Thanks to Mom on Dealz for sharing her series, Ask an Accountant! Sharon is married to an experienced accountant. We’re heading back into tax season so get your tax questions answered from a professional.

See more Ask an Accountant posts to see if you’re tax question has been answered.

It’s almost December so I know many of you may be scrambling to get your year end tax information organized.

Question:
I have a small business and I was wondering if I pay my taxes based on the income I earn or the income left after I have paid expenses?

Answer:

You would pay your taxes on the net profit. Net profit is calculated as follows:

Gross Revenues – Cost of Goods Sold (Direct Costs if a service business) – Operating Expenses (advertising, bank fees, rent, subcontractors, etc…) – Depreciation of Fixed Assets = Net Profit. Keep in mind that not all cash outflows are considered expenses. For example, purchase of inventory, sales tax payments, principal payments on loans, payroll withholding payments, loans or distributions to owner/member/shareholders, and personal income tax payments or estimated tax payments are not expenses.

Please keep in mind this post is for informational purposes only and answers given are very general. Do not rely on this column for definite tax answers as many things depend on individual circumstances. Please contact your personal accountant or financial advisor for your particular situation.

photo credit: austinpost.org

Thanks to Mom on Dealz for sharing her series, Ask an Accountant! Sharon is married to an experienced accountant. We’re heading back into tax season so get your tax questions answered from a professional.

See more Ask an Accountant posts to see if you’re tax question has been answered.

Question:
Do I have to claim money I make in a yard sale?

Answer:

Basically, the occasional garage sale does qualify for the exclusion from income due to the fact you normally sell your personal effects at a loss, and you can’t take a loss on this sale. In the event you sold something at a profit (highly unlikely, but could happen) you would have to report the gain 🙂

Please keep in mind this post is for informational purposes only and answers given are very general. Do not rely on this column for definite tax answers as many things depend on individual circumstances. Please contact your personal accountant or financial advisor for your particular situation.

photo credit: austinpost.org

IRS Circular 230 Notice: Any U.S. tax advice in this written or electronic communication was not intended or written to be used, and it cannot be used by the taxpayer, for the purpose of avoiding any penalties that may be imposed under the Internal Revenue Code or applicable state or local tax law provisions

Thanks to Mom on Dealz for sharing her series, Ask an Accountant!  Sharon is married to an experienced accountant.  We’re heading back into tax season so get your tax questions answered from a professional.

See more Ask an Accountant posts to see if you’re tax question has been answered.

Question:

I travel quite a bit to teach coupon classes. Can I deduct the mileage? If so, what are the rates?

Answer:
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Do you have a tax question? Thanks to Mom on Dealz for sharing her series, Ask an Accountant! Sharon is married to an experienced accountant. Although tax season is over, tax questions arise year round. 

As the end of the year approaches many people start thinking of deductions to lower their tax expense.

Question:
I own a cooking blog and blog about recipes and my family meals. Can I deduct the cost of the ingredients needed for the food shown on my site?

Answer:

Here are some questions you need to ask yourself. Your answers will determine deductions.

1. Is the blog a business (profit motive) or a hobby (not profit driven)?

2. Only 50% of meals & entertainment are deductible for business purposes, so I would not deduct any more than that. This also assumes the meal is consumed by the family after being posted on the website.

3. If a business, then I would deduct 50% of the cost of the meals used on the website in the month they were cooked & eaten. If a hobby, you can only deduct expenses equal to the hobby income, so the best case scenario you would report a net 0 profit (can’t have a hobby loss). In the hobby scenario, I would still only deduct 50% of the cost of the meals.

This post is for informational purposes only and answers given are very general. Do not rely on this column for definite tax answers as many things depend on individual circumstances. Please contact your personal accountant or financial advisor for your particular situation.

See all previous Ask an Accountant posts

photo credit: austinpost.org