I want to write off stuff (1 Viewer)

[Judge Smails]

Buddies that have their own businesses are writing off everything.  Multiple cars, paying their kids the equivalent of college tuition and then writing that off, bunch of other stuff.  I just sit here like a good Californian and get crushed with taxes.  

My accountant has recommended setting up a general partnership with my wife.  Then can put whatever businesses I want under it.  The question is what.

I could start up a Sales or Healthcare Consultant business.  I could build website, cards, etc and start the framework.  Couldn't actively do too much while I work for the man at my full time gig, which will likely be 3 years more (5 max).  

Have explored golf lessons for high handicappers.  Could also organize guys golf trips (as an example have done 24 guy trips to where they played the PGA event in La Quinta for many many years.  Know all of the courses and best places to stay, eat, cater, etc)

Could start buying some real estate and do something around that (just own primary home now)

Wife could also do several types of businesses.  Organizing, pet care, personal assistants/helpers, whatever.

You can write off losses for 3 years with a business, right? Can you just go to the next one after that? I want to do what I can within the rules.  I wouldn't do well in San Quentin.   Figure the collective knowledge of the FFA can keep more $ in the Smails coffers.  Hey, and if the side hustle thrives even better.  Whatchagot?

 

[AAABatteries]

My Link

 

[belljr]

My Link

Don't even need to click!!!!

 

[IvanKaramazov]

My Link

I knew exactly what this was going to be before clicking.  Well done.

 

[Tom Hagen]

Buddies that have their own businesses are writing off everything.  Multiple cars, paying their kids the equivalent of college tuition and then writing that off, bunch of other stuff.  I just sit here like a good Californian and get crushed with taxes.  

My accountant has recommended setting up a general partnership with my wife.  Then can put whatever businesses I want under it.  The question is what.

I could start up a Sales or Healthcare Consultant business.  I could build website, cards, etc and start the framework.  Couldn't actively do too much while I work for the man at my full time gig, which will likely be 3 years more (5 max).  

Have explored golf lessons for high handicappers.  Could also organize guys golf trips (as an example have done 24 guy trips to where they played the PGA event in La Quinta for many many years.  Know all of the courses and best places to stay, eat, cater, etc)

Could start buying some real estate and do something around that (just own primary home now)

Wife could also do several types of businesses.  Organizing, pet care, personal assistants/helpers, whatever.

You can write off losses for 3 years with a business, right? Can you just go to the next one after that? I want to do what I can within the rules.  I wouldn't do well in San Quentin.   Figure the collective knowledge of the FFA can keep more $ in the Smails coffers.  Hey, and if the side hustle thrives even better.  Whatchagot?

A couple of things to keep in mind.  In order to be deductible, expenses need to be both ordinary and necessary for the particular business you are in so you need to be able to justify the expense in an audit.  Necessary is defined pretty loosely so in the example you gave, your friends would need to have mileage logs to justify business use on multiple autos and be able to prove the kids worked and their pay was in line with their qualifications.  There is a chance they have been able to deduct these things only because they haven't been audited.

You could deduct a business loss for more than 3 years as long as you can prove a profit motive and that you are serious about running it like a business. The IRS is looking to distinguish businesses from hobbies. A sales consultant business is going to have a lower threshold to prove it's a legitimate business than organizing golf trips because of the perception.

With regard to real estate, rental real estate would be subject to passive loss limitations which may limit your ability to deduct losses regardless of the hobby rules.

 

[The Noid]

For the 3 years thing, you're thinking of the IRS designating it as a hobby versus a real business: if you have turned a profit in at least three of five consecutive years, the IRS will presume that you are engaged in it for profit. If not, it's considered a hobby and most business-related deductions are no longer allowed. There's some bit of an exemption to the 3 of 5 rule (not even considering any allowance for COVID alone throwing most businesses into at least 2 years of losses), and it's around "intent" that you would have to show should you be audited:

• You conduct the activity in a businesslike manner by keeping good records and searching for profit-making strategies.
  
• You have expertise in the activity or hire expert advisors.
  
• You spend enough time to justify that the activity is a business, not just a hobby.
  
• You’ve been successful in other ventures, suggesting that you have business acumen.
  
• The assets used in the activity are expected to appreciate in value. For example, the IRS will almost never claim that owning rental real estate is a hobby even when tax losses are incurred for many years.
  

For the benefits of "writing it off" against your other source of income, you have to make sure your business is setup correctly so that it will work that way:

Types of Businesses and Excess Business Losses

Excess loss limits only apply to businesses that are not corporations. These business types are:

• Sole proprietors and one-owner LLCs (called single-member LLC) that calculate business taxes on Schedule C as part of the owner's personal tax return
  
• Partnerships and multiple-member LLCs that calculate business taxes on a partnership tax return, with income passing through to the individual partners
  
• S corporations that calculate business taxes on Form 1120S, with income passing through to individual owners
  

 

[popeye]

Can you still post from jail?

 

[AAABatteries]

I knew exactly what this was going to be before clicking.  Well done.

I don’t want to hijack Smail’s thread but this is one of hundreds of clips we could show that demonstrates the brilliance of Seinfeld.  The fact that so many of us immediately thought of this scene is a testament to its genius.

 

[comfortably numb]

I knew exactly what this was going to be before clicking.  Well done.

I knew it was going to be in here even before he posted it!

 

[The Noid]

For the 3 years thing, you're thinking of the IRS designating it as a hobby versus a real business: if you have turned a profit in at least three of five consecutive years, the IRS will presume that you are engaged in it for profit. If not, it's considered a hobby and most business-related deductions are no longer allowed. There's some bit of an exemption to the 3 of 5 rule (not even considering any allowance for COVID alone throwing most businesses into at least 2 years of losses), and it's around "intent" that you would have to show should you be audited:

For the benefits of "writing it off" against your other source of income, you have to make sure your business is setup correctly so that it will work that way:

To expand, and give you an example using my situation, my wife quit her job as a teacher in August 2019 to start her own business. She opened an event decor rental business in January, 2020 (just in time for COVID!) It's a Single Member LLC and we file our taxes jointly so essentially her losses last year (and likely again this year) will offset against my income. Should there be any question from the IRS if losses continue next year, and the year after, etc., we are in good shape when it comes to the "intent" factors:

• You conduct the activity in a businesslike manner by keeping good records and searching for profit-making strategies. Very detailed records, professionally maintained website, advertising-related business expenses, etc.
  
• You have expertise in the activity or hire expert advisors. She is a Certified Event Rental Professional and actively maintains the certification 
  
• You spend enough time to justify that the activity is a business, not just a hobby. It's her full-time job, no other income or side hustles
  
• You’ve been successful in other ventures, suggesting that you have business acumen. 
  
• The assets used in the activity are expected to appreciate in value. For example, the IRS will almost never claim that owning rental real estate is a hobby even when tax losses are incurred for many years. Her business specializes in antique and authentic rental pieces (e.g. her Roaring 20's package has over 30 items from that era that are considered "collectible" and more often appreciate, instead of typical folding chairs and tables that people rent, which depreciate.)
  

So while she's still in this "start-up" phase, we get the types of benefits you're looking for even though it's like pulling teeth to get her to embrace it. She's using a 5 year-old cell phone (that her business phone number routes to) and uses it to take pictures for her social media accounts to display her items. I keep telling her to get a new phone that takes higher-quality pictures and "write-it off!"

 

[JaxBill]

Can you still post from jail?

We'll send him a file inside a pot of chili.

 

[wikkidpissah]

i been writing off stuff for yea.....................huh?!...............taxes?..........................that's completely different...............nm...

 

[Judge Smails]

Good stuff - I knew FBGs would get me some smarts real quick

 

[EYLive]

Just wear a shirt that says "You'll Never Amount to Anything!"

 

[STEADYMOBBIN 22]

Buddy of mine has a side company and he pays the side company higher prices to do things than it costs his side company. 

Installed a security system and pays his side company to run/manage it.

Also does this for everything from his landscaping, his pool, snow removal, you name it. 
 

Not sure if any of this is legal but he does it. He also has all his cars registered in Florida. Doesn’t have to do emissions or inspection as required here in Maryland. 

 

[Tom Hagen]

Buddy of mine has a side company and he pays the side company higher prices to do things than it costs his side company. 

Installed a security system and pays his side company to run/manage it.

Also does this for everything from his landscaping, his pool, snow removal, you name it. 
 

Not sure if any of this is legal but he does it. He also has all his cars registered in Florida. Doesn’t have to do emissions or inspection as required here in Maryland. 

I must be missing something but that sounds like he is creating more income for himself.  If it's his house or vacation home, the payments would not be deductible to him personally but would be taxable income to the side business.  Even if the payments were deductible because they relate to an investment property you are taking a deduction on one form and creating income on another. At best it's a wash.

 

[shades]

Buddy of mine has a side company and he pays the side company higher prices to do things than it costs his side company. 

Installed a security system and pays his side company to run/manage it.

Also does this for everything from his landscaping, his pool, snow removal, you name it. 

Sounds like what the movie studios do to keep their money and cut out net profit participants. Spend a hundred million dollars to make a movie. Take in three hundred million in the box office. But! To handle all the distribution and promotion, hire their own advertising department, and spend two hundred million to do it. Hey, look, no money left for anyone else.

 

[Jayrod]

Buddy of mine has a side company and he pays the side company higher prices to do things than it costs his side company. 

Installed a security system and pays his side company to run/manage it.

Also does this for everything from his landscaping, his pool, snow removal, you name it. 
 

Not sure if any of this is legal but he does it. He also has all his cars registered in Florida. Doesn’t have to do emissions or inspection as required here in Maryland. 

Sounds like the way Marty Byrde handled things in Ozark.

Build a paper trail the size of Texas and wash it through 5 different entities and viola, the laundry is done.

 

[STEADYMOBBIN 22]

I’m meeting with him Friday. I’ll ask more about it if I remember .