computer consultant tax write offs

Hi,
1) I have a full time job as a computer system administrator 2) Rent a 2 bedroom apartment in NY 3) Consulting part time (20-60 hours/month) as a computer system
administrator. Majority of the work is remote but once in a while I might go into the office 4) Own a laptop, desktop, printer (previous personal now for consultancy), home phone service (previous personal now for consultancy), cell phone (previous personal now for consultancy), internet connection (previous personal now for consultancy 5) Setup a very small business area in my bedroom (1/4 of the bedroom) 6) S corp was registered in Delaware 7) Setup a business checking account 8) Setup a business credit card for all expenses
What tax write can I take legally? I am just tired of shady accountants.
Things I am hearing about which need further explanation.
1) I have to subscribe to 2 home phone lines (personal and business). Mitigating circumstances - I don't really use the home phone for personal. Very rarely. 2) I have to count my personal and business minutes on my cell phone each month. This is annoying since most of the calls are for business. 3) Cable modem. Is this a 100% write off? 4) Is 1/4 of 1 bedroom a write off? Any caveats like "primary" source of business, etc? 5) How do I deal with previously owned laptop, desktop, etc? Are these write offs? 6) When do I have to pay my taxes? 7) I gave a gift of $500 to a colleague at the company I am consulting for. This was not a bribe, but just something I wanted to do b/c him and I get along with him very well. I sent this from the new founded business checking account. Is this bad? Is this a tax write off? Do I need a receipt from him? 8) Do I only pay taxes every March? This is what I am hearing from an accountant 9) Anyone know a CPA who can help who is not very expensive? I am not making enough money to warrant a very expensive CPA. 10) If I buy some clothes that I use once in a while for the consultant job, is this a 100% write off? 11) If I donate to charity from my business CC, is this a 100% write off?
Kind Regards, -SN
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Good tone to set while asking questions in an - accounting - newsgroup.

The IRS and Congress have decided that you probably would have a phone at home even if you didn't have a business. The result - your first line is personal in nature and no expense for that line can be taken except for actual business related long distance calls.

Yes, you have to allocate the bill based on usage. Averages might work out, but the auditor will count minutes used. Congress knows how the cell phone game is played, so does the IRS. Don't take all of your cell phone expense as business unless it IS all business.
Which means - having a separate line for personal calls - either a land line or cell number.

Not if you use any of it for personal use. And really, will anyone believe that you don't surf for fun? Take persaonal e-mail? Just take some portion of it and be happy.

Maybe possibly. But you generally can't take an "office in the home" expense under an "S" corporation structure.
You could have the company reimburse you for it's expenses.

You can book them as assets, based on their actual values, as of the time you converted them to business use. Any personal use should be accounted for and depreciation (expensing) taken over time.

It depends. Annually or quarterly, maybe monthly or weekly. It depends on how much profit you generate, if you are making payroll to yourself from the business, what amounts of payroll withholding you have from that payroll, what your withholding is from your regular job's salary, and a host of other factors.

Yeah, well, gifts are limited to $25, so that's the extent of your business deduction.

The corporate return due date is March 15th. You can extend that to September 15th if you like.
An "S" corporation doesn't owe taxes at the federal level. Your state may impose some type of tax at the corporate level, either an income tax or an excise tax, or a net worth tax, or......
Check with a local tax advisor.

Remember that you often get what you pay for. And remember that some times you don't get what you pay for.
Find someone in your community that you feel comfortable with. Their style, office location, fees, etc, all play a role in who you chose. Ask your friends, associates, suppliers, and other business contacts for a referal.

Only clothing that is a uniform, and/or for safety purposes allowed as a deduction. Generally clothing that is "steet adaptable" is considered as personal in nature and not a business deduction.
So, have shirts embroidered with your corporate logo, or screened with the company name, and you're talking a deduction. Buying a suit from the store isn't going to cut it.

Nope. At least not at the "S" corporate level. Donations are passed through to you and taken on your Schedule A as a charitable contribution.
Now, see if you can turn that "donation" into advertising in some manner. I "donate" to the local school sports program, but I get an ad in the football program or a banner hanging on the outfield fence, or my business name called out during a time-out on the court.
How you do all of the above should be ironed out with your accountant, even if you don't like what they tell you.
--
Paul A. Thomas, CPA
Watkinsville, Georgia
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On Sep 16, 11:11 am, "Paul Thomas, CPA"

1) I am going to average out to 400 mins usage a month, b/c it is too hard to know what exactly I am using. I am underestimating.
If the IRS comes to my house, then I will tell them that I need hire a person to figure out how much mins I use.
3) Cable modem. Is this a 100% write off?
So, I take off a percentage for business and a percentage for personal?
4) Is 1/4 of 1 bedroom a write off? Any caveats like "primary" source of business, etc?
You could have the company reimburse you for it's expenses.
Do you mean that MY CORPORATION can pay myself (on a personal) for a few hundred dollars a month?
This this a 100% business expense? About $200-$300 a month based on square footage.
5) How do I deal with previously owned laptop, desktop, etc? Are these write offs?
You can book them as assets, based on their actual values, as of the time you converted them to business use. Any personal use should be accounted for and depreciation (expensing) taken over time.
How do I legally account for personal use?
7) I gave a gift of $500 to a colleague at the company I am consulting for. This was not a bribe, but just something I wanted to do b/c him and I get along with him very well. I sent this from the new founded business checking account. Is this bad? Is this a tax write off? Do I need a receipt from him?
I figure I will be taxed for $475 now?
8) What is a "owner withdrawal?"
Something like taking out money from the business account for some personal use. I will have to be taxed on this correct?
9) What is the main use of deductions? What benefit is this to me?
I figure, that I work hard, make money, give money to the government, they use my money to expense fancy cars and other personal things, and life goes on.
The best I can get out of a business deduction is a business meal, and some growth of my business. Correct me if I am wrong?
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Does hiring an Ivy League personal tax, coach, guru, sage a 100% tax write off?
He/She will advise all all matters.
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1) Are there any payroll taxes for the personal guru?
He/She will be an independent contractor
2) If I hire my 8 year old very smart son for some business work (file paper, etc), and pay his $8.00 in hour, but not let the yearly amount exceed like $1000-$2000 dollars, I can just write a company check to him correct?
Since he will be an independent contractor, I don't have to pay payroll taxes correct?
AND, this will be a business expense for me correct?
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Your personal guru is personal. Non deductible by the business.
Get a business guru and you'll be much better off.
Hiring children is a tricky issue. The amount you pay them needs to be reasonable for the work they do. Meaning, that you'll pay that amount for someone else's 8 year-old kid for the exact same work. Also you may run afoul of child employment issues, so TALK TO A LOCAL PROFESSIONAL before hiring your kid.
And yes, payroll tax reports are mandatory for child employees same as with adult employees. So hire someone to handle all this for you.
There's no way in hell your 8 year old is an independent contractor.
--
Paul A. Thomas, CPA
Watkinsville, Georgia
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Yes, I would consider it a business expense.
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If I just cut a company check to them, I don't have to worry about payroll taxes correct?
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If I purchase anything that is generally for business use (headset for cellphone, earphone, stapler, etc), but I use it for personal use sometimes or rarely, do I have to account for the personal use and take the percentage of the deduction at the end of the year?
SN
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There are things they really look at with a microscope and tweezers:
travel meals and entertainment cell phones computers (especially laptops) mileage, business use of autos
They need to be looked at carefully to assure that the deductions you are taking are business related.
Otherwise, they allow deductions for expenses that are >ordinary< for your type of business (meaning that others in your business field pay those same types of expenses) and >necessary< for your business (meaning that the expense has to be an integral part of your business operations.)
They also look at amounts paid to related parties - like your kid - to be sure they are reasonable in amount.
--
Paul A. Thomas, CPA
Watkinsville, Georgia
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Be careful, one of those "shady accountants" you referred to might be lurking here.
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wrote:

What is this in response to?
I am just clarifying, b/c I can't really tell the difference between a shady accountant, CPA, or somone who is masquerading as an accountant.
This is part of the government, accountant, society complex.
The money I send to the federal government will probably be used to contracts with escort services anyway. lol
I am doing a "common good to society" by trying to understand the laws
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The portion of their bill that relates to the business - yes - is deductible by the business.
The portion that relates to say, your personal tax preparation, personal financial plans, or dating techniques is personal and not a business deduction.
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Feel free, they'll deny your claimed deduction till you have proof.

You will ned to establish a reimbursable plan and provide receipts to the buisness that they will reimburse for the expenses you incured on behalf of the company.

It needs to be exactly the cost to you, that gets reimbursed by the company. That is what's called an accountable plan. If you just cut a check for some random amount, it's taxable to you. Don't do that.

Say your laptop has a fair value of $500 when you convert it to business use. That $500 is your basis.
You use it 20% for personal use and 80% for business use. You subtract 30% of the basis to obtain the depreciable basis, or $400.
That $400 gets depreciated over 3 years.

It's a non-deductible expense of the business. What you "get taxed" on is another number all together.
There are many items that a business might incur that are non-deductible for tax purposes.

You will be taxed on the bottom line profit of the business based on your taxable revenues less allowed deductions.

What is your question.
You need some serious help for your business. See if there is a small business outreach center in your town or where the nearest one might be to you. http://www.sba.gov/localresources/index.html Then get some help for this venture you are on before it does you in.
You have a lot of very basic questions that you should have had some minor grasp of before you went into business for yourself, and at a corporate level at that.
If you can "gift" out $500 to a friend just because, you can pay out $500 for some basic consultation that will benefit you for years.
--
Paul A. Thomas, CPA
Watkinsville, Georgia
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Sorry, I am not an accountant. You obviously need one. You may also need or want to talk with an attorney regarding the choice of entity you picked (S-corp), and the state of incorporation you picked (Delaware).
Here are some of my thoughts, but again I am no expert.
These days, I think there is usually no advantage to incorporating in Delaware or Nevada or some other state unless that is where you are located and are doing business. That's because most states now require that if you are conducting business in their state, you have to register as a foreign entity doing business in that state. So, if NY is like that, you have to also register your S-corp as a foreign entity in NY, pay the annual registration fees, file a NY tax return, pay NY taxes, etc. So, you are probably paying twice for annual registration fees etc. because you now have to do that in Delaware and in New York. If you dissolve your Delaware S-corp and just form a new entity in NY, you will probably only have to pay NY annual registration fees etc. instead of paying twice to two different states.
If you have an S-corp, you don't have a "home office" in your bedroom because the S-corp isn't on your lease -- you are. It is not "you" who is sharing the bedroom between personal and business use. You and the S-corp are separate persons/entities. I guess the S-corp could pay you rent to rent space in your bedroom, but that would just be additional income to you that you would have to report and pay tax on.
People sometimes use an S-corp because it can allow them to split some of the income from the S-corp between dividend income and "earned income", thereby being able to somewhat control the amount of "earned income" they have. This can be important to people who receive Social Security income or Social Security survivor benefits, etc. That's because those types of benefits limit how much "earned income" you can have before you start to see a decrease or elimination of your benefits. The benefits are not impacted by the dividend income. But, that's not your situation, so an S-corp may not be what you need.
You may be better off with a single-member (meaning just you) LLC than with an S-corp. But, that depends on how S-corps and single-member LLC's are taxed in NY and some other factors. Generally, single-member LLC's are less cumbersome in terms of paperwork and reporting requirements. But, see an accountant and an attorney about this.
In terms of liability protection, since you are personally doing the work, an S-corp or LLC may not offer you any special liability protection. If your LLC hired someone else to do work for the LLC, and that person did something that caused a liability issue, then your personal assets may have some protection through the S-corp or LLC. But, if you do the work, you (and your personal assets) are at risk.
In New Jersey, a single-member LLC doesn't have to do a separate tax return, but an S-corp does; and there is no minimum New Jersey state income tax on a single-member LLC but there is on an S-corp. I don't know about NY and/or Delaware.
Good luck.

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Wow, I just read the rest of the thread on this topic...
You are "tired of shady accountants" and you want to pretend that your 8 year-old son does work for your company at $8.00 per hour, and also pretend that he is really an "independent contractor" who has his own business, does not require direct supervision and direction of what he does for your company, etc.? Good one.

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