The Small Business Tax Help Blog

Question: This year i plan to start a small business as well as a rental property, I have a few tax questions?

concerning my rental. I wanted to charge $750.00 monthly minus certain utilities included amounting to $150.00. So I have a proffit of $600.00 each month. Can I offset this proffit with the monthly mortgage payment of $600.00 (P&I )or can I just claim mortgage interest, insurance costs and depreciate the buliding over 30 years. Can I exspense any repairs against the profit or do I have to depreciate them. Example a new roof might cost 5-7 thousand dollars. If I have to depreciate that over 30 years that doesn’t amount to much but that sure was a lot to come up with now.
Concerning the business, I plan to start a home based carpentry business. I would like to spend roughly 20k – 30k on a workshop that will serve as a business hub at my physicall residence. I would prefere this over an in town based business for obvious reasons. Now can the business pay myself rent to use the bulding and claim this as a business exspense, and I claim mortgage intrest and depreciation for myself.

Answer: When renting out real estate, these are the expenses you can take to offset your costs: Mortgage Interest, Insurances, Utilities, costs of finding tenants (advertising fees, credit checks etc), repairs,depreciation of the building and any furniture and fixtures you have placed in the home.

You can expense repairs such as painting, fixing plumbing etc. If you replace something such as the carpet or a toilet, you have to depreciate that new asset you placed in your rental. Any capital improvements you put into the house should be depreciated over 15 years. The building can be depreciated over 27.5 years.

If your business uses a building you own, it can pay rent to you and you would claim it on Schedule E of your 1040. Any expenses you incur (not your business) would be deducted from the rental income you report on Schedule E. If the business pays for any of the expenses related to the rental, the business would deduct them and you’d put that income and deductions on Schedule C.

Check out the IRS’s website for small businesses to get answers to any specific questions you may have: http://www.irs.gov/businesses/index.html

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Question: Can a business partner use my EIN to apply for credit ?

I use my own social when applying for a EIN for our joint business with my business partners. I just want to know whether my business partners can simply apply for credit without my approval ?
On paper the business belongs to all of us.

Answer: Yes, without a previously signed agreement to the contrary, your business partner is technically “allowed” to apply for credit without your approval – however, they probably cannot actually do it without turning in a “fradulent” credit application. This is because almost all credit applications require the signature of ALL partners who own 20% or more of the company. If a partner were to fill in such a credit application but only list themselves and leave off of the application any other partner that owns 20% or more, then would have in fact turned in a fraudulent application.

The fact that you gave your social when you obtained the EIN doesn’t have anything to do with the use of the EIN – the EIN “belongs” to the company.

If you want to stop partners of yours from applying for credit on their own wtihout your permission, you should have an attorney draw up a partnership agreement that everyone signs that lays out the basic rules of what the partners have and don’t have the authority to do. This is a simple document that should cost you no more than $100-$150 to get drawn up.

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Question: Tax Cut Software Glitch warning?

There seems to be a temporary glitch in the H&R Block Tax Cut software until a fix occurs which is planned for Jan 31st. If you have federal withholding on Govt Payments 1099-G such as Unemployment Comp., the software may prevent you from e-filing unless your interest, pension, Soc Sec, or IRA income exceeds the withholding. If anyone using this software (and maybe other tax software vendors also), you may need to wait a few more weeks for a fix. The problem is blamed on a faulty IRS update & cannot be fixed until the next scheduled IRS update.

Answer: that’s correct per IRS waring in December.Congress screwed up by takeing all year to patch the AMT law.

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Question: Independent Contractor And Taxes?

I Know being an independent contractor that I do need to file taxes, question is, how do I go about doing this correctly?. If someone can give me a step by step process and a list of the forms I will need..it will be appreciated. I have used search engines to help answer some of my questions but their written very confusing.

TIA

Answer: 1040 and your 1099 form showing your income.

Listing of any tax payments you made.

www.irs.gov

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