and purchases.
Depreciation on tools.
You get the idea, if they aren't focusing you on ALL of these things, find another accountant.
Great info Bad Sport!
I like the LLC set up. I had one in Georgia. I'm operating as a Sole Proprietorship here in Virginia since we're trying to get back to Georgia.
Think of an LLC as a separate person. It has its own bank account, its own expenses, and its own earnings. The LLC makes money, pays expenses (including wages or "owner's draw) and what's left over is taxed. One important thing to remember is "EVERYTHING" must be separate from your personal stuff. If something were to happen to the LLC, it helps protect your personal assets.
But nothing beats a great local accountant!!
I like the LLC set up. I had one in Georgia. I'm operating as a Sole Proprietorship here in Virginia since we're trying to get back to Georgia.
Think of an LLC as a separate person. It has its own bank account, its own expenses, and its own earnings. The LLC makes money, pays expenses (including wages or "owner's draw) and what's left over is taxed. One important thing to remember is "EVERYTHING" must be separate from your personal stuff. If something were to happen to the LLC, it helps protect your personal assets.
But nothing beats a great local accountant!!
That's how I paid myself, "owners draw". An LLC is an absolute must IMO, if you have vehicles being used for business (think accident and lawsuit), or you are actually working on someones "real" property such as a car (think something breaks and causes a crash or injuries) and they come back on you, house (think house burns down) and they come back on you etc.
My business is an LLC, am working on getting dealers license at this point, plan to buy wrecked/repair/sell.
I am trying to do everything 100% legit as mentioned in above post and within reason ( my reason ) I am there.
I am trying to learn all of the loopholes that the big business take so that I can show no income or little to none and still make a decent living.
Thanks for all the input, it is a big help.
I am trying to do everything 100% legit as mentioned in above post and within reason ( my reason ) I am there.
I am trying to learn all of the loopholes that the big business take so that I can show no income or little to none and still make a decent living.
Thanks for all the input, it is a big help.
Frankie, can you explain more/better to me this neat scanner? Looking on google I see that it is a scanner, they also have cloud which I understand as another version of a back-up system and a neat desk ( according to thhis page http://www.neat.com/pricing/compare-best-scanner/
I would like to possibly start with the neat scanner cause it is the cheapest and I am only starting out but would still like to have all my ducks in a row just in case.
Hate to sound like a broken record but get a good accountant. I wouldn't make it a goal to show no income to make a decent living and do it by not paying taxes. Make a profit, pay yourself, and pay your share of taxes. The IRS can make it rough on you. tmm
All good information from you guys. Just make sure you clear things with your accountant to make sure you're doing things properly for where you live. tmm
As long as everything is done legally and everything is kept track of, AND you have a good accountant, there isn't much they can do.
A good accountant is going to right beside you if ever audited.
If the IRS is giving you those tools, to make more money for yourself, why not use it?
Not going to go out of my way to not pay what is owed to anyone, I am only going to try and take advantage of what I am able or allotted to me. Thats smart business
Exactly! Like I said, if the IRS gives you the tools to take that advantage, it's foolish not to use them.
Sorry, didn't mean to ruffle feathers but this sentence is the reason why I responded the way I did. My wife is a CPA and I have been in business for 25 years. I don't want to see anybody get in trouble with the IRS by not doing things right. tmm
Quote: I am trying to learn all of the loopholes that the big business take so that I can show no income or little to none and still make a decent living.
Quote: I am trying to learn all of the loopholes that the big business take so that I can show no income or little to none and still make a decent living.
-
