Federal income taxes, business expenses, auditing, blah blah blah blah blah blah blah! I live in IL. and I’m planning to start my own window cleaning business but all these crap is just demotivating me.
Do I have to log everything I do like I’m living in communist Russia or can I just let my sales be taxed out and not make any deductions? because if I understand everything I’ve read lately on this forum correctly, I could care less about gas usage from driving place to place or phone use or buying cheap equipment and logging it for deductions. Keeping a receipt of a $300 set of supplies (that would last a few years) for deduction is just pointless. I used to make $10 an hour washing windows for a company and having my own business working only by myself making an equivalent to $40 an hour with 33% tax (medicare, social security, federal) without deductions is fine by me since it’s still a lot more than a ridiculous $10 an hour income.
To summarize it short: Could I just file as sole proprietor, get business name, get tax ID, get liability insurance, create a business bank account, buy window cleaning equipment then acquire customers and start doing work and let IRS tax my sales without silly logged deductions… then when taxes are due I’ll just grab the pile of sales receipts and give it to a tax preparer at H&R Block or some place then voila, no hassle and no audits forever?
In short, yes you can! The IRS will love you for that extra money you’ll be giving them. Ill tell it to you straight, you will not be in business long. I guarantee it. Why on earth would you not make deductions? I find satisfaction in looking for deductions. I encourage you to reevaluate your attitude about business ownership. Yeah it’s hard, really hard sometimes.
Save yourself some headache and hire a part time bookkeeper
Just to clarify, we’re talking about federal taxes correct? You mention “taxing sales” so that makes me assume you mean sales tax. Sales tax is reported to the state in which you live in. You probably have other local taxes you might not be aware of to boot.
The IRS wants your income tax, self employment tax, etc…
I really would like to go into detail but I’m definitely not qualified nor wish to give tax advise. Call on a professional.
Don’t take offense to my comment about being guaranteed out of business, none was meant to be. But seriously, 50% of businesses fail within the first year and 95% fail in in five years. (Yes, we’ve all heard this before) But why? Lack of Preparedness and Funding.
You have a lot of work to do. Look into the(SBA) Small Business Administration. There, you with find invaluable information.
You want some good reads that might uplift your spirits? Read E-Myth Revisited.
Ok then so back to the original plan, at the end of the term I’ll just give the sales receipts to a tax preparer and then they can pay whatever taxes required using my bank money.
If you go in unorganized with just a shoe box of receipts it will cost you more to have your taxes and deductions prepared for you; as in anything, more work cost more money. Take your business seriously and your business will seriously take care of you. Screw your business plan up in a hap hazard way and you will soon hate what you do and that will reflect across to your customers - if you get any.
Your Federal income tax is not based on “sales” or gross receipts. It is based on income. To over-simplify it: Income = Sales - Expenses.
Keeping good records is a drag, but it’s something that grown-ups do. And it’s not that difficult once you get a system in place. And it’s not unique to window cleaning, as the thread title might indicate. All responsible business owners in all industries need to keep good records.
So I’ll only keep a record of my sales receipts then? Federal/income, sales, SS and medicare can just be calculated out of it by a tax preparer if I understand it correctly.
I used to make $10 an hour for 9-10 hours a day which is about $14,400 per year after taxes. From what I read on an e-book about how to start a window cleaning business under $500 , owning a window cleaning business bumps the income higher. So if I made $50,000 per year before tax then it would be $33,000 after taxes. That’s a shipload of money moving from $14,400. I could finally move to a nicer apartment and buy a brand new Scion FRS or Subaru BRZ. IMHO, the micro deductions such as gas usage or squeegee rubber refills would just be chump change… and would be pointless to log and submitted to the IRS. Anyways, thanks for the help.
True but it’s only annually as in once a year as a Sole Proprietor and only about $300, right? If that’s right then again it would just be chump change for me.
I’ll try my original plan first and if that don’t work out as some people say then I’ll take a hiatus and go back to being a computer repair technician and take business classes during the weekends.
Seriously, be a tech and take classes or start your business and take classes. Educate yourself
you don’t wait to improve your driving AFTER you get into a car accident. Don’t start bad habits and wait until you crash your business to decide that you were running your business carelessly.
“Chump change” adds up, tbh. If you take the two seconds to record each expense in one of the many business accounting apps available, you’ll be pleasantly surprised with how much you [I]won’t[/I] have to pay at the end of the quarter.
In my experience, mileage adds up the fastest, if you have a home office. If you’re going to be using a personal vehicle that gets good mileage, you’re usually better off just taking the standard 55c/mile or whatever it is this year, than trying to itemize all of your vehicle expenses. Again, there are apps available to make this nearly effortless.
Are you going to do any marketing? (That’s rhetorical- of course you are, or you’ll be out of business!). Marketing costs money! Even passing out “cheap” flyers: do you want to [U]pay the government[/U] for the money you spent on those flyers, and the miles of wear and tear you put on your vehicle?
From a wage perspective, $40/hr looks pretty good. Unfortunately, if you’re trying to run a profitable business (that is, compensating yourself fairly for all of the work you put into the business, as well as pay all expenses and put aside some profit), you should only be paying 30% of your gross revenue towards labor costs. That means you can afford to pay yourself $12/hr while on the job! Read the book, “Simple Numbers”.
So marketing is a big thing, heh. I thought I could just cold call a few commercial places that need window washing once a week and offer a price $5 lower than their current cleaners and then forget about it and not worry about marketing again until more than a few accounts starts to switch to national cleaners. I might just give up on this whole thing and be a peon for life making hourly wage working for a boss with crap managerial/social skills who fires employees in front of everyone and talks down employees if they make one mistake.
