PDA

View Full Version : The Last Day of the Year



Aaron Hats
12-31-2008, 09:06 AM
I certainly don't think we should wait until the last day of the year to think about our taxes but thought it would make a good topic for discussion. What things have you done to help your businesses tax situation? I'm going to make some charitable donations today to some local charities we like to support. I've been meaning to do it but have been so busy but I'm going to force myself to do it today.

Aaron

Evan
12-31-2008, 08:04 PM
Hi Aaron,
Hope you got a receipt for those charitable contributions!

My tax situation is still pretty favorable for me considering I'm a full-time student and that is where most of my focus still is. For me, my best bet for tax savings lies with the Section 179 deduction for new equipment I had purchased this year for my business.

vangogh
12-31-2008, 09:31 PM
I didn't do anything specific to close out the year, but over the last few months I've been more willing to invest in a few things I knew would be tax deductible. I think I'll be using section 179 like Evan.

huggytree
01-16-2009, 01:30 PM
i gave the max to my SEP IRA...this saved me the double taxing on S.S/Medicare, so i start out with 15%+ more

the negative is i put $12,000 in a couple months ago 4 days before the market dropped... i now have $7,000.....ugggghhhhh.....i added some more in late dec. to the max allowed....this time im letting most of it sit in a moneymarket fund and put 1/6th in each month...lesson learned...

another illegal way to save on taxes is getting customers to pay in cash. im sure this idea is probably on the upswing as things get tighter....im getting more people offering me for a deduction off their bill.

Evan
01-16-2009, 08:23 PM
another illegal way to save on taxes is getting customers to pay in cash. im sure this idea is probably on the upswing as things get tighter....im getting more people offering me for a deduction off their bill.

You are still required to report cash transactions.

huggytree
01-17-2009, 09:34 AM
you are required but many small businesses dont....in construction its very common...

i was never offered when i started and now i get a few offers here and there...its on the upswing as a way to save money......Most of my jobs require alot of materials which need to be accounted for, but people who do small service/repair jobs may only use $5 worth of materials and accepting cash on the side is easy to hide....when i do a remodel its typically $1,000-5,000 in fixtures alone....you have to show where they went, so i couldnt do it.....

yes you are required to report cash transactions....ill bet almost no one does in the trades

Business Attorney
01-17-2009, 12:26 PM
I'm sure some people get away with not reporting all of their cash transactions, but the IRS is pretty darn smart. If someone has car payments, mortgage payments, utility bills, credit card bills and other traceable third party expenses and claims to receive income that is less than his expenses, it is a simple matter for the IRS to establish that he is taking payments under the table.

Evan
01-17-2009, 02:28 PM
I'm not saying you couldn't get away with not reporting some income to the IRS, but the problem is people get greedy and grossly under report income. Some people who I know have done this got a real kick in the ass when they wanted to collect social security and had little contributions because of under the table jobs. Another went on disability and never "made a lot of money" because she decided to severely under report their tips as a waitress. Now they're paying for it in the form of less money from the government when they thought they were smart "in the day".

As David points out, the IRS can figure things out based on what you report on your 1040.

Even if you sold illegal drugs, you're suppose to report your income on your 1040. The IRS isn't concerned as much about the legality as they are the fact that you pay your taxes.

Steve B
01-17-2009, 03:35 PM
"ill bet almost no one does in the trades"

I do - every penny of it. It has nothing to do with the likelihood of getting caught or not.

Blessed
01-17-2009, 04:06 PM
I report all of my cash payments too... it's just simpler and it's what is right to do.

I don't report what I earned from my garage sale, from selling baby stuff at the local consignment sale or the few things I sell on Craigslist or Ebay - but any income I earn by working I report, no matter how I get paid.

Aaron Hats
01-17-2009, 04:48 PM
Not reporting cash sales devalues your business. Imagine if someday I want to sell my business and my books say I had sales of $1M but I tell the potential buyer it was actually $1.3M with $300k in cash under the table. There's no way to prove it thus I have to sell the business for a lesser amount.

huggytree
01-17-2009, 07:29 PM
are you serious about the social security thing?....the less i can give to S.S. the better...id love to opt out right now and get $0 when i retire...id give up all i put in over the years...S.S. is completely worthless...my generation will see nothing and will have paid in all their lives....I love the fact that i file as an S-Corp and only pay S.S. on my wages on not my profit....

I dont think anyone worries about taking $ on the side and not getting the extra $1 per year they will lose on S.S.....

im glad to hear everyone is so honest on this website.....im an honest guy too and it makes the advice mean more....the reality is alot of people in the trades are not....i always tell people 1/2 the contractors are crooked on some level and 10% are outright crooks...i have other contractors bragging about the cash jobs all the time and some say its a major part of their business....id have no way to hide it....

Steve B
01-17-2009, 07:39 PM
I think you are correct about those percentages, unfortunately.

Evan
01-17-2009, 11:21 PM
An S-Corp provides you with the advantage of lowering the amount subject to employment taxes (regardless of who is paying it). To have only $35K taxed at 15.3%, instead of your total net income of say $100K is much better.

I don't disagree with the solvency issue of social security, but I'm sure something will be done about it soon enough. The problem is people don't trust the government to manage their money, but we've also learned that individual-controlled retirement plans (IRAs, 401k's, etc.) can also be detrimental [did your stock portfolio plunge 40% last year? So did everyone elses!]. The government is suppose to be "guaranteed". But I have mixed feelings over the issue anyways.

I'm many years behind most people here, and I'm sure I'll never see a penny of it either. Too bad it can't be written off as a "charitable contribution", as that's about all it seems to be worth today.

huggytree
01-18-2009, 08:37 AM
The goverment cant do anything correctly...we need them for the Military and Mail....i cant figure out why anyone would want national Health Care...

S.S. for people our age is charity for the old people of today.

stocks are down 40% right now...but in 20-30 years when we retire a $100 in the stock market(today) vs $100 in S.S.(today) will probably be $1500 vs $0...yes i can manage everything better than the government can...a 12 year old 'D' student can manage everything better than the goverment can.....

the people in government are not the smartest people of our generation. They all think they know whats best for you and me....S.S. is beyond saving.

was this post about S.S.? sorry for changing the topic!

Evan
01-18-2009, 02:24 PM
National health care is a different issue, and I've debated that issue against members of the Cambridge Debate Society (oldest debate society in the world). Very intriguing system, and they don't even like the system! But it is hard to say that because something is good or bad in one country, it would be the same here.

...and to think, that 12 year old "D" student could one day grow up to be our president!

huggytree
01-18-2009, 05:34 PM
John Kerry was also a D student also from what i remember(maybe a C-)...I think he had some F's..George didnt have F's atleast.I truely believe Al Gore has mental problems..I really dont want to defend any of them...you made the point very well!...a 'D' student can be president.

BillR
01-21-2009, 02:54 PM
The goverment cant do anything correctly...we need them for the Military and Mail....i cant figure out why anyone would want national Health Care...

One of the compelling reasons for national health care has to do with simple statistics.

Pricing for health insurance policies for small employers is based off of your group risk figure. If you start a new company you are at a standard risk. As time goes on your number goes up or down and your prices go accordingly. They will generally always go up but the price might go up 5% if you are on the low end instead of 25%.

Here's the problem - let's say you have a company of 5 people. All of them are marathon runners in excellent shape. Year 1 you have a few small claims totalling $10,000 (office visits, labs, simple meds) and your risk factor is low. Your premium is $500/mo/person or a total of $2500/mo or $30,000/year. The company makes money on you (these figures are grossly over-simplified). Average cost per employee is $2,000.

Year 2 you have an employee who gets pregnant and has a premature delivery. The average cost for this? Over $1,000,000 in hospital care.

Now your price/risk level has gone up astronomically. The premium is still $30,000 but the average cost per employee is now OVER $200,000. The insurance company will jack your rates accordingly.

Since each business is evaluated individually for this risk factor the problem is simple: upside years with few claims do not greatly benefit the business. But downside years GREATLY penalize the business.

If we all - the entire country - were tracked as on statistical pool the risk factors would go down substantially for our total pool.

Does that mean health care should be nationalized? Not necessarily - but this is something to think about.