Income tax

[Modee]

Always pay what you owe BUT deduct as much as you can!

[John14789]

But don't deduct absurd transactions related to your personal expenses. For example you shouldn't deduct groceries if you run a business from your home.

Another thing which could be deducted is payroll for yourself. You can deduct a salary for yourself if your business is your job.

[Modee]

Exactly - it's a trade off. Deducting every single item might seem wise in the short run but can lead to getting audited. Besides the time and expense of an audit, if you have something to hide this will come out in the audit and cost you more in tax and penalties than you were saving with those little deductions.

But...if you can prove every penny (AND those pennies add up to enough to make it worth your while) and you are 100% legit, go ahead and deduct it all.

[John14789]

Also I suggest leasing a car for your business. If you purchase a car for your business and pay it monthly you'll not benefit from it as much because only the intrest will be deducted from your taxes not the entire payment. With leasing the car the entire payment will be deducted. If you have taxes in the tens of thousands then splurge and get a nice car!

[Modee]

That's correct on the leasing of a car. I did that on a company minivan once.

But then we made this massive amount of money in one deal, and it didn't make sense to keep paying all those costs of financing, so I just paid it all off in cash at once. You can still deduct a certain amount per business mile of usage on a vehicle, even if owned outright.

[guitarca18]

What are the legal obligations for having a company car? Does the business name need to be on the car somewhere?

Say I lease a car for my business. Can I also write off the cost of maint, insurance, registration, cleaning, etc?

[Modee]

In general the entity that PAYS the costs can DEDUCT the costs, but if you are audited, it is not going to look so good if the vehicle is not in the business name.

That said it is quite difficult to get a company lease, especially these days, and the IRS knows this. So, if an owner or officer of the company puts his name down for the actual lease, but the vehicle is used by the company, then you should be okay.

Also, in all cases, unless the vehicle is used 100% for business use (never leaves the garage unless it is being used for business), you should keep a log of all business-use miles.

One other way to do this, is to just deduct the standard per mile rate for each business mile. You don't get to deduct everything related to the car, but the IRS tends not to audit these sorts of deductions as much as trying to deduct every penny related to the car. Also, you can keep deducting the per mile method even after the vehicle is paid for.

There are details related to doing this properly, and for those, contact me privately.

[tenspace]

if you provide a service to a friend, he sends you
paypal thru the options of "personal" and "payment owed"

do you need to pay income tax ?

[Modee]

Well yes, why would you think otherwise? Income tax is due on goods sold for profit, as well as services rendered for profit.

[tenspace]

What is the difference when you receive Paypal payment

via

1) under " Good and Services" category

or

2) under " Personal " category?

[Modee]

None for taxation purposes. And anyway, there are only two categories nowadays for off-Ebay PayPal transactions: GOODS or SERVICES.
An analysis of ways get money out of PayPal, including bank, ATM, casino, PP to PP - Free EBAY, PayPal, Business and Law Forums - Ebay Suspension, PayPal Limited

[pay2233]

Sending Paypal as GIFT

I did some work for a client.

I requested him to send $2000 Paypal as GIFT.
He is not going to treat this as expense.

Do I still need to pay income tax on this $2000

[Modee]

You need to hire me for tech support to address a personal question like that. Thanks.