Is this my stupidest idea yet...or most brilliant?

RX Reven' said:

 my business cummute

Are you some sort of ... film star?

Mr. Peabody said:

RX Reven' said:

 my business cummute

Are you some sort of ... film star?

Nope, just a rank and file engineer but I work for a big Fortune 500 company that has locations all around the world and, pre-COVID, they sent me everywhere to teach engineering statistics.

My boss likes to say "I think RX Reven' would do his job even if we didn't pay him"...he's right, I love what I do.

I'm actually pretty introverted so you wouldn't think I'd be willing to do public speaking but it doesn't feel like I'm talking as much as it feels like I'm giving math a voice.  I'd be nervous having people watch me auto-cross as well but I don't see myself as the main ingredient...I'm just the catalyst that unleashes my car.

RX Reven' said:

In reply to mtn :

Yep. 4,200 miles per year at 2022's 58.5 cents per mile = $2,457.  I just use a little Mazda CX-3 that couldn't get less 33 mpg if it tried so even with California's near $5 per gallon, I'm just at 15 cents per mile for gas, change my own oil, blah, blah, blah...I'm way short of 58.5 cents per mile. 

Even for your car you are forgetting tires, consumables, depreciation etc.  Also I'll bet the average car being used for business is probably less than 3, certainly less than 5 years old.  Almost all business owners will pay for oil changes and all maintinance at a dealer etc.  You may be one of the ones who come out on the plus side of $0.585/mile, but as always the average GRM forum member ≠ the average human.

In reply to RX Reven' :

He was talking about your typo...

93EXCivic said:

In reply to mtn :

So if I am not sure if I will make a profit, I should just deduct as a hobby. I mean is there some minimum amount I need to sell/make to even worry about it

It depends. How do you get paid? Will you get a 1099 from anyone? Is the income significant? Do you expect it to be in the future? 

I can go into more detail offline, but again, I'm not a tax pro and it is not advice.

z31maniac said:

RX Reven' said:

In reply to mtn :

Yep. 4,200 miles per year at 2022's 58.5 cents per mile = $2,457.  I just use a little Mazda CX-3 that couldn't get less 33 mpg if it tried so even with California's near $5 per gallon, I'm just at 15 cents per mile for gas, change my own oil, blah, blah, blah...I'm way short of 58.5 cents per mile. 

This goes to show how ignorant I am of tax law and just let a pro handle my, incredibly easy taxes because I got into the habit of it about a decade ago. 

What does the price of gas, maintenance, self oil changes etc, have to do with anything? I thought it was just "If you have 10k miles you can write off, you write off 10k x 58.5 cents per mil" and move on? 

Apparently it's not that simple? 

You can write off actual expenses, or 58.5 cents a mile, whichever is more. 

Noddaz said:

You can do that until you get caught.

Or Google How long did it take for Amazon to break even in the US?

9 1/4 years...

Amazon is not a sole proprieter, and to my knowledge, never was. This is business income that you report with your personal tax return; basically, the "company" may not even exist, it is just side work that you're doing without being employed by anyone. You're an independent contractor without any employees. 

Steve_Jones said:

z31maniac said:

RX Reven' said:

In reply to mtn :

Yep. 4,200 miles per year at 2022's 58.5 cents per mile = $2,457.  I just use a little Mazda CX-3 that couldn't get less 33 mpg if it tried so even with California's near $5 per gallon, I'm just at 15 cents per mile for gas, change my own oil, blah, blah, blah...I'm way short of 58.5 cents per mile. 

This goes to show how ignorant I am of tax law and just let a pro handle my, incredibly easy taxes because I got into the habit of it about a decade ago. 

What does the price of gas, maintenance, self oil changes etc, have to do with anything? I thought it was just "If you have 10k miles you can write off, you write off 10k x 58.5 cents per mil" and move on? 

Apparently it's not that simple? 

You can write off actual expenses, or 58.5 cents a mile, whichever is more. 

Yeah. As Adrian said, the $0.585 (or $0.56 for 2021) a mile is low for many - for them, they'd be better off adding up every single receipt.

For me, for 2021, I use my vehicle for personal use and know exactly how many miles are for my "business". I drove 1,926 miles. My total deduction for my vehicle will be $1,078 (not including $86.5 in tolls, but they're counted separately either way).

At $4 a gallon and 25mpg, that is $308 in gas, we'll call it $25 for oil changes, and... $39 worth of tire use? Insurance doesn't factor into it, I have to have it anyway and 2k miles isn't going to move it up or down much when I have 2 cars, a house, and an umbrella policy I'm bundling together. I've spent an additional $75 in maintenance on the car, but that was for a coil and 2k extra miles a year... meh. 

So if we were going by actual cost, I'd be at about $375. I'm claiming $1,078. Win for me. 

Mr. Peabody said:

I know people that have been doing what you're proposing for years.

Our current Prime Minister, while campaigning, once said (foolishly) that small businesses are only set up in order to lose money for tax purposes.

I wonder where he got that idea from.

I wrote a rather rude note about that a few years back.

To the original post, though- You have to show income to the company, and then you can write expenses off your self employment income until you get to zero.  You can carry forward business losses to future years, but you cannot write it off against employment income.

I'm pretty sure.

In Canada.  I can't imagine the IRS would allow such things either.

In reply to KyAllroad :

Your first step needs to be to find a good accountant who deals with clients like this. I was fortunate to have one when we had our business & he told me that I really didn't need to worry about turning a profit for a small business like ours. However, I'm nowhere near organized enough to actually track & record everything that could have been a tax deduction. 

mtn said:

In reply to RX Reven' :

He was talking about your typo...

Thank you so much for being tactful but it may not have been a typo...I'm such a E36 M3'y speller that I may have intentionally spelled commute with a "u";  Honestly, I don't' know.

What I do know is that I married someone that graduated Cum Laude in English Literature from a California UC and we've all had spell check for decades so being good at spelling isn't too important at this point. I do admire good spelling abilities, I do aspire to having good spelling abilities but after decades of trying, I just suck at it.

Again, thank you for the "out" but in the moment, I probably just thought "commute" was spelled with a "u" and I don't want to receive any false valor.

Streetwiseguy said:

Mr. Peabody said:

I know people that have been doing what you're proposing for years.

Our current Prime Minister, while campaigning, once said (foolishly) that small businesses are only set up in order to lose money for tax purposes.

I wonder where he got that idea from.

I wrote a rather rude note about that a few years back.

To the original post, though- You have to show income to the company, and then you can write expenses off your self employment income until you get to zero.  You can carry forward business losses to future years, but you cannot write it off against employment income.

I'm pretty sure.

In Canada.  I can't imagine the IRS would allow such things either.

In Canada it’s 3 years carry back and 7 years carry forward.

In reply to RX Reven' :

I still like you whether you want the valor or not

Rons said:

Streetwiseguy said:

Mr. Peabody said:

I know people that have been doing what you're proposing for years.

Our current Prime Minister, while campaigning, once said (foolishly) that small businesses are only set up in order to lose money for tax purposes.

I wonder where he got that idea from.

I wrote a rather rude note about that a few years back.

To the original post, though- You have to show income to the company, and then you can write expenses off your self employment income until you get to zero.  You can carry forward business losses to future years, but you cannot write it off against employment income.

I'm pretty sure.

In Canada.  I can't imagine the IRS would allow such things either.

In Canada it’s 3 years carry back and 7 years carry forward.

And you can lose money indefinitely.

mtn said:

93EXCivic said:

In reply to mtn :

So if I am not sure if I will make a profit, I should just deduct as a hobby. I mean is there some minimum amount I need to sell/make to even worry about it

It depends. How do you get paid? Will you get a 1099 from anyone? Is the income significant? Do you expect it to be in the future? 

I can go into more detail offline, but again, I'm not a tax pro and it is not advice.

I am probably going to use Etsy so no idea on the 1099. I am guessing under a couple thousand at absolute most. Maybe it could take off but I don't really want it to. 

Just something I am considering. More curiosity then anything.

Having a CPA and a lawyer involved at all are some of the threshold criteria. If you have business losses that are offset by personal income (ie you are investing in the new venture) that are taxed already generally things are easier. 

There are some cool benefits. Bought a truck, 100% business use, can deduct the whole thing in 1yr, or choose to depreciate over a few yrs. I use a certain sqft of my house for business purposes and no other, I can deduct a % of mortgage, taxes, utilities (has to be documented well). Any inventory I have at the end of a year can be "scrapped" for a loss. There's lots of tips and tricks out there with a quick google search. If any are a big knob in your mind, it's worth the minimal costs to get started.

Paul_VR6 (Forum Supporter) said:

... I use a certain sqft of my house for business purposes and no other, I can deduct a % of mortgage,..

As a quick note on this point.  Be very aware of what you are doing when you do this.  As I remember, if you do this, that % of value of the house is no longer protected from capital gains tax if you sell and move.  Normally if you move within a certain period of time, you don't have to pay tax on any gains in the original house, which could be a lot of course.

Someone might be able to clarify that a bit more.

Mileage deductions are a flag for the IRS. My father had properties all over town and drove around a lot. The first time he was audited they harassed him about when he could start deducting mileage each day. It came down to being able to start after he reached his first property or his office.

He bought a house a block away from where we lived on way out of the neighborhood. The drive to his office was across town but every day he "checked" on the rental house around the corner first thing. He got audited years later and when mileage came up it was a non-issue.

He told me if didn't matter if it he made money renting the place, it paid for itself because all he had to do was subtract .2 miles from his actual mileage every day.

In reply to KyAllroad :

I assume by the question, and lack of participation in the answers, this was a (correct, imho) statement about how crooked a large percentage of CEO'a are. 
Having worked for MANY of this type, I've stated may times,"If we balanced our checkbooks they way "they" operate, we'd be in jail!"

My view on the responses is that about all of the folks on here are essentially honest folks, that don't want to step on others; with the tendency to assume most folks are as well. 
My experiences with management, has been that most of them are not. 

03Panther said:

My experiences with management, has been that most of them are not. 

There are some very shrewd business persons and there are crooks. They can look a lot alike.

Paul_VR6 (Forum Supporter) said:

. They can look a lot alike.

I guess to the naive, they might, but not in my experience. I understand the using the system to one's advantage, and have done some myself. But not really what I'm saying. 

Paul_VR6 (Forum Supporter) said:

 

 Any inventory I have at the end of a year can be "scrapped" for a loss. 

The quotation marks suggest you are not actually scrapping the inventory, but are keeping it to sell in the future. That is called cheating on your taxes.

Streetwiseguy said:

Paul_VR6 (Forum Supporter) said:

 

 Any inventory I have at the end of a year can be "scrapped" for a loss. 

The quotation marks suggest you are not actually scrapping the inventory, but are keeping it to sell in the future. That is called cheating on your taxes.

Assuming he means inventory that he intends to sell and that he has fully depreciated (down to $0) said inventory, the sale is just capital gain. Assuming the accounting is happening correctly, nothing illegal about it.

My CPA, or yours, could explain it better. I just do all the things that I am told to do by professionals.

Paul_VR6 (Forum Supporter) said:

My CPA, or yours, could explain it better. I just do all the things that I am told to do by professionals.

Outsourcing to a professional is never a bad move, especially for something as confusing as US Federal taxes.