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A company writing it off saves the owners paying any income tax but still has to pay sales tax on the stuff they purchase, even if it's a write off.
It's understandable why people want to away with the Death Tax, gotta pay tax again when you die on anything over $5 million
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If he hadn't been, i wouldn't have wasted my time messing with him. He knows I was joking, by replying with 'writing off his pizza'... lol
Back on topic...
My brother is an accountant, though not a CPA yet. I can tell you they are just as inconsistent as any other industry. A lot of interpretation done on their part. Ask one accountant about x and they will say yeah, you can do that then ask another and they will tell you absolutely not. When you have a business pay for a good accountant. At least then it falls back on them.
Don't get me wrong there are some things set in stone for accounting, but there is still quite a few gray areas.
com
If he's bringing in 30% margins, which is a fair profit margin, he is looking at $750,000. Pretty nice income. Could be much higher profit margins, also.
I'm also a CPA/MST with about 30 years of experience dealing with IRS practice and procedure. I have recently started my own practice after 25 years employment in a variety of CPA firms from local to international. I am accepting new clients on a limited basis, and offer free consultations to anyone who may be considering using my services. The best general guidance is the familiar comparison to water foul. "If it walks like a duck, etc... Also known as the "reasonable person" standard. A highly qualified CPA should be able to provide basic reliable guidance in most cases. My practice is centered around IRS problem resolution/client representation, so any of you who may have already sidestepped the spirit of the Interenal Revenue code may want to retain my contact info for future reference.
Pit Row
That sounds like something my CPA would say when I have come up with something really creative to prevent the spirit of the Internal Revenue code from ripping the last nickels from my bloody hands.
The OP article clearly didn't have a ligitimate expense. I have talked with my CPA about this and understand it just as Kawboy and others said. It can be expensed as marketing of a ligitimate profitable business. Or you need a ligitimate race team with real revenue from sponsorship or large purses.
But, yes consult a CPA they ain't cheap and they never say what you want to hear but its better than getting an invitation to meet with an auditer.
'red flag" deductions it may be best to use a conservative, or cautious approach. Clients with numerous questionable items should be certain that their CPA is familiar with DIF scoring, and how it relates to their tax situation.
http://irs-audit.net/DIF_score.html
I believe it's still this way in America that a business can only be run without a profit for 7 years, after that it has to be closed or converted to something else.
Also if a guy was running it as a business and didn't show a profit would he be subject to the minimum tax rules?
If a guy is clearing 750K that's awesome.
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