Taxes

[RiverCityAutoSpa]

How do you go about reporting income? Do you pay quarterly and what do you decide to pay? Do you log the miles of each job or use an app?

Having some hard times getting together for taxes. Had a CPA year 1 we exchanged detail or tax services. Didn’t log anything the 2nd year and didn’t bother claiming anything on my end.

This year I’ve been taking notes on mileage, income, and have almost all my expenses in order.

Do you use turbo tax or some kind of program or do you hand it off to a CPA?

[sudsmobile]

The same CPA that does my personal taxes will be handling our business taxes. We set up as a general partnership. If you're a Corp, I believe you have to pay quarterly.

[LSNAutoDetailing]

^^^ what he said ^^^

You should be tracking everything, you can use turbo tax small business and create general simple categories. You'll want to separate business expenses by:
Expenses ---> regular product purchases
Reusable Expenses "Assets" --> although I believe the new tax code allows for 100% deduction in year 1 instead of depreciating assets.
If working out of your house work with an accountant to figure out % of house sq footage and % of utilities
If your driving to and from clients, track your mileage.

Like I said, Turbo tax can get everything for you with reports so you can just hand your accountant the report outputs or in some format they like.

CPA's know the tax law, loop holes and what is and isn't allowed... I do not. That's why I use an accountant.

[WindyCity]

It depends how your business is structured, this is sole proprietorship or a corporation?

There’s a big difference between those two because for example a sole proprietorship is easy to file business income and expenses at the end of the year with your personal taxes where as a corporation requires quarterly

I never track my mileage I just guesstimate it.

Other than that you should have a separate business checking account which all deposits and withdrawals come out of making your taxes pretty straightforward until you hire an employee then it’s a whole different game

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[usshelena725]

It depends how your business is structured, this is sole proprietorship or a corporation?

I never track my mileage I just guesstimate it.

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Careful here, if you get audited, it can come back and bite you with a requirement to reverse all the mileage deductions along with penalties and fees.

Same for what others said, if you are just doing this as a side business and are an SP, it is much easier than if you are a C-Corp, LLC, LLP, etc.

FYI - anyone generating more than $1,000 a year in tax liability is 'REQUIRED' by law to file quarterly income tax payments. You must pay estimated tax for 2018 if both of the following apply.
1. You expect to owe at least $1,000 in tax for 2018, after subtracting your withholding and refundable credits.
2. You expect your withholding and refundable credits to be less than the smaller of:
a. 90% of the tax to be shown on your 2018 tax return,
or
b. 100% of the tax shown on your 2017 tax return.

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For what it's worth, I am a licensed and practicing Certified Public Accountant in the state of Tennessee. (lic# 25061).

[LSNAutoDetailing]

Careful here, if you get audited, it can come back and bite you with a requirement to reverse all the mileage deductions along with penalties and fees.

Same for what others said, if you are just doing this as a side business and are an SP, it is much easier than if you are a C-Corp, LLC, LLP, etc.

FYI - anyone generating more than $1,000 a year in tax liability is 'REQUIRED' by law to file quarterly income tax payments. You must pay estimated tax for 2018 if both of the following apply.
1. You expect to owe at least $1,000 in tax for 2018, after subtracting your withholding and refundable credits.
2. You expect your withholding and refundable credits to be less than the smaller of:
a. 90% of the tax to be shown on your 2018 tax return,
or
b. 100% of the tax shown on your 2017 tax return.

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For what it's worth, I am a licensed and practicing Certified Public Accountant in the state of Tennessee. (lic# 25061).


Not to hijack the thread, so you're saying quarterly filings are required for 2018? Is it also true for 2018 we don't need to separate assets from regular supplies due to the 100% full deduction on assets vs. three year depreciation?

Doing thing the right way (separate accounts), tracking expenses, all allow you to take legitimate deductions.

[usshelena725]

Not to hijack the thread, so you're saying quarterly filings are required for 2018? Is it also true for 2018 we don't need to separate assets from regular supplies due to the 100% full deduction on assets vs. three year depreciation?

Doing thing the right way (separate accounts), tracking expenses, all allow you to take legitimate deductions.

Filing quarterly estimates is best practice for any business, regardless of requirements, and is also the practice best aligned with US GAAP as it best follows the matching principle.

Filing quarterly estimates is required if a business meets the guidelines I noted above, which is most businesses including SP's.

If you are putting all of your assets and expenses into a section 179 expense for this year, then you wouldn't have to bifurcate out items you plan on capitalizing, since they are all being expensed anyway and there is no depreciation that you will need to calculate via MACRS (modified accelerated cost recovery system).

Best practice, however, is to still track your depreciable assets, since you never know when the tax laws can change, whether or not you have depreciation options available to you at the SALT (state and local tax) level, or if you change your mind and decide to capitalize something later on.

[usshelena725]

Funny how I have been lurking here forever on how to best polish and keep my cars looking tip top, and the first posts I make relate to my employment. (sigh). :)

[mk9750]

Funny how I have been lurking here forever on how to best polish and keep my cars looking tip top, and the first posts I make relate to my employment. (sigh). :)

When you have an area of expertise, it's great that you share it. One of my early posts was explaining some of the differences that exist in different color paints because I work for a company that makes pigment dispersion and some paint, including automotive paint.

I appreciated that you offered your expertise.

[usshelena725]

When you have an area of expertise, it's great that you share it. One of my early posts was explaining some of the differences that exist in different color paints because I work for a company that makes pigment dispersion and some paint, including automotive paint.

I appreciated that you offered your expertise.

Yeah, I wasn't really complaining - was just laughing that I didn't post till something related to accounting in a detail forum, lol. I am truly the epitome of a CPA, haha.

But yes, I understand the benefits of offering advice - and appreciate all those who do.

[WindyCity]

Careful here, if you get audited, it can come back and bite you with a requirement to reverse all the mileage deductions along with penalties and fees.

).

I get what you are saying but What is an audit going to do? In order to prove the mileage was accurate someone would literally have to follow me around for an entire year tracking my movements and try to figure out if that Home Depot run was personal use or business use.

Every construction contractor I know that uses their truck for mixed business and personal use guesstimates their mileage. If they put 12k a year on The truck mostly for business they will say 10,000 of it was business in 2000 was personal. Or to make it look good 9857 miles business and 2143 personal miles

The only people That I know that keep accurate records of every mile they put on their cars are employees of a company that are using their car for business use so they can get reimbursed, But I couldn’t even imagine trying to log every mile I put on my vehicle every day of every week whether it was a personal or business trip


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[sudsmobile]

I always wondered what pulling a wrapped trailer does for you. If I'm pulling it around 100% of the time, am I advertising? Is that business related? As it is, I probably use my rig for business 99% of the mileage because, well, it has a trailer attached 100% of the time.

[Jon TDS]

For mileage, QuickBooks self employed thru phone app tracks it for me. You'll just have to classify business or personal once tracked.

Per my accountant, mileage recorded here also adds anything to do with your vehicle (ie maintenance, gas, depreciation, etc). It averages out compared to tracking individually.

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[sudsmobile]

My accountant told me the same thing. Just track mileage. It incorporates all auto related expenses.

[usshelena725]

I get what you are saying but What is an audit going to do? In order to prove the mileage was accurate someone would literally have to follow me around for an entire year tracking my movements and try to figure out if that Home Depot run was personal use or business use.

Every construction contractor I know that uses their truck for mixed business and personal use guesstimates their mileage. If they put 12k a year on The truck mostly for business they will say 10,000 of it was business in 2000 was personal. Or to make it look good 9857 miles business and 2143 personal miles

The only people That I know that keep accurate records of every mile they put on their cars are employees of a company that are using their car for business use so they can get reimbursed, But I couldn’t even imagine trying to log every mile I put on my vehicle every day of every week whether it was a personal or business trip


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I'm not saying it makes sense, or is practical, but it is the law. Unfortunately, dealing with the IRS is never a fun experience and unlike a typical criminal case scenario, the onus of validity isn't on the accuser, but on the accused when it comes to dealing with an IRS audit.

The IRS is not required to prove you were lying about the business mileage, you have to prove to the IRS that you were telling the truth. As you have noted in your post, this can be very difficult to do, and odds are, if the auditor wants to be a jerk, he can deny nearly all mileage claims since it is so difficult to prove them out.

Just use smart judgement and track business mileage to the best of your ability. In the vast percentage of IRS audits, the auditor is rarely looking for honest errors or mistakes - he is looking for purposeful deceit. If it is obvious that you are making a conscious effort to properly track your mileage, then it will usually suffice. If there is any hint of dubious mileage claims, then he will probably delve deeper looking to pull on that thread, and chances are it will not end well for you.

You do what you want, I am just telling you to be careful.