Tax Time Questions!

[Phyllis Meyer]

Hello Everyone!

Any tips for us newbies when it comes to tax time? We have the tax man (that I'm sure has never dealt with a laser engraver), aside from all the deductions a new business can take (the loss being the big one), any other advice from you guys in the business for awhile making millions:) ? Just how much of a loss can a new business take? We gutted and remodled a building, and all the goodies the laser needed...it looks bad on paper, but ready to take on the world in 2007!!

Any advice from the experts would be most appreciated!

Sincerely,
Phyllis

[Carl Eyman]

If not, you should unless you remember your accounting 101 well enough to do it yourself. Just as a starter, you won't be able to claim all the money you've spent so far as an expense. Much of it will have to be capitalized and then recovered through depreciation or amortization. To be much more specific than thaton this forum would be difficult.

[Tim Goldstein]

My understanding (I am not an accountant and it has been 25 years since I took an accounting class) is that you can only deduct a loss up to the amount of basis (your investment) you have in the business. As Carl points out what you sent on equipment and renovation is not neccessarily expense or loss, but mostly capital items that are depreciated. The last 5 or so years there has been a special allowance that lets you deduct up to $100K or so of normally depreciated items as an expense instead. Great if you have revenue you want to bury, but no help if you are already at a loss.

My suggestion is to get a book keeping/accounting service and let someone else worry about the details. I used to use a CPA and besides being expensive he wanted me to pretty much do all the work by maintaining everything in Quickbooks and then only work from that. I since changed to Padgett Business Services which is a franchise that bills themselves as small business pros. They have me give them a copy of my check book registers, credit card statments, bank statements, and sales summaries. They do everything from that and I don't have to mess with being a book keeper. I have them do my statements quaterly, but they are willing to do any period I want. It is the best money I spent as it is now an easy process where I do not have to do anything special just for accounting purposes and I am no longer stressing over whether I am doing it right. You can see if they have a franchise in your area at http://www.smallbizpros.com/Locate_An_Office.htm

I truly feel this is an area where trying to do it yourself to save $$ is a really bad idea.

[Dave Fifield]

Phyllis,

I ran a small electronic kit business a few years ago, so the tax laws have changed quite a bit since then, but I recall a discussion I had with my tax accountant that is still relevant IMO. His main point was that what tax you pay and what you can deduct all depends on how you have set the business up (its legal form).

I was set up as a "sole proprietorship". As such, I was told that for the first 3 years (or was it 4, I forget) in business, if I showed a loss on schedule C, I would be audited automatically. This is to stop people from setting up sham businesses just to write off personal spending. He told me if I wanted to write off the value of capital equipment (test equipment), then I'd have to incorporate my business (make it an S-corp). This had other consequences that I didn't want to deal with (such as having to pay corporation tax!), so I simply forgot about writing off the cost of the test equipment. I still came out way ahead.

I would recommend that you retain the services of a good tax accountant firm - one that already handles small businesses - and have them work out
what legal form your business needs to take for you to pay the least tax. For reference, my tax guy charged me just under $1K for the priviledge of doing my taxes every year.

Good luck,
:Dave F.

[Russ Reaney]

Try getting an enrolled agent
We run party store (most everything for every kind of party) that offers etching on glass, serving set, (mostly weddings) imprinting on napkins and hot foil stamping.
A cake and candy center,
A fireworks store (it’s mostly seasonal but offered year round).
The stamping and engraving are run thru the store, but manufactured in basement workshop.
Cake and candy center and party store are run in two building side beside.
It sometimes fells like an octopus, but you do what you do to turn a buck.
Anyway we found that an enrolled agent with the I R S was the best way for us to go.
Call the I R S and ask them for a list of enrolled agent in your area.
Ours happened to be H&R Block.
Good luck.
navespartysupplies.com