Income Taxes - 2019

[Walnut Beast]

That's kinda what I thought if your using the sawmill on lumber your using on a building where your storing equipment used on the farm

[Sedgehammer]

Loses can be carried over from one year to the next. I forget what form it is.

[WV Sawmiller]

   Not income taxes but Sales taxes I guess - I have several customers who buy from me who are tax exempt. One local outfitter sells plants in the spring and buys tomato stakes from me to re-sell. He is tax exempt. Sometimes I do mobile sawing for farmers who use the lumber for farm purposes and they are tax exempt. Sometimes I saw or sell to craftsmen who use the slabs and lumber and such to make products for resale and are tax exempt. Sometimes I saw or sell to builders who will use the lumber or beams or such for part of their construction/building business and they are exempt from sales tax.

   Just because a customer has a tax exemption number does not mean my services are tax exempt. They sign a form that the purpose for the wood is tax exempt. If I get audited I show the forms as the reason I did not collect and submit the state sales tax. If the tax people want to challenge it they need to go see the customer. A farmer having me saw logs into lumber for a vacation cabin has to pay sales tax. That same farmer using that same wood to build a barn or shed for storing feed or farm equipment could claim sale tax exemption. If they have a tax number and sign the form stating it is for exempt purposes my job is done and the burden of proof shifts to them. The same is true with non-profit customer organizations.

   I think many states do not charge sales taxes on services such as sawing but only for products such as sawed lumber. Other states, like WV, make me collect sales tax on all my services and products so if you are starting out check your local regs.

[mike_belben]

What will really get you an audit is having your number of 1099 incomes on tour schedule C not match what number of 1099s these institutions have sent in.. That triggers the system for automatic audit so claim all your 1099 incomes perfectly.  



Next, youve got to categorize correctly.  A new wheel loader cant be expensed in one season.  It has to be depreciated. A $6k engine overhaul for a tractor cant be expensed, its gotta be depreciated.  The rules are muddy so just use $1000 as a threshold.  Over a grand depreciate and youll stay in good shape.  During audit they can throw out big expensed items and have you paying the difference. 


You can deduct the price of overhauling old business equipment over a number of years, say a project tractor.  If you bought it in 2014, did trans in 16, paint in 18, tires in 19 then ran it for profit in 20 you just put all years receipts into a folder and then begin depreciating the total the year it goes into service.  


For face to face transactions off craigslist or FB.. Screenshot the ad, any important texts, take pic of the item in your truck or trunk when you go get it, and write yourself a receipt with the date, item, amount, and persons name address number, anything you got on them. If its cash keep your atm withdrawal slip and write "tablesaw from craigslist" on it.  Print the images and staple it all together. Drop the packet in your equipment folder.   No problem.  

[Walnut Beast]

Time to break out the dress clothes. CPA MIKE 😂

[mike_belben]

I have a great lawyer and a great accountant.  And ive paid them both in guns and ammo before. 

;)

[Sedgehammer]

I fired our accountant several years ago.  Wouldn't take any risk at all with tax deductions, so what was the use in using them? Started using turbo tax way back when. Was audited for 2014. They claimed we owed 87k. Paid them $807 and didn't even owe that, but figured a small token for their time was a better investment then a total embarrassment. Unless your taxes are very complicated, I'd never hire an accountant again.

[mike_belben]

Having a CPAs name on your return reduces your audit odds considerably compared to self filing.. If your 1099s are in order anyway.  

[Sedgehammer]

Having a CPAs name on your return reduces your audit odds considerably compared to self filing.. If your 1099s are in order anyway.  

I'll take the risk cuz we've saved well around 5, 6 figures over the years all told then if we'd had a cpa do it.

Been audited twice. Once in 97 also. They asked me why i didn't use numbered invoices. I said why should I make your job easier? They said I owed $27k then, paid them $1,700.

Oh, another funny. They didn't want to accept my daily/yearly mileage report (66k+). They wanted me to back that up with some oil change mileage documentations. I said the law states one or the other not both and it's my choice. They took my log book. 

[Walnut Beast]

CPA most are or Tax expert  or no CPA ???

Experienced Sawyer or Someone sawing no experience.


How do you think things are going to turn out 95% of the time 😂😂

[Sedgehammer]

CPA most are or Tax expert  or no CPA ???

Experienced Sawyer or Someone sawing no experience.


How do you think things are going to turn out 95% of the time 😂😂

big difference. do you know how to saw? do you know how to do math? do you know how to read? do you know how to ask questions if you don't know? I don't know how to saw, but I know how to do those other 3 really well.
I'm basing it off of my/our experiences. we've saved a lot ad i mean a lot. The 2014 audit we'd have paid the 87K when we filed if the cpa did it most likely. i paid $800. I'll take that.

[mike_belben]

Mines a hundred bucks a year and punches in whatever i put on my xcel spreadsheet file that tallies the books.  Saves me the grief of turbotax, and obviously hes a pro.. Im not. 

[LogPup]

Mike,  You should check out the Sec 179 deduction.  I have used this over the years for things that you normally have to depreciate for.
Overhaul, repairs, computers and software.  It depends on your tax situation for that year.  It can be very helpful for reducing your taxes due.

David

[Sedgehammer]

Mines a hundred bucks a year and punches in whatever i put on my xcel spreadsheet file that tallies the books.  Saves me the grief of turbotax, and obviously hes a pro.. Im not.

That's great. hopefully he's taking every deduction you are legally allowed and not being 'safe'. Most are 'safe'. 

[WV Sawmiller]

Sledge,

   Good analogy. I expect my tax guru to advise and let me decide how much risk to take. I have no problem explaining the rationale behind any of my decisions. I figure if you get 10 different IRS agents do an audit of your books you are going to get 12 different opinions anyway. : I figure billionaires pay lawyers and accountants. (BTW - I have no problem with anybody claiming every legal exemption no matter how wealthy he is!) Pore folks like us pay taxes.

[Sedgehammer]

Thanks @WV Sawmiller Have a buddy with a business. Revenues and expenses were roughly the same. He pays $70k+ a year in income taxes. He asked what we were paying. I told him. He almost fell down. Couldn't believe it. So i asked him some questions and he then then asked his CPA. They won't use those exemptions, as they are 'risky' and subject to being 'looked' at. He said "so, I want them, as I am legally entitled, I run a clean business" they told him he'd have to go elsewhere. He's still with them..... :D :D

What many people don't know is a CPA is actually required under IRS code to report any questionable financial activity by their clients to the IRS.

If you run a legal business you are entitled to EVERY legal exemption. Period. 

[WV Sawmiller]

   I always figure if its a judgement call lets use my judgement,

   I also tell my tax folks I don't want to overpay then get a refund at tax time. I figure on April 15 if I am not square or owe a little we did something wrong. I don't want to owe enough to get fined but just short of it. I filed one year when working overseas and I reported all my income from there even though the IRS would have had no way to check. When done they sent me a notice, through regular mail - no tracking or verification of receipt required, saying I owed about $200 more and if I did not reply it implied concurrence. I called my tax folks and they checked and said no, we filed correctly and did not owe it so I sent in a challenge. They did that a couple more times and we refuted each time. Finally it came tax time and I had a refund due and they took the $200 out of it. I never got any hearing or my day in court - they just stole it. It was not enough to hire a lawyer or anything but I have told my tax folks ever since to be sure we never overpay to prevent such as that. It still ticks me off as I could have reported half or less what I did and paid less and no way they'd have known but I did what I considered was legal and right and got penalized for it.

[Sedgehammer]

I wish there was an angry button, as I can't click on a 'like' button.

I also refuse to 'over pay'. It's my money, not theirs. They don't pay interest and it should be your judgement, it's your money.

[Ricker]

I am a self employed tax preparer.  That's after 26+ years working for a state tax agency.  Seen both sides, both have their own interpretation of what's a legit expense.  Usually the tax guy wins 99% of the time if they throw out a claimed expense.  The IRS will accept anything filed, if it stands up to their review if you are selected for audit is another story.  For example you claim mileage when you go to the grocery store to get dawn dish soap to mix in your lube tank.  That's a legit expense.  Same trip to the grocery store to get the dish soap except while you are there you buy your weekly groceries, and you use your debit card so they can prove it or better yet you give them a receipt that has the soap and the rest of your groceries on it.  You claim the mileage to and from and the IRS will cut that mileage expense by 50%.  That's just one way they can trip you up with what you claim is a legit expense, and there are dozens of them that they can use.  As cpa's will tell you some credits aren't worth taking as it can raise havoc with the whole return filed, which can lead to a big bill.

[mike_belben]

[  @Sedgehammer  edit- hmm.. Post lost my quote of you talking to me on the last page. ]

Without saying too much, i have many times said no, shrink it back, thats too big of a refund, i dont want to trigger an audit.  I never claim anything stupid or split use or stretching it, and i never hide income in any way.  I claimed $33 of scrap income that wasnt 1099'd last week.  [I prefer having refund in winter so do apr15 extension every year]
If an expense receipt can be nitpicked at all i toss it. At a certain size refund i just say thats enough and most years still hold back a pile of qualified deductions just incase an audit throws a few out.  Okay well let me produce the whole stack then.  
Most people get a chunk of money and go on vacation or put on a new deck.  I get a chunk of money i get another asset.  It is a lifestyle to make sure that most of your purchases are genuine qualified deductions.  I always make sure that the business income is expanding the business assets because they arent printing and mailing out skid steers or tag trailers to everyone.  Theyre printing money for so called 'stimulus'  so its losing its purchase power while stimulating a rise in price for my old worn out junk.
As a w2 employee i knew tons of guys hungry for overtime.  Ohh im making $41/hr!  Sounds great.  Id look at my check and see it just bumped me into a higher bracket and i got $24 extra take home for 3 hrs work and the rest went to withholding.. Dont even ask me how the magical formula does that sort of thing.  Pith on it.  Hit 40 punch out, go do side gig make money buy more tools, equipment, materials etc.
And never buy a mortgage to deduct mortgage interest. Thats a game of give me a dollar i will give you back 30 cents and we can play til you fold. Foolish.

[Sedgehammer]

@mike_belben I understand and since it's yours and he does it how you want, your golden. 

I know of many people that do it that way, but since our books aren't cooked either, I'll take every darn deduction/exemption allowed and turbo tax will represent you in an audit for a one time fee of like $75 per tax year. So I don't have much to lose if they throw out a few here and there, as the audit itself didn't cost me in being represented. Now if I had to pay hourly for a lawyer or a cpa to represent me in an audit, yeah I'd be a bit more careful also. 

[WV Sawmiller]

   I am chump change to the IRS I figure but I am in total agreement with the hammer! I bought, got a separate receipt for and listed a quart of ATF from my grocery store on the way home to use a mill lube. If they asked why I bought it at a grocery store it was because I was buying Gatorade to take on tomorrow's job so bring it on. If it was a business expense it goes on my report. I also claim and pay my state sales tax on every $10 cash sale when a neighbor buys a load of slab wood for kindling.

[WDH]

I also declare and pay sales tax on each and every cash sale. 

[mike_belben]

Our walmart is almost entirely self checkout which is nice because we often have need for 3 different receipts for tax purposes, and now theres no feeling guilty about it in a cashier line. 

[Sedgehammer]

  I am chump change to the IRS I figure but I am in total agreement with the hammer! I bought, got a separate receipt for and listed a quart of ATF from my grocery store on the way home to use a mill lube. If they asked why I bought it at a grocery store it was because I was buying Gatorade to take on tomorrow's job so bring it on. If it was a business expense it goes on my report. I also claim and pay my state sales tax on every $10 cash sale when a neighbor buys a load of slab wood for kindling.

Make sure you take the mileage deduction