taxes.... do i have this right?

Question

there are many kinds of tax deductions when running my business. right?

1.) Are cost of goods sold are 100% deuctable?

2.) if the cars are for business and personal I can deduct $.485 per mile, if it's for business only Can I duduct the payment and gas costs?

3.) If I buy equipment like a computer, I can't deduct the cost of the computer, because it's still an asset that is taking the place of what was cash right? What if it's part of the start up costs? If I sell the equipment do I have to consider it income?

4.) Are consumables like electricity and printer paper are 100% deductable.

5.) what about waste? We have a vinyl graphics business and have mistakes sometimes. Can I deduct the retail value of the wasted item.
This is so confusing. how do I keep it straight?

Answer 1

You do need help girl... Learn to do a balance sheet and an income statement...make your life easier!
A debit is money in...a credit is money out...so....
#1 ...#2...#3...and #4 are all credits on your income statement. If the cars are used more than 50% of the time in the business...claim 100%. There is depreciation expense if you don't want to claim it all in one tax year. But that's too much for now.
#5 You can credit the cost to you of the item as a business expense, not the retail value.
Be very descriptive of what you name the accounts...and have receipts properly organized to back everything up.
Good Luck!!! I hope business is good!

Answer 2

1. Generally, but you spelled it wrong. Also, it is computed very strangely, so be careful.
2. Depending on various things, your deduction may be based on actual expenses or miles. If it is miles, you use only the miles that were for business, not the miles that were personal. If it is actual expenses, you use only the gas, etc., that were for business, not the gas, etc., that was for personal use, and prorate the depreciation of the car, the cost of insurance, etc., based on how much the car was used for personal stuff and how much for business stuff. You can never deduct gas and $.485 per mile for the same car in the same year.
3. You can depreciate it. That means to deduct a part of its cost each year. There is a formula to determine how much to deduct which year.
4. Electricity probably is. Paper for internal memos, records, etc., probably also is. Paper that becomes part of the final product that you sell is part of the cost of the goods sold, and is deducted on a different line that paper that is used for your own documents.
5. I think you deduct what it cost you, not the retail value.

Answer 3

1. Cost of goods sold is subtracted from gross revenues to arrive at gross profit. The formula for CGS is: Beginning Inventory + Purchases - Ending Inventory = CGS.

2. You can either deduct a flat 48.5¢ per business mile OR you may keep track of all costs such as interest, repairs, fuel, maintenance, tires, depreciation, etc. and apportion it between business and personal use based upon the mileage driven and deduct the business use portion.

3. Generally you depreciate equipment and fixed assets over time. However there is the Section 179 deduction that allows you to deduct the total cost of certain assets in the year of purchase. If you sell an asset you may need to recapture some or all of the depreciation claimed and you will have to recapture a portion of any Section 179 deduction claimed in a prior year. You may have a taxable gain on the sale of an asset or a deductible loss; it all depends upon the numbers.

4. Yes, all reaonable and necessary business expenses are deductible.

5. Waste figures into the CGS. You only get a "deduction" for the cost of the raw materials through the CGS, never the retail value. If you paid an employee who messed up the job that generated the waste, his wages are your deduction already and you get no more. If YOU as the non-employee owner messed it up you cannot deduct the value of your own time. You should look into recycling opportunities. Nearly anything is recyclable today and there are companies that will pay you for your wasteage. Seek them out. Recycling can cut your cost of raw materials anwhere from 2 or 3 percent to as much as 50% depending upon the materials. That equals PROFIT for you. Do it.

Answer 4

1. Cost of goods sold is an expense deducted from revenue. It is part of the calculation of net income and all of it is reported on Schedule C

2. You have a choice. You can deduct an expense based on miles driven, or you can deduct the actual cost of operating the car, such as gasoline, maintenance, and depreciation. You can deduct the interest portion of the monthly payment on your car loan, but not the principal potion. That's why you depreciate the car.

3. Assets like computers, furniture, fixtures, and equipment can be depreciated over their useful lives. You can deduct their entire cost in the year of purchase under section 179, but then you cannot depreciate them in the future. Section 179 has a limitation. See the depreciation form.

4. All expenses of operating the business are deductible. Insurance, utilities, maintenance, rent, licenses, accounting and legal expenses.

5. No you can't deduct the retail value of the wasted item. You deduct the cost of materials used, whether they produce a good product or are wasted.

The important thing is to keep good records. Keep all receipts, invoices, and all other documents. If you can't handle the tax matters at the end of the year, there are lots of people who can help you.

Answer 5

1. COGS are deductible if they fall within the guidelines of the IRS rules. They are income adjustments, not tax credits.
2. No, you can deduct the mileage and/or costs associated with the car subject to the depreciation schedule from the IRS
3. Again, it is a depreciable asset so you can deduct a portion of the cost of it each year of its expected life - again the IRS will have a depreciation schedule for that type of equipment
4. As income adjustments, yes
5. No, only the cost of the supplies.

Answer 6

on gas, save receipts becayse you can also do it by total spent. ( you cant do mileage and total spent, must be one way or the other) if you go to IRS.gov, you can get answers to all your questions...

like your office is to be in a room where it is exclusively used for business and nothing else. and to calculate utility uses you have to take square footage of room to get the percentage of house used in business... that is the percentage of utilities...you can also deduct your house payment if you use over a certain percentage of your home and you run your business there..there are alot of deductions that you may never think of...that IRS website has all you need to know..

Answer 7

You really need to hire a part time accountant or bookkeeper.
Open a separate checking account for the business and run everything through it. Keep details of every deposit and withdrawal from the account. Try to write checks for everything and avoid a debit card. An accountant can sort it out fairly easily if you don't mix personal and business expenses.