Small Home Business please help. right offs?

[jacobmagner]

Hello, im Jacob. 

I run a custom powder coating shop where the majority of our work is dirt bike and side by side componets. the shop is located on my home property and we made around 70,000 this year before COGS. We have not done anything with paying taxes yet and my wife also works for the home business. we have 4 children. 

here are my questions i hope someone can guide me in the best direction to help. 

1. What are some of the best items i should be looking at to reduce my taxes?

2. We purchased to dirt bike to powder coat and display at events. are these considered right offs? how do i go about adding them in the return? 

3. is there any helpfull videos for me to watch i have reviewed many youtube videos just curious if someone may know one that hits all the spots 🙂 

Thank you so much! 

[Anonymous_]

Frankly, you raised a lot of issues in your post and could seriously benefit from consulting a tax professional and/or legal/business counsel.

@Critter-3 

[Carl]

We have not done anything with paying taxes yet

So you haven't paid quarterly taxes as required? You can get a "pardon" for that, if 2021 is in fact, your first year of doing business. But with $70K of business income you "NEED" to seek professional help yesterday, if not sooner.

1. What are some of the best items i should be looking at to reduce my taxes?

Two things jump out to me right away.

 - This is your first time dealing with business taxes.

 - You have not worked through the program to see how it works, and what it asks for as it relates to business deductions.

If you will work through the program the way it is designed and intended to be used, You'll be asked for almost every possible business deduction you can take. I say "almost" because no program can cover every single itty-bitty possibility.

2. We purchased to dirt bike to powder coat and display at events. are these considered right offs? how do i go about adding them in the return? 

No, It would be considered a business asset.

3. is there any helpfull videos for me to watch i have reviewed many youtube videos just curious if someone may know one that hits all the spots

The best thing you can do in your first year dealing with this stuff, is to seek professional help. Especially if your state taxes personal income. You want a tax pro with the "heart of a teacher" who is willing to share with you, the knowledge you need. You will be paying them for that after all.

Then, after that first year, if you feel comfortable with tackling it yourself, my all means have at it.

I also highly recommend that in your first year of dealing with this (be it 2021 taxes or 2022 taxes) that you use the CD version of the program that you physically install on your computer. It's significantly more user friendly than the on-line version for a first timer, and a whole lot easier to fix errors or even "start over", as I'm confident you'll need to do several times in the learning process.

[Critter-3 · Accepted solution]

I highly recommend you have a talk with a local tax pro who can help you understand all the situations you have and some you may not know yet ...

my wife also works for the home business. we have 4 children.  If this is a sole prop then you can pay your spouse and kids wages if they actually work for your Sch C business. Payroll reports must be filed at least quarterly.

here are my questions i hope someone can guide me in the best direction to help. 

1. What are some of the best items i should be looking at to reduce my taxes?  See the info listed below. 

2. We purchased to dirt bike to powder coat and display at events. are these considered right offs? how do i go about adding them in the return?  The cost of the bike ( if you are not considering it inventory) could be considered a demo product (office expense or a supply for your event table ) or even advertizing would be appropriate if you put your business name on it.

3. is there any helpfull videos for me to watch i have reviewed many youtube videos just curious if someone may know one that hits all the spots  Personally I would start reading for yourself ... 

If you are new to being self employed, are not incorporated or in a partnership  and  are acting as your own bookkeeper and tax preparer you need to get educated ....  

If you have net self employment income of $400 or more you have to file a schedule C in your personal 1040 return for self employment business income. You may get a 1099-NEC for some of your income but you need to report all your income.  So you need to keep your own good records. Here is some reading material……

IRS information on Self Employment….
http://www.irs.gov/Businesses/Small-Businesses-&-Self-Employed/Self-Employed-Individuals-Tax-Center 

Publication 334, Tax Guide for Small Business
http://www.irs.gov/pub/irs-pdf/p334.pdf 

Publication 535 Business Expenses
http://www.irs.gov/pub/irs-pdf/p535.pdf 

Home Office Expenses … Business Use of the Home

https://www.irs.gov/businesses/small-businesses-self-employed/home-office-deduction

https://www.irs.gov/pub/irs-pdf/p587.pdf

Publication 463 Travel, Gift, and Car Expenses

https://www.irs.gov/pub/irs-pdf/p463.pdf 

Publication 946 … Depreciation

https://www.irs.gov/pub/irs-pdf/p946.pdf

          

There is also QuickBooks Self Employment bundle you can check out which includes one Turbo Tax Self Employed return and will help you keep up in your bookkeeping all year along with calculating the estimated payments needed ....
http://quickbooks.intuit.com/self-employed

          
Self Employment tax (Scheduled SE) is generated if a person has $400 or more of net profit from self-employment on Schedule C.  You pay 15.3% for 2017 SE tax on 92.35% of your Net Profit greater than $400.  The 15.3% self employed SE Tax is to pay both the employer part and employee part of Social Security and Medicare.  So you get social security credit for it when you retire.  You do get to take off the 50% ER portion of the SE tax as an adjustment on line 27 of the 1040.  The SE tax is already included in your tax due or reduced your refund.  It is on the 1040 line 57.  The SE tax is in addition to your regular income tax on the net profit.
 


PAYING ESTIMATES
For SE self employment tax - if you have a net profit (after expenses) of $400 or more you will pay 15.3% for 2017  SE Tax on 92.35% of your net profit in addition to your regular income tax on it. So if you have other income like W2 income your extra business income might put you into a higher tax bracket.

You must make quarterly estimated tax payments for the current tax year (or next year) if both of the following apply:
- 1. You expect to owe at least $1,000 in tax for the current tax year, after subtracting your withholding and credits. 
 
- 2. You expect your withholding and credits to be less than the smaller of: 
    90% of the tax to be shown on your current year’s tax return, or 
  100% of the tax shown on your prior year’s tax return. (Your prior year tax return must cover all 12 months.)

To prepare estimates for next year, You can just type W4 in the search box at the top of your return , click on Find. Then Click on Jump To and it will take you to the estimated tax payments section. Say no to changing your W-4 and the next screen will start the estimated taxes section.

OR Go to….
Federal Taxes or Personal (H&B version)
Other Tax Situations
Other Tax Forms
Form W-4 and Estimated Taxes - Click the Start or Update button