Taxes questions for Bob, Scott and anyone else.

[wifehatescar]

I've been toying with the idea of going legit sometime this year as far as taxes and insurance. I found insurance for $300/yr (really good deal! 1M liability, garage keepers and $2k for tool insurance) but I'm unsure about taxes. 1/2 the work I do is cash and I never give receipts. What are the chances I could have an issue working under the table?

If I'm lucky this year, I will gross $3000 working some weekends. Anyone know how much tax I can expect to come out percent-wise? I'm afraid if I go legit all the way, profit will so low it will not be worth my time to run the business. Plus factor in the time to do the paperwork which I hate doing.

Any advice? I don't look forward to paying the gov't but don't want to worry about getting in trouble either.
If the gov't is reading this, my name is Joe Schmo and I live at 1234 Main Street :lol: :roll:

[Bob]

Well, the paper work is not that bad for just detailing cars. You give the customer a copy of the invoice, and keep the original and keep invoices from anything you buy for the business. Then give that all to your tax guy come tax season. For real, that is about it. The accountant will do the work. Your insurance deal sounds great so you will have that covered.

Under the table would get more risky as you do more and more cars is all. Then, if you ever have an insurance claim or someone sue in sue happy America that might not be what you want.

[wifehatescar]

Well the insurance guy said tax stuff is totally seperate from insurance claims.........

I was not assuming I would use and accountant and tax guy...what would that cost me? Sounds like that 's what you do/did?

[Bob]

Well the insurance guy said tax stuff is totally seperate from insurance claims.........

I was not assuming I would use and accountant and tax guy...what would that cost me? Sounds like that 's what you do/did?

Our tax guy is a freaking moron. We won't be using him again and I am not even sure what he is charging us to be honest. He would not return calls for weeks! I finally had to get someone I know to go get our stuff from him.

[Bob]

Well the insurance guy said tax stuff is totally seperate from insurance claims.........

I was not assuming I would use and accountant and tax guy...what would that cost me? Sounds like that 's what you do/did?

Our tax guy is a freaking moron. We won't be using him again and I am not even sure what he is charging us to be honest. He would not return calls for weeks! I finally had to get someone I know to go get our stuff from him.

We got our bill from our tax clown the other day. I am going to make him call me 20 times a day before I pay him like we had to do to get anything done from him. He never returned one single call. I figure the time I wasted calling him all the time and trying to go through hoops to get our tax papers we are about even now. If he wants to get paid he can come get his money in person. I would love to chat with him again!

[LAA Mobile]

Hello All,

I just joined your forum today. I have a similar story as yours, Bob. I am a professional software consultant by day and an Auto Detailer on weekends. I am looking forward to trying some of your products in the future. To answer the tax issue, it is not worth the risk of hiding your income. It really isn't that difficult to buy a software package like Quick Books and do your own accounting. Then, you just run reports at the end of the year and go to a tax preparer. If you eventually want to be legit, get used to it. It is a necessary evil when doing business. Besides, if you always know what is coming in and going out, you can be a much smarter business person. Just my two cents.

[Bob]

Welcome to the forums LAA! My tax guy two years ago also sent the forums in late and the IRS tried to stick us with a $300 fine! Luckily I was able to prove how big of a boob this moron was and the IRS waived the charge. This year I went with someone I know and trust and everything was fine!

[ryan87500]

I've been toying with the idea of going legit sometime this year as far as taxes and insurance. I found insurance for $300/yr (really good deal! 1M liability, garage keepers and $2k for tool insurance) but I'm unsure about taxes. 1/2 the work I do is cash and I never give receipts. What are the chances I could have an issue working under the table?

If I'm lucky this year, I will gross $3000 working some weekends. Anyone know how much tax I can expect to come out percent-wise? I'm afraid if I go legit all the way, profit will so low it will not be worth my time to run the business. Plus factor in the time to do the paperwork which I hate doing.

Any advice? I don't look forward to paying the gov't but don't want to worry about getting in trouble either.
If the gov't is reading this, my name is Joe Schmo and I live at 1234 Main Street :lol: :roll:

I assume you are going to be operating as a Sole Proprietership, if that is the case you will report the income on your individual 1040. That being said your tax rate will be the same as your individual tax rate. The extra income might put you into a higher tax bracket but you can look at the tax charts here to determine if that is the case. You will also need to pay self-employment tax as a sole proprieter.

http://www.irs.gov/formspubs/article/0,,id=164272,00.html

Hope that helps.

[BlueZero]

I'll forward this to my friend at the IRS and see if he has any good information. :p

Just teasing.

Write offs are very important too. If your going to be detailing cars just remember that anything you buy to do this is a write off. Wax, your insurance, digital camera to document your work, shop vac, etc. Hire a good accountant too. I've paid anywhere from $100-$400 for an account and to my surprise the $100 was the good one. I've had a few businesses over the last 5 years and never ran into any problems. Just get a ledger book and keep track of everything as you go. I also have one of those accordion folder things, make a pocket for each month and put all your documents in there. That way when you need to go back to something it's easer to find. Stay organized and it will pay off.

[bert31]

If I'm lucky this year, I will gross $3000 working some weekends. Anyone know how much tax I can expect to come out percent-wise?

Keep in mind, you pay income taxes on your net profit, not your gross revenues. So that will not wipe out your profit, only minimize it at the percent you currently pay in taxes. As Ryan87500 stated, if you are a sole proprietor, your detailing business will not have its own tax return, the revenues and expenses of your business will hit your personal return on Schedule C. Make sure you keep track of all your expenses. Also, if you are a mobile detailer, keep track of your mileage, you can expense that too. Or, if you car is used for more 50% business usage rather than personal usage, you may be able to depreciate a portion of it. While I am a CPA, it has been a while since I have done tax preparation besides my own 1040 so I have forgotten all the details.