Gardeners & Landscapers – Tax Tips To Run Your Business

Michael Lodge

by Michael Lodge

When you operate a gardening or landscaping business it is very important to know – you are operating a real business and need to take care of tax issues every year.  Let’s go over the tax concerns of running your business.

Here are some tax issues that you should know:

  • Accounting Method.  An accounting method is a set of rules about when to report income and expenses. Many small businesses use the cash method. Under the cash method, you normally report income in the year that you receive it and deduct expenses in the year that you pay them. Find out more in IRS Publication 538, Accounting Periods and Methods.  You should also be prepared to provide your client with a W-9 to show what type of business you are with either a social security number or a federal identification number.  At the end of the year your client should provide you with a 1099-MISC for the fees that they paid to you for the full year.  If you do not get a 1099-MISC make sure that you have recorded this income correctly in a ledger or through you bank account  (make sure you have a bank account just for your business).
  • Business Taxes.  There are four general types of business taxes. They are income tax, self-employment tax, employment tax and excise tax. You may need to pay self-employment tax as well as income tax if you make a profit. Self-employment tax includes Social Security and Medicare taxes. With estimated tax payments, you pay taxes at various times during the year to ensure you don’t have a large tax bill when you file your tax return. Use IRS Direct Pay, the fast, easy and secure way to pay from your checking or savings account.
  • Tax Forms.  There are two forms to report self-employment income. You must file a Schedule C, Profit or Loss from Business, or Schedule C-EZ,  Net Profit from Business, with your Form 1040. You may use Schedule C-EZ if you had expenses less than $5,000 and meet other conditions. See the form instructions to find out if you can use the form. Use Schedule SE, Self-Employment Tax, to figure your SE tax. If you owe this tax, make sure you file the schedule with your federal tax return.
  • Allowable Deductions.  You can deduct expenses you paid to run your business that are both ordinary and necessary. An ordinary expense is one that is common and accepted in your industry. A necessary expense is one that is helpful and proper for your trade or business.  Work with your tax accountant to go over everything that is allowable by tax law.
  • Business Use of a Vehicle.  If you use your car or truck for your business, you may be able to deduct the costs to operate the vehicle for the business use. Refer to IRS Publication 463, Travel, Entertainment, Gift, and Car Expenses for details.

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