Small Business Taxes...HOLY SHI...COW!

[Growley]

So, I figured being a year and a half into this, I'd better look into getting set up to pay taxes on my pipe sales. My first year's sales pretty much went back into equipment, but this year I'll probably make some money. I like to be above the board on things, so today I called a small business CPA type guy to see what I needed to do to get set up. I'm pretty much illiterate when it comes to this sort of thing , so I really didn't know where to start or how bad it would hurt!

Apparently there's a 15.3% tax rate just for showing up and owning your own business , plus my standard tax rate, which will fall somewhere between 28% - 33% or something similar . So, worse case scenario I'm looking at almost 50% !?!?!?

Can that be right? If so, I'll probably quit selling and end up with a huge selection of Growley pipes to smoke myself...

Say it isn't so.

PS. Taxes are a pretty dry subject, so I thought I'd spice it up with as many emoticons as possible.

[RadDavis]

Brian,

You used a lot of emoticons.

I don't think you're looking at 50%. Get a better CPA.

Hope this helps.

Rad

[Ocelot55]

Andrew Staples told me he runs his whole operation as a small business. I know Idaho is quite different from Alabama, but he might have some sage advice.

Care to chime in, Andrew?

[dogcatcher]

I was in the tax accounting field for years and I was an Enrolled Agent. EA's are licensed to practice before the IRS, the same as CPA's and attorneys. This is a link to the Alabama Enrolled Agent Society, I cannot vouch for any of them, but my experience over the years is that you will get a very competent person that can explain tax law correctly. http://www.alsea.org/alabama-enrolled-agents

After I retired, I found that tax law changes were something I did not want to mess with, I went with what I consider the best EA in my area. Generally EA's work with taxes and small businesses, so they have to keep abreast of all of the changes.

[caskwith]

That sounds like some complicated shit, you need to move over here, much simpler tax system for those who are self employed. Keep track of income, keep track of expenses, write both on tax return, pay income tax on anything over the basic threshold. Simples!

[Tyler]

50% sounds high, but in the 40's wouldn't shock me. It will also be a factor of how much you make at your other job, and what bracket that puts you in.

My dad had his own business for most of my life. It's a bit discouraging to take the risks, face the challenges, and care for the employees of your business, only to have to work through May or so before the government says they have enough and you can keep the rest money you are making that year.

[scotties22]

That sounds like some complicated shit, you need to move over here, much simpler tax system for those who are self employed. Keep track of income, keep track of expenses, write both on tax return, pay income tax on anything over the basic threshold. Simples!

If you have a good CPA it isn't that much more complicated than that here. We own a landscape business, rental houses and what I do and we don't pay more than 25% (on the high side) when it's all said and done. It sounds like you need to talk to someone else. You get to do fun things with your small business, like write off part of your house and utilities if you work from home (I think most of us here do)...comes in handy.

Oh....and we play by the rules too. Above board 100%, just not worth the risk otherwise.

[snapper-G]

I make about $5,000 each year as a hockey official and not only is that added to my regular income and taxed but I usually end up paying around $500 to $600 in what the IRS calls a Self-Employment Tax. As the Beatles sang "if you walk, we'll tax your feet"

[ToddJohnson]

When you're taxed as a small business--LLC or sole proprietorship, you're taxed on your net income, not your gross income. If your CPA is too retarded to get your net income down to zero after deductions--especially on such a small amount--then you should just get TurboTax and do it yourself. The tax code also says that you can use "any legal means" to lower your tax burden. Most CPA's know how to plug W2's into a formula and cash a check. If you do itemized deductions, however, you have a tremendous amount of latitude. For instance, did you know that you can gift each of your children up to $13K/year tax free, and they will pay taxes on it in their (much lower) tax bracket? (in order for them to pay taxes on this amount in their tax bracket and not yours, they must "earn" at least 50% of their annual support, but you can set them up as independent contractors, and just 1099 them for $13K per annum) You can also set up limited partnerships to reallocate income within your family. I could go on, but I'm not a tax professional, and I'm not giving tax "advice." I'm just saying that, as someone who's self employed, you're just giving away money if you don't know how to play the game. And make no mistake, it is a game.

TJ

[scotties22]

TJ is right. It really helps that my CPA's husband is self employeed as well....she knows all the tricks and deductions available.

[Growley]

Well, I guess I'd better find a better CPA. I appreciate you all chiming in. It always helps to get multiple perspectives.

[andrew]

Yeah, your tax rate on profit should be between 10%-15%. If you're looking at something any higher than that... I would be suspect. You deduct state tax from federal, yadda yadda, by the time you get done you shouldnt be feeling a horrendous pinch, but you WILL notice it eating at your bottom line. You also need to determine whether or not you should be paying quarterly taxes. IRS has a short formula for that. Give me a call and ill share what I do know and what I don't (which is lot).

Sas, if the IRS comes and takes me away in the middle of the night in Chicago, you'll know that I didn't know enough

[DMI]

When I was doing the historical leatherwork full time I was able to claim for all sorts of odd things like muskets, a cannon, my 'work wear' included chain mail and some armour.

Now as a full time care giver I can earn £100 per week tax free.

David.

[caskwith]

When I was doing the historical leatherwork full time I was able to claim for all sorts of odd things like muskets, a cannon, my 'work wear' included chain mail and some armour.

Now as a full time care giver I can earn £100 per week tax free.

David.

Is that £100 in addition to your basic tax free allowance?

[Tyler]

Well, apparently I'm wrong. Good.

[mcgregorpipes]

the only receipts I don't keep are from the grocery store, nearly everything else can at least be partially attributed to a business expense. a good accountant will tell you what you can get away with at a stretch and still keep things above board.

[DMI]

If I was on the mainland no, but we have all sorts of odd rules over here which can be confusing as hell when you are used to mainland taxes etc.

The way it works is I receive £36 a week to care for Sheena on top of that I have the option of Income Support of £46 per week or I can take a tax break of an extra £100 per week or work 16 hours as an employee before it affects the I.S. I cannot guarantee being able to go out to work and I thought I could earn more than £46 so I took the tax break.

The idea is to reward people who give up full time work to care for someone and save the government a few million in wages or residential care.

[dogcatcher]

There is some misinformation on this thread, granted I have been out of the tax filed for 13 years, but I know the basics of what has and hasn't changed in the last 13 years. Find a competent tax preparer, whether it is a CPA, an attorney, an Enrolled Agent or John Doe the bookkeeper, key word is competent. If he or she does not know the law, and you are the one that is ultimately responsible for any penalties or interest if it is wrong.

[caskwith]

If I was on the mainland no, but we have all sorts of odd rules over here which can be confusing as hell when you are used to mainland taxes etc.

The way it works is I receive £36 a week to care for Sheena on top of that I have the option of Income Support of £46 per week or I can take a tax break of an extra £100 per week or work 16 hours as an employee before it affects the I.S. I cannot guarantee being able to go out to work and I thought I could earn more than £46 so I took the tax break.

The idea is to reward people who give up full time work to care for someone and save the government a few million in wages or residential care.

Ahh I see, once you head away from the basics of work,earn,pay tax it does get complicated