Taxes, but not what you think

[Kenneth Brown]

I noticed Pat said this in another thread- pjc <br /><br />Lieutenant Commander <br />Member # 26818 <br /><br /> posted January 13, 2006 07:04 PM <br />--------------------------------------------------------------------------------<br />And SBN, small business owners using the tax structure to enrich themselves while claiming tax write offs for their benefit.<br /><br />--------------------<br />Practice Patience<br /> <br /><br />This burns me up. I have a small farm. There is no way in he11 I will be profitable for at least 10 years, if then. There is so much I have to buy to get it all started. The land was $39,000, tractor was almost $20,000. I will have 5 mares foal in the spring. If I'm lucky I'll get $500-600 each. I'm getting into goats as they are more profitable. It again is a huge start-up costs. Good breeding stock is not cheap. I pay for it paycheck by paycheck. No bank loans for livestock for me, although its comman in my area. All I'm trying to do is build something for the future. When I retire I'll have something to sell and travel or something to keep at and generate a little income. I COULD use this as a huge tax write off but I choose not to. I know of a bunch of people that do this very thing. They have one dang horse and call it a farm. They build there fences tax free, buy clothes and write them off, etc. I don't write anything off. I do have farm tags on my truck and trailers. On the truck I save about $8. On the trailers I save about $50 each and I have 4 of them. I don't pay taxes on my equipment or supplies. I just don't see how people can have a clear concise and do this stuff. I know of several (forgive me Lubedue, uh Bassin Fever, not naming you here at all) Amsoil "dealers" who use it as a tax write off. I also know several "fishing guides" who do the same thing. These people aren't involved in a business. They are simply using it and abusing it. So many people are "dog breeders" with their one damn poodle it ain't even funny.<br /><br /><br />Since its gonna go there anyhow, ya, I like the flat tax on purchases.

 

[heycods]

Re: Taxes, but not what you think

You just had to bring up taxes. Its getting that time again. Wife and I were gonna start on that this weekend, but shes got a bug of somekind, and has her head under her wing.( I wonder who will understand that.)@#&^%@# tax time just ruins the fishing.

 

[Kiwi Phil]

Re: Taxes, but not what you think

If the write-off's or expences are legally allowed to you, and you don't choose to take them, then that is your choice.<br />I personally believe you should consider every opportunity that is legally open to you, to reduce your tax liability. <br />Don't mean to antaganise anyone here, but not doing this is a bit like shooting yourself in the foot.<br />That's how i see it.<br />Cheers<br />Phillip

 

[waterone1@aol.com]

Re: Taxes, but not what you think

I agree with KIWI, why let Washington take more of YOUR money ?

 

[KaGee]

Re: Taxes, but not what you think

Pat obviously has no clue what he's talking about.

 

[Limited-Time]

Re: Taxes, but not what you think

I'm with KF, if tax breaks are offered and you CHOOSE not to benefit from them it's your loss. And I see no sense in hampering yourself.

 

[Kenneth Brown]

Re: Taxes, but not what you think

Its not so much that I choose not to use them. Its that others use them WAY TOO MUCH. Lets say that I am sitting at the bar and grill with a friend. I mention that I have some firewood I need to sell. I'm not really trying to get him to buy any, just talking. At the end of the night I ask for the recipt. I then use it for my taxes. Thats the kind of stuff I'm talking about. Its flat out wrong, and they are getting away with it. Just because they do it doesn't mean I should. I am sure that whenever I see my place starting to get close to a profit I'll start the taxes on it and do a loss for a year or two. Not much but just a little and then it'll show profit the next years. The IRS would flip if I filed a loss for 10 years.

 

[waterone1@aol.com]

Re: Taxes, but not what you think

K.B., is the farm a sideline for you ? Do you have a full time job that is actually supporting your family ? If that is the case, that is totally different than someone struggling for a few years and their family making sacrifices. In that case they should claim every deduction they can to offset the taxes owed when they finally do turn a proffit.

 

[jtexas]

Re: Taxes, but not what you think

Originally posted by Kenneth Brown:<br /> The IRS would flip if I filed a loss for 10 years.

Whoever told you this either 1) knows your situation, and what you have there is really a hobby, not something you care about making a profit at, or b) doesn't know what they're talking about, just repeating something they heard somewhere.<br /><br />You are not required to make a profit; you are only required to try. If it's a business, and you run it like a business, and you are trying to make a profit, and do the things that people who are trying to make a profit do, then it's a business and losses are deductible. Period. It's the law. <br /><br />I strongly recommend filing amended returns for 2004, 2003 and 2002.

 

[Kiwi Phil]

Re: Taxes, but not what you think

Rule No1 Kenneth....never take what you "hear" for the truth. <br />Get yourself an Accountant, tell him what you are proposing to do and how you intend doing it, and follow his advice.<br />There are distinct advantages in running a business, and at the top of the list is "tax", because what you do in business is pay tax on what you have left after your expences. <br />What you do as a wage and salary earner is pay tax on your income before you pay your expences.<br />Believe me, the difference is like BLACK and WHITE.<br />You mentioned a reciept for a meal. That is small fry. Wait till you see what may be available for depreciation of buildings, plant, equipment, machinery, and probably a % on your personal truck for business use (same with rates, phone, fuel etc)<br />If you are running a business (not a hobby)which is combined with your living, then.........what can I say, go see your accountant and do it.<br />The IRS will never flip, because what you are effectively doing is negative gearing your farming operations losses, against your wage income profit, until your farming operation is up and running.<br />Whatever you do, stay within your laws, and a certified accountant is the man to advise you.<br />Good luck.<br />Cheers<br />Phillip

 

[pjc]

Re: Taxes, but not what you think

Oh, I do have a clue......looky here... web page <br />Best to you building your business KB !

 

[jtexas]

Re: Taxes, but not what you think

One more comment for Kenneth: I don't mean to be critical - people decide to treat their farms as hobbies for tax purposes - it's a perfectly valid point of view. <br /><br />Something you might want to know about tax treatment of revenue-generating hobbies:<br />Hobby expenses are deductible to the extent of hobby income. In other words if it's a hobby you can offset the revenue from beef sales with the expenses incurred, just can't deduct a net loss. So not reporting the cash sales of firewood ain't cheating if 1) it's a hobby AND b) you have expenses that exceed the revenue. In that case you have no reporting requirement.<br /><br />If you win a bass tournament, add up all your fishing expenses for the year and deduct 'em against your tournament winnings. If you win the lotto, your winnings can be offset by your gambling expenses for the year.<br /><br />Something you learn in the CPA business:<br />There's a difference between "cheating", and "taking an aggressive position." If an audit results in a refund, it means you haven't been aggressive enough. Judge Learned Hand said that taxpayers are under no obligation to arrange their affairs in such a way as to maximize their liability to the treasury (paraphrase since I can't remember his words exactly).

 

[Kenneth Brown]

Re: Taxes, but not what you think

I here ya loud and clear J. I'm very familiar with the hobby vs business aspect. In my dirt track racing days I learned the diference. We had to pay taxes on our winnings. We might only get $200 dollars or so per race but after 26 races it adds up. A CPA tryed to get me to do it as a business because I kept such good records of my racing. I kept logs on everything, subscribed to profeesional journals to improve performance (read magazines), only ran big shows when they could be profitable, etc. I instead used it as a hobby. I could have gotten more back because it was just a year and would probably not raised many flags but.... That being said I pretty much run a hobby farm. There is no way that it will ever generate an income that will provide a liveable income. One day it will generate a profit and then I'll be glad to pay the little bit of taxes that I'll owe. I do have the intent to make a profit but it'll be so may years into the future that it ain't even funny. What I desire out of it is a place in the country. I love to work with land and do improvements. I love animals and learning new things about them. My place is just big enough that I can do what I want without a neighbor being my concern. If I want to pee off the porch it'll be fine, no one can see, not that they would see it anyhow but