Tax Perks???? - Hot Rod Forum : Hotrodders Bulletin Board
Hotrodders.com -- Hot Rod Forum



Register FAQ Search Today's Posts Unanswered Posts Auto Escrow Insurance Auto Loans
Hot Rod Forum : Hotrodders Bulletin Board > Tech Help> Garage - Tools
User Name
Password
lost password?   |   register now

Reply
 
LinkBack Thread Tools
  #1 (permalink)  
Old 04-08-2005, 12:38 PM
Im trying to have an idea!
 
Last photo:
Join Date: Dec 2003
Location: Abilene Texas
Age: 35
Posts: 382
Wiki Edits: 0

Thanks: 0
Thanked 0 Times in 0 Posts
Tax Perks????

Did not really know where to post this (at least where it would be read by shop owners)--

I think Im goin to legally open my shop as a small buisness to see what all i can write off on my taxes for next year on tools and such i purchase this year.

Guess the simple questions first-

would i have to classify my shop as automotive to write off certain things?
What can i write off?
How does the write off work?
Can a buisness car be written off?
Are there limits to what you can write off?
Can i write off my payments for the building? (will be payed off in a couple of years).
Would the buisness credit be established from my credit, or is that completly diffrent?

I am no tax expert...but will be making an appointment with one.

    Advertisement
Reply With Quote Quick reply to this message
Sponsored Links
Advertisement
 
  #2 (permalink)  
Old 04-08-2005, 12:49 PM
poncho62's Avatar
Out of the Loop Moderator
 
Last wiki edit: Streetbeasts links
Last journal entry: at car show
Last photo:
Join Date: Oct 2003
Location: Hanover, Ontario, Canada
Age: 62
Posts: 17,031
Wiki Edits: 5

Thanks: 24
Thanked 332 Times in 258 Posts
If you are serious about opening a business, the 1st thing you need, is knowledge...That is, whether you need a business lisence etc.

The next thing you need is an accountant....................they can answer all your tax questions.
__________________
Ontario Rodders
Reply With Quote Quick reply to this message
  #3 (permalink)  
Old 04-08-2005, 01:00 PM
Im trying to have an idea!
 
Last photo:
Join Date: Dec 2003
Location: Abilene Texas
Age: 35
Posts: 382
Wiki Edits: 0

Thanks: 0
Thanked 0 Times in 0 Posts
will an accountant answer the "opening a business" questions....
Ive been calling around the city departments, seems no one knows where
to get this kinda information, and they have no idea who to ask. I stopped in on a couple of small business here in town and asked what they did. they seem very hesitant to answer the question, they may think i a competitor or something. But the info i did get was kinda foggy. seems that most of these guys just rented a place and started selling.

the more i read the more i get confused about a lot of stuff. leaves me tongue tied on what i really need to ask- you know what i mean...
Reply With Quote Quick reply to this message
  #4 (permalink)  
Old 04-08-2005, 01:09 PM
OneMoreTime's Avatar
Hotrodders.com moderator
 
Last wiki edit: Health and safety in the shop or garage
Last journal entry: Yard Dog pic
Last photo:
Join Date: Jul 2004
Location: Washington State
Age: 70
Posts: 7,511
Wiki Edits: 3

Thanks: 80
Thanked 173 Times in 161 Posts
CPA can tell you

And in order to write off expenses for a business there needs to be a legit business there..Sign on the building..business cards..some actual work for hire going on..that sort of thing..

Make some discreet inquiry as to the local zoning and code issues..in some places auto shops have been zoned out of business..

If you have good credit establishing business credit is not a problem..tho (speaking from experience) avoid lenders bankers and credit card people as much as possible..

Just my thoughts..

OMT
__________________
I have tried most all of it and now do what is known to work..
Reply With Quote Quick reply to this message
  #5 (permalink)  
Old 04-08-2005, 01:09 PM
Beenaway2long's Avatar
or Jeff, or Doc, or...
 

Last journal entry: Results of the Camaro
Last photo:
Join Date: Nov 2003
Location: Syracuse, NY-well, just North
Age: 51
Posts: 988
Wiki Edits: 0

Thanks: 0
Thanked 4 Times in 3 Posts
Quote:
Originally Posted by MRGM
Did not really know where to post this (at least where it would be read by shop owners)--

I think Im goin to legally open my shop as a small buisness to see what all i can write off on my taxes for next year on tools and such i purchase this year.

Guess the simple questions first-

would i have to classify my shop as automotive to write off certain things?
What can i write off?
How does the write off work?
Can a buisness car be written off?
Are there limits to what you can write off?
Can i write off my payments for the building? (will be payed off in a couple of years).
Would the buisness credit be established from my credit, or is that completly diffrent?

I am no tax expert...but will be making an appointment with one.
************************************************** *****
See a certified accountant or Tax Attorney prior to opening a business.

Writeoffs suck. They equate to recovering the same percentage as your taxable income. Example: If your in 30% bracket, you will get back .30 for ever $1.00 you spend.

Business Credit is ALL BRAND NEW. Just like your a teenager again, only harder. Be careful with new Bunkruptcy Legistlation.

If you write off your building, BE CAREFUL! You will have to pay "Recapture" when you sell the building. Example: If your building was 200,000.00 when you bought it, you wrote off 80K over 10 years or so, then SOLD it for 200,000.00 (bad investment)- The Government sees this as you MAKING 80K off the building. You are taxed accordingly. Nice, huh? Capital gain. So that writeoff, actually will cost you money. The improvements are fully deductable, though. That is the sole benefit, but again, its only good to the extent of your tax bracket.

Opening a "store front" will also get you occasional visits from EPA, OSHA, etc. to see if you are playing by the rules. They don't mess with individuals so much, unless a neighbor blows you in. And everyoine now thinks your a golden goose, where they can slip on your property and sue you for 1/2 million. (Higher property insurance (your now Commercial) as well)

You can write the stuff off, but like I said, you only get back a percentage of the money spent. These guys that think big corps get off with only paying 1 dollar, are only seeing the dollar, and not that they only made profits of $2.00 (50% bracket). Seriously! The tax break is no real advantage.

Quick Example
100,000. Gross Income
-25% taxes ($25,000.00)
$75,000.00 Net
-$20,000 Non deducted expenses (like you didn't open the business)
$55,000.. in your pocket

100,000, Gross
-20,000 writeoffs
80,000 adjusted gross
-25%
$60,000 Net in your pocket (after writeoffs)

$60K
-55K
5 K more in your pocket, yet you SPENT $20K (Net 25%-same as tax bracket)

You have to decide if the $20K you spent is coming off your building, which you repay in the future, or if its in tools. Then you also have to factor in the added expenses (workmans comp ,even for yourself, when you can not collect on yourself!, and commercial insurance,etc, accountant and legal fees). There are also W/C audits, tax audits, etc.

Take a look at the WHOLE picture before deciding which way to go.
Reply With Quote Quick reply to this message
  #6 (permalink)  
Old 04-08-2005, 02:06 PM
Will I ever get it done?
 

Last journal entry: Left Front Fender
Last photo:
Join Date: Oct 2004
Location: Tulsa, OK
Age: 57
Posts: 1,049
Wiki Edits: 0

Thanks: 1
Thanked 3 Times in 3 Posts
Some other points to consider. When I had my small business (buying and selling toy trains) I was a sole proprietor. All I had to do was file a DBA (doing business as) at the financial institution where I had my accounts. As a sole proprietor, you are personally liable for any and all expenses created by your company. I felt there was little opportunity for a major judgment against my company, so I went that way. If you have a building where the public is going to come to you and/or there is a high probability of a large judgment against the company, I would incorporate. While you can do this yourself, I would hire a lawyer to make sure it is done correctly. (Laws vary from state to state, so check with your financial institution and/or lawyer first.)

If memory serves, the IRS required that you show a profit in 2 out of 5 years of business. If you didn't, the IRS could require you to prove to them that you were actually trying to make a profit. If you couldn't pass this test, they would consider your "business" to actually be a hobby. Any profits are considered as regular income and you can not deduct expenses.
Reply With Quote Quick reply to this message
  #7 (permalink)  
Old 04-08-2005, 03:27 PM
bracketeer's Avatar
489 Lemans
 

Last journal entry: Street Legal
Last photo:
Join Date: Dec 2004
Location: Courtenay, BC, CehNehDeh
Age: 55
Posts: 2,139
Wiki Edits: 0

Thanks: 0
Thanked 1 Time in 1 Post
small business

A lot of good info here. The Federal Gov't puts out a package on opening a small business. Has all the forms to get registered, company name, tax numbers, who do keep books, etc. Expenses are generally a whole lot more than you anticipate. Thus getting a tax break on your day job for 3 years. Then your business fails for not turning a profit. But there is no one stopping you from opening another the next day. As long as you don't go bankrupt.

You do not need an accountant. Simple books for a proprietership is straight forward. Expenses; percentage of mortgage used for business, phone, hydro, advertising, company car, gas, insurance, heat, etc. Your already paying these now. Why not get a tax break on it.

Right offs is a bad term. You will save 25% of every dollar you spend. You "do not" get your dollar back!
__________________
[URL]http://members.shaw.ca/g.body.building[/URL]
Reply With Quote Quick reply to this message
  #8 (permalink)  
Old 04-11-2005, 09:58 AM
Toyman's Avatar
Member
 
Join Date: Aug 2003
Location: USA
Posts: 108
Wiki Edits: 0

Thanks: 0
Thanked 0 Times in 0 Posts
You should never (NEVER!) start a business without an attorney AND accountant. Both will be able to advise you as to the best setup for your Company, be it a Sole Proprietorship, S- Corporation, or C-Corporation, based upon the information you provide to them. A Sole Proprietorship is the easiest. You are basically working as yourself, but that makes you personally liable for everything. Late bills, lawsuits, etc. This means that you could lose your house, hot rod collection, Aunt Millies valuable antiques, etc. An S-Corp is basically the same as a Sole Proprietorship or Partnership, but you have the safety net of setting up a seperate legal entity in the Corporation. Theoretically, the Corp is only liable to the extent of its' assets & holdings. The trick here is that if you get a bank involved, they will bind the Corp and you individually for any loans. (Found that out when I refinanced my house and had a plow truck, commercial mower, & some hefty Credit Line balances) Another drawback for an S-Corp is that the owner(s) pay the taxes based upon the profits. (If you reinvest your profit, new equipment or tools, you may not have the cashflow, but show the profit) This can happen in a C-Corp also, but the Corp is responsible for the taxes, not the individual.

As far as the "Hobby Loss" rules go, it is correct that if you have a business that is considered a Hobby, it needs to make a profit in 3 of 5 years. But the hobby rules are pretty easy, as long as you are doing things right. 1) Do you keep a seperate checking account in the business name, or run everything through you personal account? 2) Do you actively participate in the business? (ie: do you physically do work?) 3) Do you supply customers with an invoice on your company letterhead? 4) Do you keep books on your collections and expenses? Basically, if you are setup to do business as a business, you will not have to worry about the "Hobby Loss" rules. This is just the beginning of what you will go over with your attorney & accountant. This by no means is a comprehensive way to start a business. Just a taste of what starting a business is. The other thing that I will mention from helping others out of a few jambs. If you intend on having an employee, DO NOT EVER think that it is better to pay a vendor, employee, advance, electric bill, than to pay your payroll taxes. Uncle Sam always knows who owes him. And he doesn't let you know right away. The amount carries interest and the penalties are STIFF!!!!!

Now, having said all that, if you want to start a business & disregard everything above, go to the IRS website, www.irs.gov , download a form & instructions for an SS-4. Complete the form, get your Federal ID number. If you are using a ficticous name, you will need to advertise in 2 law journals for 2 weeks prior to using the name, at least in PA. After that, you will start receiving information from your State and the Feds about your new business. Finally, here is my disclaimer. The above is my opinion. This information is not intended to be used to start a business, or as guidance to start a business. It is merely information that should be used to acquire additional infomation. You should consult with an attorney and accountant before starting any business. Good luck!
Reply With Quote Quick reply to this message

Recent Garage - Tools posts with photos

Quick Reply
Message:
Options

Register Now

In order to be able to post messages on the Hot Rod Forum : Hotrodders Bulletin Board forums, you must first register.
Please enter your desired user name (usually not your first and last name), your email address and other required details in the form below.
User Name:
Password
Please enter a password for your user account. Note that passwords are case-sensitive.
Password:
Confirm Password:
Email Address
Please enter a valid email address for yourself.
Email Address:

Log-in

Human Verification

In order to verify that you are a human and not a spam bot, please enter the answer into the following box below based on the instructions contained in the graphic.




Currently Active Users Viewing This Thread: 1 (0 members and 1 guests)
 
Thread Tools

Posting Rules
You may post new threads
You may post replies
You may not post attachments
You may not edit your posts

BB code is On
Smilies are On
[IMG] code is On
HTML code is Off
Trackbacks are On
Pingbacks are On
Refbacks are On


Similar Threads
Thread Thread Starter Forum Replies Last Post
so how are you spending your tax refund 53LEDSLED Hotrodders' Lounge 27 02-01-2005 11:46 AM
tax by the mile? 40fordtruck_son Hotrodders' Lounge 14 08-01-2004 09:24 PM
Fahrenheit 9/11 part DOUX! 4 Jaw Chuck Hotrodders' Lounge 50 07-22-2004 03:46 PM
Tax refund problem..........please help Carbed95GT Hotrodders' Lounge 14 02-09-2004 01:56 PM


All times are GMT -6. The time now is 07:16 PM.


Powered by vBulletin® Version 3.8.7
Copyright ©2000 - 2014, vBulletin Solutions, Inc.
Search Engine Optimization by vBSEO 3.6.0 PL2
Copyright Hotrodders.com 1999 - 2012. All Rights Reserved.