I’m able to write off my milage now, aside from some tool expenditures it will really be my only right off on my taxes, I ask some people they say get an accountant, It must not be that hard if you keep records and are organized. Can someone please tell me the tax form for this and any other info I need, thanks Joe. I live in So.California
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Joe, I would think that California is like most other states and offers state related forms on the states website (ends in .GOV). and the forms you need for the federal stuff like mileage is located on the IRS website. They also will send you books and CDs on how to set yourself up to report taxes, etc. They are great resources. Just go into the section for businesses.
BTW I would still think at least for the first time that you hire an accountant. There are other programs you may benefit from that you could not find on your own. I believe that my accountant saves me more than I pay him, just in good advise alone.
joepet,
You will need Schedule C for your business income reporting and the instructions. Go to IRS.gov and download for free. You may also need form 4562 Depreciation and Amortization for your vehicle and any other large tool or equipment expenditures that need to be depreciated, unless you elect to take a section 179 deduction. You will also need the instructions for form 4562 as well.
If this is all news to you then it may behoove you to speak to an accountant or a bookkeeper. At least to help you organize and prepare for tax time.
J.P.
I am also in favor of hiring a CPA to help you out. My wife is a CPA. She usually makes an initial visit for free. She gives a reasonable fixed price for a year of tax prep and advice.
I belileve the current business milage deduction is $.485/mile.
current is that, but only recently, not all year. before that I believe it was 40.5 cents
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What most refer to as write offs are your legitimate business expenses. Your milage and tools will be only a part of what it costs you to be in business.
An accountant or just a bookkeeper would be a wise investment and a deductible (next year) business expense.
Read back in the business threads for any number of publications designed with the contractor in mind. Also go online to irs.gov for a free download of all the publications and forms you might need. Start with Circular E. Get Scedule C and the instructions for the list to start documenting your deductions (expenses).
Milage, if you are claiming from the first of the year, was $.405 per mile for the first 3 quarters and was increased to $.485 per mile for the 4th quarter.
"Start with Circular E. "Circular E is for employeers witholding and remitting to the IRS.If he needs that he is in real problems.The basic pub that covers everything is Publication 17, but there are many separate ones that have much more detailed information.In his case either the one on Small Business Expenses or Employee Business expenses. There might be one just on vechicle expenses.
As Bill pointed out in another thread, the 48.5 cent rate actually started in September.
It depends.
You did not indicate if you are a self-employeed or an employee.
If you are an employee it goes on sch A, itemized deduction, from the employee expense form (2106 IIRC). But it is reduced by 2% of your AGI and also your total deductions need to be over the standard deduction.
If you are self-employeed it goes on sch C.
Also milage has changed. Jan to Sept is one rate (41.5, maybe) and 48.5 after that.
Also out of pocket tolls and parking (but not parking tickets) can be taken. There is also an option for acutal expenses.
But you need to understand what milage is deductible. But basically milage from home to first business stop and last business stop to home is commuting and not deductible. But depending on the if you are self-employeed and where your business stops are that will vary somewhat.
"aside from some tool expenditures"
And on those you need to figure out what should be expensed and what needs to be depreciated and also how to do those forms.
The IRS - http://www.irs.gov - has a forms and publication section where you can get booklets on Small Buisness Expenses and also on Emplyee Business Expenses.
But I suggest that you hire an tax pro (does not need to be a CPA, just someone that does taxes and has a full time office) and consult with them about the details of what you do so that are prepared come tax time. Should take 1-2 hours and not be too expensive.
Thanks for all the feedback, I will seek help from a tax consultant, I will ask someone in the same line of work and circumstances, Joe.
I disagree with hiring an accountant or bookkeeper for income tax strategies. They have their place in normal business operations but a tax attorney will make a significant difference in how much of your money you get to keep. They usually pay for themselves. Just like everything else, there are great ones and not so great ones. Finding a great one will be the best thing you can do for your business and finances. Taxes can be a lot more complicated than just filing out a form.
Beat it to fit / Paint it to match
I agree Hammer1.
I have a little tax story but I don't want to share the details out loud. Anyways, lets just say that someone that I'm close to saved 40k by using a tax attorney. The odd thing is that they might in fact owe the 40k, but the IRS chose to let their claim lapse rather than deal with the tax attorney.
It's a little known fact: when the irs audits you, they set into motion a timeframe that they must adhere too. When you involve the sevices of a skilled tax attorney, he sets into motion a stall tactic. The results are predictable. You only have to think about the overworked IRS auditor to figure out which audits he chooses to pursue. He's got a stack of audits where the taxpayer is fighting it himself. There's a stack of audits where a bookeeper is fighting. There's another stack where an accountant is working. And another with a CPA.
Common sense tells us the he will focus on the ones with the path of least resistance.
They saved 40k!
blue
"They have their place in normal business operations but a tax attorney will make a significant difference in how much of your money you get to keep. They usually pay for themselves."Now much more deduction can them get for a figuring different ways to deduct milage?
I hope I didn't offend any bookkeepers or accountants, it wasn't my intention. Both can have some very sophisticated understandings of tax laws. In my experience, tax attorneys have a bolder approach and seem to know more about the legal intricacies of income taxes. If you are only talking about business vehicle use, there are two ways to handle the mileage issue. Both only include business use. You can keep records of the actual costs or take the standard mileage deduction. I don't know what the standard deduction will be this year. Given the outrageous increase in gasoline prices, it may be wise to keep daily records. There are also the issues of depreciation and amortization as well as alternative fuels and fuel taxes, depending on the types of fuel and vehicles your business runs. Beyond the vehicle use deductions there are ways to keep more of the money you earn. Keoghs, annuities, estate planning strategies, and other investments can put more money in your pocket. I get a headache just reading about depreciation. Many of the tax laws that may effect a small business aren't clearly written for a novice. In my opinion, there's a lot more to it than just filing out a tax form. As Blue said, if you are questioned or audited, an attorney won't be standing there helpless, the way I would be. It's really a matter of taking full advantage of the tax laws in your favor.Beat it to fit / Paint it to match
First of all you are ASSUMING that he is a small business owner.That has never been stated and it is just as likely that he is an employee. And yes employees can deduct tools and transportation expenses.And since he did not mention anyother business expenses such as materials, supplies, sub-contractors/employees, advertising, utilities, etc I suspect that he is an employee."Beyond the vehicle use deductions there are ways to keep more of the money you earn. Keoghs, annuities, estate planning strategies, and other investments can put more money in your pocket."Keoghs are obsolete and I am not sure if they are even available anymore. Much better options with SEP-IRA's and solo-401k's. And you don't need a tax attorney to suggest one. Anyone that does taxes knows the basic options.There is no indication that he is doing anything that would save enough in taxes to pay the extra cost.No mention of flipping property or developing property and building spec homes, etc, etc.What it sounds like he needs now is some basic education that he can be better served at $50 hour and not $250 an hour.". In my experience, tax attorneys have a bolder approach "And you need to be care of the BOLDEER APPROACH.There have been a number of high profile cases in the last couple of years where they have had to back taxes in the ten's of millions. And that is just in taxes, more for interest and penalties.The former CEO and former President of Sprint got caught in this and lost their jobs.Closer to construction;"Museum donor David K. Welles Sr., who started Maumee, Ohio doormaker Therma-Tru, and his family are fighting an Internal Revenue Service demand for lawyer records of an allegedly abusive tax shelter that might have shielded upwards of $200 million of capital gains. In 2003 Fortune Brands bought Therma-Tru, including the Welles' reported 44% stake, for $925 million. In a Chicago federal court filing the family invoked attorney-client privilege. Nonsense, says the IRS, because the lawyers, from Dallas' Jenkens &Gilchrist, were selling the shelter as a product and charging a commission. --Janet Novack and W.P.B.
"http://tinyurl.com/8rrut
Well Bill, your are correct in my making some asumptions, but no more than you are in assuming the person is an employee. After all, the question was in the business folder. Like any post on this forum, I read the question and if I feel I have something to offer, I sometimes do. I'm just one more voice sharing some of my experience. Keoghs are still available. One thing about them that differs from IRA's and some other qualified programs, is the amount of contributions a self-employed person can make. I think the maximum amount for 2005 is $42,000. That's just for one type of Keogh, they can be combined with other programs and if your income warrants it, I think you can contribute up to $84,000. I'm not suggesting that a Keogh is the way to go for this individual. I just used them as an example of things that might be available. I'm not a tax strategy expert and I don't claim any expertise in Keoghs but I'm pretty sure that you can't put that much into an IRA, SEP or SIMPLE. I don't know that all lawyers charge $250/hr. or that bookkeepers or accountants charge $50. Some lawyers offer free initial consultations. Generally the more information a person can get, the better. The case that you described sounds a bit on the extreme side. When I spoke of my impression of a lawyers boldness, I wasn't suggesting anything that could be legally questionable or even cutting edge. I just look for competent advice and I think I've received it from my lawyer.Beat it to fit / Paint it to match
Actually the max contributions to most plans have the same max of $42,000 including sep-ira's.http://www.boston.com/business/taxes/articles/macpa/new_2005/Resetyourmonthlyretirementsavings/While the sole 401k's also have the same limit you can have them bottom loaded so that you don't need to earn as much to put in the max.http://www.smartmoney.com/taxmatters/index.cfm?story=20021031
While a tax attorney might do a good job in court, a CPA may keep you out of trouble.As I said my wife is a CPA. She has a small firm with my daughter, who is a EA and is taking college work necessary for her CPA.My wife is very agressive relative to the tax code. While her clients may get letters from the IRS, my wife's tax advice/prep has never been the cause of an IRS claim.I came home one day and my wife said she needed $130,000 now, $130,000 in a year, and $130,000 in the next year. I asked "why?" She responded a client was being assessed $500,000 additional tax - $130,000 was interest and penalties that she would be paying - and she expected that the IRS would want the same amount in each of the next 2 years.Half an hour later she discovered that the IRS had failed to note a $1,000,000 deduction on a 1099 and she no longer needed the money.A call to the client to reassure him, a 10 minute call to the IRS then and as the future assessments came in, and a RED sheet of paper with the appropiate note on future returns pointing to the error the auditor was about to make and all was good with the world.All of this was done at no cost to the client.I expect there are better and worse CPAs and tax lawyers than my wife.