starting small home based buisness

[Kodiak]

Not sure if it belongs here but i have some questions.

What would it hurt to start a small business doing tile work, small odd jobs, and other things..basically handyman stuff just for the writeoffs. I have a full time job that provides me a good income, just been talking here at work with guys and sounds like a good way to get some writeoffs.

what are the rules, how much can you save?

all the tools you buy you could right off, fuel, computers.

is there a minimum of jobs that you have to do?

please discuss.

[BobT]

First, it is a misconception that owning a business automatically qualifies one for "writeoffs" that will earn you money. In a nutshell for every dollar you spend you save $.20 or $.30 in taxes depending on your tax bracket.

Bob

[pinkfloyd4ever]

Not an expert at all, I'd say though just start yourself, work for cash, get some references, advertise yourself in the local paper and go from there.

[Kodiak]

you still have to get a liscense and tax id correct?

i have some literature coming from the state.

as stated before i do not need this for income it would just be for writeoffs and some extra cash.

just sounds like a way for a working joe to use the system to his advantage for once.

[setterguy]

You would still need a tax id, and the "business" would eventually have to show a profit before the IRS got very suspicious. I know a couple guys who own "kennels" for writing off dog food vet bills, fuel to and from trials ect. If you are going to go this route make sure you have a real good tax man that can steer you around the red flags.

[Sandmannd]

I would advise setting up and LLC, it's cheap and protects you personally. Folks can go after the LLC but a lot harder to go after you. Once you have that, you can use sub companies under. I run a couple of small companies under mine. You do have to show a profit, I believe it's after four years. I had one business that didn't show a profit in that time frame so I shut it down. Wasn't using it for a tax write off, I wanted it to take off, but it did cut my taxes down because the loss on your buisness also comes off your private taxes. If you want to do the work and get a buisness going, go for it. If you are only doing it for a tax write off, probably not a wise choice.

[BobT]

I think Sandmannd is giving you good advice. Starting a business for "writeoffs" is not a good reason to start a business.

First, unless you are doing something illegal, there really aren't any writeoffs that will be free. You have to spend money to show cost and then you won't get the cost written directly off your tax liability but it reduces your overall gross income but remember, if you continually run a business in the red with nothing to show why, you'll be looking for an audit.

There's more to starting a business then just saying you are in business. You have to keep records, receipts, show cost of goods sold, and in the end be able to demonstrate that you are making an honest effort to produce a profit.

Remember in my previous post it'll cost you about $.70 for each dollar you save in taxes, give or take depending on your tax bracket.

What happens when you try to cheat? Does Enron ring a bell?

Bob

[fivebucks]

Plus the bigger tools etc that you buy can only be used as a write-off to the percentage that they are used in business. ie: 25% business and 75% personal - you can take 25% of the cost. That is how bigger items will work, not sure on smaller hand tools etc. You also would not be able to deduct a home office or computer unless that room is used only for business and never for personal use. The IRS has gotten very picky on home business deductions. Definately check with a good tax guy before taking the plung.

[DTro]

Doing those same jobs on the side for cash would yield a lot more money in your pocket.

With the economy struggling, more people will be trying to use these "loopholes" and even if you do everything to a "T", an audit would not be a fun process. The Govt wants their money and I'm sure will be looking at things much closer.

[Dave S]

I don't know the specifics, but isn't there also a law that prohibits working out of your home? In some cases, you must have a separate mailing address, office location or something to that effect.

The other guys have provided some good info and may be able to shed more light on this.

[Iambjm]

I have been self-employed for around 35 years, took some of my home space for an office and storage of my product. Pitfalls - property tax refunds, you must reduce for the space used for business which most years wiped this out. When I sold my house I ended up paying capital gains taxes because of the deductions I had taken for home office. Always having the worry in the back of my mind "am I going to get audited". When I delivered papers for the Strib a bunch of drivers were audited and ended up paying some big time taxes for taking deductions they were not entitled to. The last few years the economy has been so bad I have lost money, this year I am packing it in and trying to decide how do I liquidate a couple of thousand dollars worth of inventory. Depending on what you would be doing, you may have to have insurance to cover your hinder. If you are using your vehicle for business, you should tell your insurance agent, then expect a rise in your auto insurance. If you use the vehicle for a deduction and then sell it expect to have to deal with that on your taxes. Etc., etc., etc.

[Big Dave2]

I don't know the specifics, but isn't there also a law that prohibits working out of your home? In some cases, you must have a separate mailing address, office location or something to that effect.

The other guys have provided some good info and may be able to shed more light on this.

I know in my town it was pretty easy to get a home business permit, especially if you are doing the work off-site.

I'm with DTRO on this one. You will be WAY money ahead just to work a few jobs here and there for cash.

[JeffB]

A better option for some on like you might be a rental house. I have a friend who started this in college and has done quite well. You get a quite a few write offs and if you have the ability it seems like it might be a good time to but, since realestate prices are down along with interest rates. Plus you should get a decent rental income along with long term appreciation. Just a thought do your homework before you do anything.

[BobT]

Quote:

Doing those same jobs on the side for cash would yield a lot more money in your pocket.

Important to note that working for cash and not paying appropriate income tax is tax evasion.

Bob

[IFallsRon]

I make money, pay quarterly estimated taxes and use the profits for supplies and equipment. Some may consider that writeoffs.

Based on your regular income, there is an x-factor as to how much you can/will make that will affect your bottom line. You may find that you'll have to work more than you want to see an significant income boost.

I've used TurboTax during all the years I've had a side business and I've had no year-end problems.

[Kodiak]

this is good stuff keep it coming

[Sandmannd]

A better option for some on like you might be a rental house. I have a friend who started this in college and has done quite well. You get a quite a few write offs and if you have the ability it seems like it might be a good time to but, since realestate prices are down along with interest rates. Plus you should get a decent rental income along with long term appreciation. Just a thought do your homework before you do anything.

I've done this for the past for years. Not as easy as you think and to be honest it's to the point of bankrupting me. When a tenant moves they will trash it. It cost me close to ten grand to fix it back up. Yea, I took them to court (more out of pocket expess) and won, but try getting the money out of them? Doesn't happen. They break light fixtures and call you to fix them. They shatter windows and give you a blank stare when you ask how it happend. They are a huge pain in the rear, I would not do it again.

[DTro]

Quote:

Doing those same jobs on the side for cash would yield a lot more money in your pocket.

Important to note that working for cash and not paying appropriate income tax is tax evasion.

Bob

I would consider starting up a business for the "write offs" only to be in the same category, but that's just me.

[fishorgolf]

As a business owner I can assure you if you start a business for the sole purpose of getting some "write off's" you will be greatly disappointed.

If you do decide to give it a shot my #1 piece of advice would be to keep very good records and pay the taxes you owe. I good friend of mine made some very poor choices 10 years ago and he is still being effected by it.