With tax season approaching, I have a question concerning the writing off of my Windshield repair kit for federal income tax purposes. Can I write off my injectors, bridges, lamps, exc. in the quarter purchased or do I have to write them off over a period of years? :?It will cost me less if I have this knowledge when I visit the CPA at the beginning of 2004.
With that said, I also want to thank Delta Kits and all the wsr techs out there for the wonderful abundance of info. on this forum. As a newbie to the wsr field, I know that all this info. will help me provide better service to my customers and therefore give wsr a better name than I would have.
From my experience with my accountant, equipment has always been put on a depreciation basis. I believe it's spread over a 3 year period. Materials used for repairs can be written off 100% against profits. Also remember you have two ways to claim your vehicle, vehicle maintenance and gas expense. If you have a newer vehicle you might want to depreciate or itemize that over 3 years, then add your gas and maintenance cost. You'll have to have records showing you use it 50% or more for business use though. The other way is too claim a per mile expense and not claim depreciation on your vehicle. In my particular situation because my work vehicle is only worth $4500, I write off $0.36 per mile driven which is allowed in Michigan. Just remember do do this you must keep a mileage log.
Not sure if I explained this very well....but hopefully it gives you some idea what to talk about when you see your CPA.
As for your equipment, you should be allowed to write-off the entire purchase price under Section 179 since it should qualify as tangible personal property placed into service for business use during the tax year. You can elect to depreciate as well. Your accountant should be able to advise as to how either method may affect your ability to claim certain EIC's.
As for your vehicle expense, Starquest mentioned the two most popular methods. Don't forget, if you elect to use mileage and keep records, you can compute the total percentage of business use of your vehicle and can then write-off that percentage of your interest expense if you are operating a vehicle that is being financed:)
Of course, I am NOT a Tax Attorney, but this is the info. my tax attorney has provided me with.
You can write off all equipment and tools that you use for WSR as business equipment expense. Resins ect.. as cost of repairs. As far as dual use items, vehicles were covered by StarQuest. Usually if you by a piece of expensive equipment (for example 25,000) you would depreciate it, but your equipment expense shouldn't be in that range. One area to be a little careful with is with the home office expense. Although I know the IRS has loosened up a bit on the rules of home offices, I know it used to throw up a flag. If you have kids spouses ect... you can cut checks up to $600 for contract labor without issue of a 1099. Don't be afraid to push the envelope a litle with your taxes. Audits are usually a very random drawing unless your blatant, and if they do audit you and find some gray areas be firm and argue your case, if you owe more they will tack on a penalty and interest. I went through a 2 week audit with my last business but that business was a little bigger. In the end, I had overpaid $11,000 ( got me a new CPA after that one) he was way too conservative. The one I've used since isn't even a licenced CPA but he is ex IRS and I can talk turkey with him because he doesn't have to worry about his license. I've also been through a sales tax audit. All I have to say about that is stay on top of your sales tax if you have to pay them. (which we don't in TX) The sales tax folks are scary (made the IRS folks look like a very sweet aunt). Take my advice at your own risk. NOT responsible for any audits. Thankyou and Happy New Year,
Most, if not all of the advice given to your question was good although I didn't peruse every bit of each of it.
One particular comment caught my attention originating from GRT.
That regarding CPA's.
I've told small business friends of mine for years to steer clear of CPAs precisely because of the conservatism he referred to and the CYA attitude they embrace that he didn't.
You're much better off with a decent bookkeeper who knows how to add and subtract than some yahoo more interested in protecting himself than saving you money.
Thank you so much everyone for responding to my question! I have been useing the keep track of mileage method for my vehicle write off. The vehicle is older with high mileage but still runs well. I will consider some of the other options stated in your responses when I start useing a different vehicle.
I have been doing business with this CPA outfit for some time and have been thinking of trying someone else. Maybe this is the year to make the change to a different kind of knowledgeable tax/accounting professional.
(made the IRS folks look like a very sweet aunt). Take my advice at your own risk. NOT responsible for any audits. Thankyou and Happy New Year,