I'm in turbotax. I added $32,000 in business expenses, and my tax bill only went down by 8,000..... I guess I'm an idiot.
Just venting. fuck
Just venting. fuck
WTF TAXES OH FUCK!!!!!!!!!!!!
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well that makes sense. Business expenses just reduce your gross income, not your tax obligation. It's a deduction, not a credit.
So if your effective tax rate is 25%, reducing your gross by 32k will reduce your tax bill by $32k x 25% = $8k.
So if your effective tax rate is 25%, reducing your gross by 32k will reduce your tax bill by $32k x 25% = $8k.
That'll happen when you start getting into the 6 figures.
Making some assumptions here that all of your income is pass-through, let's say your income was $300k.
Taxable Income: $300,000
Tax Owed = $85,068.25
Tax owed formula = $39,148.75 (basis) + $45,919 (33% of amt over 160k)
Taxable Income: $268,000 (300k - 32k expenses)
Tax Owed = $74,508
Tax owed formula = $39,148.75 (basis) + $45,919 (33% of amt over 160k)
That's only a $10,560 difference in your tax bill for coming up with $32,000 of expenses. So, it's easy to see how your tax bill won't change. The government apparently doesn't like it when you make too much money ;-)
BTW, getting hit with huge tax bills is no fun, so anyone doing this full time really needs to get setup with a payroll service such as Paychex. They also do your quarterly tax returns for a REALLY small fee, and it's totally worth it.
Making some assumptions here that all of your income is pass-through, let's say your income was $300k.
Taxable Income: $300,000
Tax Owed = $85,068.25
Tax owed formula = $39,148.75 (basis) + $45,919 (33% of amt over 160k)
Taxable Income: $268,000 (300k - 32k expenses)
Tax Owed = $74,508
Tax owed formula = $39,148.75 (basis) + $45,919 (33% of amt over 160k)
That's only a $10,560 difference in your tax bill for coming up with $32,000 of expenses. So, it's easy to see how your tax bill won't change. The government apparently doesn't like it when you make too much money ;-)
BTW, getting hit with huge tax bills is no fun, so anyone doing this full time really needs to get setup with a payroll service such as Paychex. They also do your quarterly tax returns for a REALLY small fee, and it's totally worth it.
I think that's how my previous employer did it... or something similar... until he felt like cashing in and let the whole thing fall to crap.
It was weird. The company was making no money and working on these 'penny' profit margins. Total mess.... yet, the head office was taking over a $1,000,000 a year. Like we actually used a million bucks in office expenses from a company that we never seen or hardly talked too.
John, is your business structured as an S-Corp, C-Corp or LLC?
If you are not paying yourself a reasonable salary with respect a) the corporations income and b.) the amount of shareholders in your company - presumably just you - and then taking large dividend distributions, you're opening yourself up to a very real potential for an audit. I hope you have a well-informed CPA working with you ;-)
Thanks Will. Hope you're feeling better. I have an appointment with a business CPA on the 23rd. Any tips on finding a good one? I do'nt know if he's good. I already don't have much faith since I got his wife/secretary on the phone, and i heard "mommy !!!!!! mommyyy! crying"
Does it really make that big of a difference? Can I really write off so many things like people claim? What about my car? I do'nt use it for business at all...
Honestly I don't know anything about taxes :|
The kosher answer here is yes, you may write it off with respect to how often it is allocated to your business. I.e. Driving to the bar to meet a client, driving to best buy to purchase a new computer, filling up gas to drive to best buy, etc. are all legitimate business expenses.
If you do internet marketing for a living, just put the title of the car in your business name and write every vehicle-related expense off.
Everything else that you can think of that helps you get your job done - business lunches, meetings (many meets can happen at bars), all your conference expenses, cell phone, hosting + domains, internet service.
Many people write off a portion of their home as a home office - you'll have to talk to ask your CPA about that as the IRS has been coming down on people hard for that in recent years.
Don't be discouraged by screaming kids in the background (affiliate managers and partners often listen to my crying kids in the background too) but I will say that a good CPA is worth every penny for a couple reasons - they will help you legitimately maximize your deductions, as well as defend you in the case of an audit (make you you discuss this with your CPA as well).
Yup, that's definitely the way to go. Do you guys over the pond also get a certain amount that's not taxable?
It depends on the way the corporation is formed; S-Corp, C-Corp and LLC's all have different rules. The short answer is no, but one might think 'yes' depending on how you look at it.
An S-Corp will get taxed on 'Earned Income' which means money coming in to your business, whether you choose to distribute dividends or not. You may choose distribute dividends 'tax-free' to shareholders, and his how many S-Corp owners (myself included) pay their share of taxes to uncle sam.
Anyway, that's why the whole 'tax-free' concept for s-corps is confusing, because even thought the distribution itself is tax free, the shareholders (you) were taxed on company earnings already.
C-Corps actually get taxed twice (1st on earnings then on distribution), but may actually work out to your advantage in many situations. I don't understand them nearly as well though, since I'm not a C-Corp.
I feel your pain. After having undergone 2 tax audits for a network-marketing business, you start to realize that your expenses have to be coordinated to your business. The best way to look at it is like thi; if you spend $1 how will that dollar spent translate into profit? Most network marketing "gurus" and even some PPC "experts" state that in order to make money you must spend money. That is true but only to a certain degree. Eg: You could borrow OPM (other people's money) and make money. The way one could look at it is this way. How much upfront capital is going to be used to get this business off the ground and working? Then figure out how long it will take to generate an income from that business. And then finally figure out when will the income that is coming into your business will start to exceed your expenses going out. NEVER run up your expenses in a business for a tax deduction. In the above example; he recieved 25 cents for every dollar spent. That is not good unless the income from the business offset or was higher than the expenses. Do not fuck with the IRS. Every expense must be well documented or they will take away the deduction and make you pay interest to boot. Good luck to all.
OOOooo...Mental note to self---MUST follow own advice. Especially about planning out expenses and forecasting profit for my business.:Yahoo_29:
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