What to do with too much profit?

[bobbin]

OK, I have finished up the year and have squared up with Uncle Sam.  Let me state up front that I don't think taxes are "bad", quite the opposite, in fact!  But, that said, I would prefer to spend money to build my business than pay it to a spendthrift gov't.. 

The object of the game is to spend down any "profit" by reinvesting in your business, right?  At what point in the year do you guys close out your books so that you know how much you have at your disposal to spend on capital investments?  I am not at all clear on this point and my experience this tax season has made manifest that the fog be lifted and I work this year with desired captial improvements/investments more defined. 

Help?

[byhammerandhand]

My wife used to be the tax expert at a local CPA firm.   She spent most of the time between Thanksgiving and the end of the year working with clients to see how to juggle things to reduce tax liability.    After the first of the year, about all you can do is contributions to your retirement plans (IRA, 401(k), etc.), assuming you are a sole proprietor for tax purposes.

With some of the new rules, you can do accelerated depreciation (i.e., first year expense) of large amounts of capital goods and equipment.  http://www.irs.gov/publications/p535/ch01.html

I have an older edition, but I found "Small Time Operator" a tremendous help in staring my business.   Well worth the money: http://www.amazon.com/Small-Time-Operator-Business-Trouble/dp/1589796640/ref=sr_1_1?ie=UTF8&qid=1332691326&sr=8-1

[kodydog]

My biggest deductions are my cars and my shop.

You can deduct mileage, repairs and depreciation if you use your autos for business. And we all do.

Any expense for your business gets deducted. Supplies, office equipment (computers, cell phones, I-pads, ect), and your mortgage. If your shop is at home you can still deduct part of the mortgage. We have a drawer full of receipts. Our shop has its own power line. That gets deducted. And any maintenance to the building.

Our business doesn't make a ton of money and I'm guessing working part time yours doesn't either. It shouldn't be to hard for you and your accountant to whittle down your tax liability to under $1000.

[Ihavenoname]

For me it's living a tax deductible life style.
You organize your life to get the most out of the tax law and deductions.

I would think you would be spending money all year not just in December.

The only time I used December as my tax spending month was when I was in college and needed my income to be lower for Financial Aid and to maximize tax credits.  Even then I was never spending much in taxes but a $1000 expense might equal $5000 in financial aid and credits.

Anymore, it's pretty much an automatic things.

Shop in house.
Van Millage.
1/3 utilities
1/3 insurance and property taxes
Phone line
Web site and access
Supplies
and so on.
By the time I'm done planning out my taxes and spending on my business there is not much to tax.
It's work but for every dollar I keep the bank, insurance and government's hands off is all good.
For every dollar deducted is at least 30 cents. At least.
And stay way from the banks as well

15% interest plus 15% taxes plus %15 Self Employment tax = 45% of your money is a low guess.
It's hard to make it. I know I know I know.


PS if you keep your income low, banks don't like you. Forget buying a house or car but credit cards they still hand out like crazy.

[baileyuph]

I don't know any upholstes with a profit problem (or any other worker).

But, everone has a too much taxation problem. if they are working.

Anyway, one can't plow too much in retirement planning, in discussion with retirees of about 5 or more years, they all say that when they retired they thought they had enough to live well the rest of their life, but they didn't understand how much inflation could eat into their retirement and didn't think that social security increases would virtually go away.

Some retirees have gone back to work for this reason and from being bored.

Lot's to think about, huh?

Doyle