Business/ Financial question for all

Ok, I know this is a very generic question but given the variety of occupations covered on this site, and what I am doing with this information, this is the only way I know to ask it. Too, before anyone askes, this is not to be used in any way for anything I am doing with my business, it's strickly for something I am working on in another area. So, here's the question. When you do your taxes, on average, how much do you usually figure to take off from your gross reciepts to obtain your net profit? Just to be clear, by 'take off' I mean include the standard tax rate for the gross, then the usual unrecoupable expenses that can be considered right offs, etc., What I am not looking to have included is the atypical, one time, big ticket purchases, etc. that would raise the right off percentage higher than 'normal'

Like I said I know this is a very generic question for what is typically a complicated equation. Still I am not looking for long, drawn out explinations, just simple, round number, best guess, estimates from a very broad range of businesses and geographic areas, to help me with something I am figuring on. Too if anyone knows any online, where similar information can be found in print, not just from individuals like ya'll, I would appreciate a link to the info. Thanks!!!!

And before the grammer police hit I know, it's write off, not right off....BUT I am looking for information that is right on...LOL Thanks again for any help ya'll can give.

I think for some business's there may be a basic formula but with other business's there's no way to know what your expenses will be throughout the year. You might do one big job for $20,000 but $16,000 of it parts and another $500 is for fuel to get to the job.

That I understand as it's often the way my business is. In a case like that the cost of the parts is being passed on to the customer so it's not really a write off in the context I am meaning. So, let me clarify a little more. Approximately how much, percentage wise, do you write off every year as supplies used by your company whose cost isn't passed on to a customer?

ALL legitimate expenses can be recorded and used to figure your net income at year end. You might even be missing some.

A big welding 'job' for $20,000???

When I milked cows I always figured my net would be about half my gross. Now I run beef cows and sell tractor parts. It still seems to run about half.

To simplify some of the bookkeeping, have a separate checking account and credit card for the business. It helps when it comes time to remember what is personal and what is business.

The income goes into the business account, the parts, tools, inventory, postage all are paid via the business credit card.

I use Quicken to download all the financials from both the personal account and the business account. If you categorize the expenses, Quicken will do a great report at the end of the year.

It will also import into TurboTax. Though I use TurboTax, I don't use the import function.

Every expense of operating the shop is a legitimate expense. I think you need to keep better records, you cannot just guess at a figure for miscellaneous shop expenses. Or any other expense.

In the nature of farming, every year is different and one trys to somewhat match expenses with income to keep the income taxes low.

Thus a farmer often becomes cash poor, but asset rich.

The 'one big' purchase is a normal part of farmer tax planning, and can carry through for 20 years of tax deductions. While grain prices have been up the past 3 years, many many needed machine sheds have gone up in the area. As well, one buys Fert & seed ahead if you had a good year, or you wait until the following year if you had a poor year.

When you retire & can't appreciate it any more, you have a lot of wealth. Which your heirs will fight over & use up on lawyers.

Anyhow, the simple answer is in farming, you try to make enough for living expenses, which often doesn't happen, and the rest in a good year you have to plow back into the farm because SS & income taxes will just butcher you if you don't.

--->Paul

Complete and accurate records are the key, the majority of farmers and small business owners hurt themselves by not recording every purchase,every mile driven and every expense while traveling etc. Signing up with a reputable accountancy firm that specalizes in or is knowledgeble of your trade or business is never money spent it is always money saved. Most people are scared of the IRS and do not take the deductions they are due, storefront tax services, including H&R Block are only interested in the easy pickings, they are not going to press for all they can because they do not want to answer any questions or have to back anyone up in an audit, there is no money in it for them. An audit is nothing to worry about as long as you have accurate, complete records of income and expenses and all reporting was completely honest.

I do alot more than just welding, in fact welding is a very small part of my business. I haven't taken on any BIG jobs in the past few years due to the economy and the fact that Dad more or less retired and I am having to do everything alone now. Still in the past when Dad and I worked together it wasn't unusual to take jobs like a total rebuild of a D9G. In that case parts for the initial round rebuilding the engine, transmission, and steering clutches were somewhere around $40,000. When he decided to do a complete undercarriage rebuild a few years later parts alone on that was in the neighborhood of $60,000. Another time Dad and I rebuilt a 71B Bucyrus Erie dragline for a mining operation up in the mountains. In that case parts were over $160,000 and labor alone was somewhere around $60,000, plus other expenses.

In the end BIG equipment comes with BIG parts cost, especially if you have to get OEM parts for everything. Had it not been for the aftermarket D6C CAT I am rebuilding the engine for right now would have required nearly $5700 in parts from CAT. As it is I was able to get a combination of OEM overstock, surplus, etc parts, along with aftermarket parts, that are just as good as CAT, and in some cases the same name brand CAT itself uses (without their box and the CAT name) and saved my customer nearly $4700 in parts alone.

None! Every expense is billed out or figured as overhead @rent , lights etc. Good accountant will keep track of what your needing .