Posted by NCWayne on May 11, 2011 at 11:04:23 from (166.82.187.163):
Ok guys, thanks for the replies to my last post but the answers I got were exactly what I wasn't looking for so let me ask the question again a little differently. Let me reword the question so hopefully what I am trying to find will be a little clearer this time, and give a little background so you'll know what I am looking for also.
Long story short, been dealing with a deadbeat dad that doesn't like to pay support,typically works alone, and for cash, and likes 'play the numbers' when he does show money coming in to make it appear he is broke. He is in the construction industry and does carpentry, siding, handyman type work, etc.
Last year he showed an income $33,000 plus. In his taxes he made the usual business deductions, truck expenses, cell phone, etc. to the tune of around $4000. That is all well and good and those are all legitimate deductions. Here is the kicker, on top of those he also claims nearly $19,000 in deductions for other "supplies" needed for his business. With all these deductions his net profit was in the neighborhood of $7800 for the year.
In other words by his calculations he was spending over $1500 a month just in "supplies", plus other business related expenses, to turn a net profit of around $653 a month. Now we all know this is pure BS and if you were looking at the actual tax papers, along with a seperate income affidavit showing different, lower, net income numbers like I am, it would be even clearer to you just how big of a pile he has built up for himself.
With all that said, and now that you have a better understanding of the situation, what I was trying to ask before was this, and forget percentages as I think that is where I screwed up asking that instead of asking for a round figure. Over the course of a year what would you say you spend in expenses that would be written off as 'supplies' and aren't passed on to the customer???
In my case I try to pass on every dime I possibly can for the items I use working on a particular customers equipment. Granted you aren't going to catch every penny and there are things that can't be readily passed on and you have to eat and therefore are valid business expenses and are therefore tax deductable. In my case shop "supplies", that I can't really pass the cost of on, aren't anywhere near $19,000 a year and even on a good year might only reach $1000 to $1500.
What it all works out to is that it just doesn't make sense to claim you are spending over $1500 a month in suppies that you can't pass on to the customer (especially in the construction field)to turn a profit of less than $700 a month. Granted when doing business the more you can legitimately write off the better and if you can run a successful business and show very little to no net profit at the end of the year by using legitimate deductions that's all well and good. But to claim "supply" costs like this guy is doing is riduculous to say the least. I know in my business there is no way I could stay in business if I was doing like this guy claims and more or less paying to work.......
On second thought maybe asking a bunch of farmers a question like this isn't such a good idea as I know just from reading some of the posts on here that is pretty much what the farming business is like anyway. At the end of the day you are all but paying just to be in business. Still, there are enough non-farmers on here that I thought maybe I could get some legitimate, best estimates from different fields and different geographic areas.
For those that answered the first post, thanks again for the replies and the input. Maybe this time I can get some numbers like I was looking for with the question asked a little different and more info. Thanks.
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