Self Employed tax question...

DaDream · Jul 31, 2010

I am starting up my own business and I have some tax questions for all yall out their that are in the tax field or are self employed as well.
First question is if I want to right my vehicle off on taxes do I have to drive around with business signs on it?
I am aware of being able to right off office space to my house or something of the sort. Any more things I should be aware of? Ways to get around tax things?

Landlord Landry · Jul 31, 2010

sorry for your loss.

wekko368 · Jul 31, 2010

DaDream said:

I am starting up my own business and I have some tax questions for all yall out their that are in the tax field or are self employed as well.
First question is if I want to right my vehicle off on taxes do I have to drive around with business signs on it?
I am aware of being able to right off office space to my house or something of the sort. Any more things I should be aware of? Ways to get around tax things?
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It sounds like you really need to talk to a professional.

RocketForever · Jul 31, 2010

DaDream said:

I am starting up my own business and I have some tax questions for all yall out their that are in the tax field or are self employed as well.
First question is if I want to right my vehicle off on taxes do I have to drive around with business signs on it?
I am aware of being able to right off office space to my house or something of the sort. Any more things I should be aware of? Ways to get around tax things?
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A business sign doesn't mean anything. If you do use your vehicle for business purpose, the IRS requires you to keep a daily mileage record which includes where you go, the distance that you ravel, and the business purpose of the trip. That's often the first thing that they ask for it during an audit.

You should also keep track of the odometer of your vehicle at the beginning and the end of each year so you will have the accurate annual total mileage. If you use your vehicle partly for personal purpose, you will need the annual total mileage and your business mileage in order to come up with the business percentage (deductible portion) of your auto expenses.

http://www.unclefed.com/TaxHelpArchives/2006/HTML/p463/ch04.html#d0e3114

white lightning · Jul 31, 2010

Speak with an accountant. Will probably advise not to deduct for home office. Should also help with your self-employment tax and the prepaid taxes you'll need to pay. The accountant will pay for him/herself many times over.

bobrek · Jul 31, 2010

As I understand things, you have to use your home office for 100% business or it's not deductible.

You should also be aware that it is 'write off', not 'right off'.

dharocks · Jul 31, 2010

I'm just going to quote directly from my tax textbook for ya:

A taxpayer can choose one of two methods for computing a deduction for using an auto for business purposed. These methods are the standard mileage rate and the actual cost method. Although the standard mileage rate method is the easier way to calculate the auto expense, it often results in a smaller deduction. On the other hand, the actual cost method may yield a larger deduction, but it requires more record keeping. The cost of commuting from home to work and back is considered a personal expense. Neither the use of a car phone to contact customers while driving to and from work nor putting advertising on the car makes commuting deductible. A taxpayer's mileage or cost of travel is considered business-related if the travel is

Out of town

From the taxpayer's home to his or her temporary workplace

From the taxpayer's regular workplace to a temporary workplace

From the taxpayer's regular workplace (or temporary workplace) to a second job

However, the mileage between the taxpayer's second job and home is considered personal. On days when a taxpayer does not work at his or her regular job, the travel to and from the second job is considered commuting.

Regardless of which method the taxpayer chooses, the deduction can be disallowed for failure to keep records that support the date and amount of an expense that is deducted, the milage allocations, and the business purpose for the expense.
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Standard Milage Rate Method To use the standard milage rate method, which is based on administrative convenience, a taxpayer simply deducts 50.5 cents (48.5 cents in 2007) for each business mile the car was driven. The standard milage rate is an estimate of the cost of operating a car (gas, oil, repairs, insurance, depeciation, etc.). Because these costs change over time, the standard rate is adjusted each year (Note: This is from 2008.). In addition to the standard milage rate, the taxpayer can deduct direct-out-of-pocket expenses that are unrelated to the operating costs of the car. The include the business portion of parking, tolls, interest and property taxes. The property taxes must be based on the car's value. Interest is deductible only if the individual is self-employed. The standard mileage rate method is subject to several limitations and requirements that should be considered before it is used. For example, the standard milage rate method may nor be used by a business that operates more than five vehicles in the business at the same time
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Actual Cost Method The actual cost method is a more flexible way to compute the auto expense deduction and often results in a larger tax savings. Using the actual cost method, a taxpayer can deduct depreciation, gas and oil, repairs, insurance, license, and other expenses of driving a car. As with the standard mileage rate, the taxpayer can deduct the business portion of the non-operating costs of the car. If the car is used for both business and personal purposes, the expense must be allocated according to the miles driven for each purpose. Only mileage driven for a business purpose results in a tax deduction. If the actual cost method is used, it is important to keep mileage records to support the allocation of expenses between business and personal use. The depreciation deduction under the actual cost method is subject to significant limitations. The actual depreciation deduction is limited to statutory caps based on when the care was acquired. For example, if a car was bought in 2007 and used 100 percent for business, the maximum depreciation deduction for 2007 is $3,060 (Note: See Rev. Proc. 2007-30.). This limit changes each tear of the car's depreciation life.
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Also, from the IRS website:

Office in the home. If you have an office in your home that qualifies as a principal place of business, you can deduct your daily transportation costs between your home and another work location in the same trade or business.
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Supermac34 · Aug 1, 2010

My family has had a self-employed business for 35 years.

They have yet to ever deduct for mileage OR the home office. The car is very hard to prove for mileage, and it is very hard to prove that your home office is 100% business usage only.

My writing off those two things, you raise the two biggest red flags to the IRS for a small business audit that exists.

Good luck in your business, but I'd certainly talk to a CPA.

You should also be aware that you will have to pay self employment tax on your earning as well as make quarterly estimated tax payments.

Space Ghost · Aug 1, 2010

Avoid the home office write off. As Supermac stated, its a big red flag and the savings are not all that significant.

As far as a vehicle, I would certainly write that off at .58 cents a mile (or whatever it is now). All you need is records kept of your mileage.

fadeaway · Aug 1, 2010

bobrek said:

You should also be aware that it is 'write off', not 'right off'.
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Not if he's talking about curling.

"HURRY! HURRY! HARD!! ....... RIGHT OFF!!!"

DaDream · Aug 1, 2010

dharocks said:

I'm just going to quote directly from my tax textbook for ya:

Also, from the IRS website:
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thanks for the info

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Self Employed tax question...

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