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Old 10-29-2008, 05:57 PM   #99
mimartin
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Quote:
Originally Posted by GarfieldJL View Post
Did you know taxes are on gross income not gross profits?
huh?
Quote:
Originally Posted by GarfieldJL View Post
Gross income is the total amount of money you take in before any expenses are factored in.
Taxes are off of net, not gross. You can deduct your business expenses and other taxes (such a Employeer Taxes) and the tax rate is based off of your income. I have a degrees in Finance and Accounting. Plus I am a small business owner, who prepares my own taxes.

IRS Tax forms - Most small Business Use

Schedule C- Profit or Loss From Business - This is the form that allows you to write off expenses such Advertising, Vehicle, Depreciation, Employee Benefits, INSURANCE, Mortgage, Rent, Office Expense, Repairs, Supplies, Utilities... At the end of it you are given Net Profit which is what you are taxed off of, but only after personal deductions and Self-Employment Tax (Social Security).

Form 4562-Depreciation and Amortization.

Schedule SE - Self-Employment Tax

1040

1099 - There are different forms based on the type of business and type of income.

So by your example, the surgeon’s Business Income (line 12 on the 1040) is $400,000 because the cost of malpractice insurance is an expense deducted on Schedule C (line15). I suspect his income is even lower once he deducted other business expenses.


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