# Taxes - Writting things off.



## Canyonbc (Dec 11, 2007)

What can and do you as a company right off???

If you go to tommorw and spent 50,000 on a brand new chipper...can you write that off when it comes to tax time???

Thanks

Canyon.


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## ropensaddle (Dec 11, 2007)

Canyonbc said:


> What can and do you as a company right off???
> 
> If you go to tommorw and spent 50,000 on a brand new chipper...can you write that off when it comes to tax time???
> 
> ...


What usually is done is depreciate it over several years
strong suggestion get a cpa if you get in biz they will keep
you legal!


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## reachtreeservi (Dec 11, 2007)

My CPA tod me you could take 100% of the depreciation the 1st year, or do up to 20% over 5 years on vehicles and large equipment. When I bought a work truck last year I took the 100% the 1st year option.


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## Canyonbc (Dec 11, 2007)

ropensaddle said:


> What usually is done is depreciate it over several years
> strong suggestion get a cpa if you get in biz they will keep
> you legal!



Thanks. 

That is what i thought would happen. 
Give the machine a set years "of life" divide the total cost by (x) years and write that number out. 

So to conclude i am correct is this example correct?

Example.

Chipper 50,000
Life - 5 years 

50,000 Chipper / 5 years = 10,000 a year 

Taxes: 
10,000 a year for 5 years are written off Taxes. 

Is this example correct??

Canyon


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## Canyonbc (Dec 11, 2007)

reachtreeservi said:


> My CPA tod me you could take 100% of the depreciation the 1st year, or do up to 20% over 5 years on vehicles and large equipment. When I bought a work truck last year I took the 100% the 1st year option.



Thanks reachtreeservi and ropensaddles...

helping out a ton. 

I need to get a CPA as i grow.


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## reachtreeservi (Dec 11, 2007)

You really need one before you grow, he can save you a boatload of money. Call around and ask what the rate for an hour consult is... and go from there. I see my CPA every other month and he bills me about a hundred a session, his advice more than pays for itself, I wouldn't make a major decision without it.


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## Canyonbc (Dec 11, 2007)

Ya i think i am gonna open up the phone book tommorw. 

Thanks guys.


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## ropensaddle (Dec 11, 2007)

Too complex as everyones finances are different depreciate
is better if you are not making huge profit or income I let the cpa
tell me and keep me straight.


By the way a cpa expense is a write off lol


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## Canyonbc (Dec 11, 2007)

ropensaddle said:


> Too complex as everyones finances are different depreciate
> is better if you are not making huge profit or income I let the cpa
> tell me and keep me straight.
> 
> ...



Haha...nice, i was going to ask that. 

Business Expense right.


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## omegajim (Dec 11, 2007)

When my folks ran their little farm, good year, depreciate more, bad year, depreciate less.

Another contractor put it to me this way "keep the numbers consistent, consistent amount of depreciation, a fairly consistent earnings level, and you won't raise too many flags."

In other words, depreciate at a nice steady consistent rate, big dips and increases raise red flags with the IRS.

Just a rule of thumb.


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## Canyonbc (Dec 11, 2007)

omegajim said:


> When my folks ran their little farm, good year, depreciate more, bad year, depreciate less.
> 
> Another contractor put it to me this way "keep the numbers consistent, consistent amount of depreciation, a fairly consistent earnings level, and you won't raise too many flags."
> 
> ...




I like that rule..alot. 

As a general rule can you write off any tools for the business. 

What about gas. 

I know i need to get a CPA, i am gonna go through the phone book in the morning and start making phone calls.


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## reachtreeservi (Dec 11, 2007)

You can write off fuel , keep your receipts.


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## Husky137 (Dec 11, 2007)

As has been said, get an accountant. Ask around for a referral to a reputable one, not just one who can plug numbers into turbo tax and then doesn't want to sign the preparer's line. Just like any profession, there are accountants at the head of the class and those at the bottom of the class.


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## Canyonbc (Dec 12, 2007)

Husky137 said:


> As has been said, get an accountant. Ask around for a referral to a reputable one, not just one who can plug numbers into turbo tax and then doesn't want to sign the preparer's line. Just like any profession, there are accountants at the head of the class and those at the bottom of the class.



No i agree that is a huge thing. I have a few friends who are owners of other tree service business's i want to first contact them tomorrow and see who they use and there opinion on there accountant.


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## Canyonbc (Dec 12, 2007)

reachtreeservi said:


> You can write off fuel , keep your receipts.



That is awesome.


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## lxt (Dec 12, 2007)

GET AN ACCOUNTANT/CPA

when it comes to depriciation keep this in mind!

your $50,000 chipper, 5 yr writeoff?
year number 6 you sell chipper for say $5000 = this is now a capital gain!! unless you reinvest!!

take the advice mentioned as Im sure you will, the writeoff`s & tax codes,etc.. are mind boggling!! good luck!

LXT...........


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## Husky137 (Dec 12, 2007)

Canyonbc said:


> That is awesome.



You can write off all legitimate business expenses, not just fuel.


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## Canyonbc (Dec 12, 2007)

Husky137 said:


> You can write off all legitimate business expenses, not just fuel.



Thanks everyone.


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## omegajim (Dec 12, 2007)

As far as fuel is concerned, you have to keep in mind the mileage the gov't allows; last time I looked it was north of 50 cents/mile. 

So after 10 miles, that 5 bucks. You may want to just keep track of the mileage on the truck. Maybe knock of 10% to be on the safe side and call the rest of it mileage. 10 k miles = over 5 k in writeoffs. However, if you use this method, you can't writeoff repairs, oil changes etc, because that 50 some cents a mile is taking that all into account. Including insurance on that vehicle, I believe.




> your $50,000 chipper, 5 yr writeoff?
> year number 6 you sell chipper for say $5000 = this is now a capital gain!! unless you reinvest!!



When you sell something that's completely depreciated, buy something else..............

"I have to get rid of this money, I HAVE to go to the store and buy something."

The dilemas of business.


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## ATH (Dec 12, 2007)

omegajim said:


> As far as fuel is concerned, you have to keep in mind the mileage the gov't allows; last time I looked it was north of 50 cents/mile.
> 
> So after 10 miles, that 5 bucks. You may want to just keep track of the mileage on the truck. Maybe knock of 10% to be on the safe side and call the rest of it mileage. 10 k miles = over 5 k in writeoffs. However, if you use this method, you can't writeoff repairs, oil changes etc, because that 50 some cents a mile is taking that all into account. Including insurance on that vehicle, I believe.



VERY important point...you beat me to it, but I wanted to second that:

You *EITHER* write off actual vehicle expenses (fuel _and_ depreciation included) OR standard mileage rate (48.5 cents), but NOT both. If you choose milage that is all you write off.

You cannot use the standard mileage rate if:
*You have used actual expense on the same vehicle in the past (I think since 1997...)
*You have 5 or more vehicles operating for the business at any one time
*Other stuff that wouldn't generally apply to us tree guys...

If you have a vehicle you don't put many miles on, you are likely further ahead writing off actual expense - more paperwork, but the depreciation on a low mileage vehicle is likely to outpace the 48.5 cents per mile. More expensive trucks or trucks with very low gas mileage are probably better off with actual expense too. Besides if you are depreciating it, you have to get a new (or another used one) one every 5 years to keep the write off coming :biggrinbounce2: 

In all honesty, this isn't the best place to be getting tax advise...we in't joining you in court if things don't work out right 

I don't have a CPA, but I spend a lot of time reading IRS pubs. It is a royal pain the first couple of years, but gets better once you have been through it a couple of times. I used to do it all by hand. Spent about $60 on HR Block brand "Tax Cut" software last year - well worth it.

There are a couple of pages here that will tell you more than you want about milage:
http://www.irs.gov/pub/irs-pdf/p463.pdf

Here is everything (and much much more) that you would ever want to know about depreciation straight from the Man:
http://www.irs.gov/instructions/i4562/ix01.html
and the form to do so:
http://www.irs.gov/pub/irs-pdf/f4562.pdf

Many of the normal business write-offs/deductions are covered on
Schedule C
Schedule C instructions (see especially Part 2 starting on page 4).

Have fun


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## Canyonbc (Dec 13, 2007)

ATH said:


> VERY important point...you beat me to it, but I wanted to second that:
> 
> You *EITHER* write off actual vehicle expenses (fuel _and_ depreciation included) OR standard mileage rate (48.5 cents), but NOT both. If you choose milage that is all you write off.
> 
> ...



Thanks, 

Ya i put some phone calls into today...with friends that run other tree service business's and i want to get talk to them about there CPA. 

Thanks for the sites too. 

Canyon


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## hermit63 (Dec 13, 2007)

*yep*

schedule c


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## Canyonbc (Dec 13, 2007)

hermit63 said:


> schedule c



Ya i went on there last night and started reading it...alot of good information in there...

Off to work, but more to read tonight.


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## urbanlt (Dec 28, 2007)

*Tax write offs*

Normally you depreciate business equipment over 5-15 years. But if you choose under Sec 179 You can write off up to $104,000 worth of equipment and trucks in one year, even if you buy them using financing. This is a good way to avoid taxes in those beginning years when money is tight. You can not however make your income go below $0. There are also weight limits on trucks. They have to weigh more then 6,000 pounds to take Sec 179. 

If it is December and you know you are going to make about $60K this year and are also going to need a new truck with in the next 6 months you might want to buy it now. However if you are only going to make $15K you should probably wait.

Overall if you use it for business you can write it off but there are some gray areas so keep track of every expense and talk to your CPA at tax time.

I also suggest instead of asking your tree buddies what CPA they use you ask a business owner perhaps a customer or a vendor who you admire and think has their stuff together who they use.


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