My friend owns a pool cleaning service and I am interested in starting one as well. He told me that I would not have to pay taxes on any of my income during the first year. I have scoured the IRS website and the web, with no luck. Can anyone help?
2006-12-12 22:46:49 · 6 answers · asked by davidm_42 2 in Business & Finance ➔ Taxes ➔ United States
As previously stated your friend is somewhat incorrect. It is possible that you may not have to pay taxes on your income from your business if your expenses are greater than your income.
That being said you will have to report all income as well you will want to report all expenses you have with regards to your business. More than likely the Sole Proprietor business type would be the easiest and best way to start your business, just adds some additional forms to your 1040 including the schedule C. You will also want to check into all the possible expenses, including car and office in home.
The following Pub 334 is for small business it might give you a little more information.
http://www.irs.gov/publications/p334/index.html
It is also possible that in your first year that you will have losses above your income that will reduce your other sources of income leading to a lower tax liability. Your main goal should be to make money the IRS will want to see that at a certain point. It would be good for you to take the time to write a business plan, and do a little homework. Looks to me like you are already on the right track! Good Luck
2006-12-13 05:20:17 · answer #1 · answered by T D 2 · 1⤊ 0⤋
First, I really like the adding "your Honor" after your excuse. If you think that it will fly after adding your Honor, then do it.
So, if you have a net profit from your business, then you will have to pay income taxes.
Not to be a buzz kill, but you should check with your state's revenue department to see if you need to charge sales tax on the pool cleaning service. Some states will require you to charge sales tax on your services as maintenance to tangible personal property.
2006-12-13 07:23:02 · answer #2 · answered by Steve 6 · 1⤊ 0⤋
I was taught this not too long ago. Put the word "your honor" at the end of your sentence and see if you think it will fly past the tax courts.
"I didn't pay any taxes on my taxable Schedule C income because my friend told me so.....your honor"
That ain't gonna fly. YES, you have to pay taxes in the 1st year of business......if you actually have net taxable income. If it's a net loss, then you pay nothing.
2006-12-13 05:42:18 · answer #3 · answered by Anonymous · 2⤊ 0⤋
Your friend is incorrect.
What is likely is that during your first year, your expenses will exceed your receipts, so there will be no income on which you will need to pay taxes. But if you do have a net profit, you'll need to report it on your tax return (the exact way that you'll need to report it depends on the type of business entity you've chosen, but that's another question).
2006-12-13 00:57:26 · answer #4 · answered by jinenglish68 5 · 4⤊ 0⤋
You may get a tax break by being self employed however, I dont know anyone self employed or not who doesn't pay taxes. Do your research. stop guessing. Call the IRS and ask them.
2006-12-13 11:42:07 · answer #5 · answered by Anonymous · 0⤊ 0⤋
absolutely false & he must know better.
2006-12-13 03:14:08 · answer #6 · answered by vegas_iwish 5 · 1⤊ 0⤋