- quote -

Since when? Inventory only counts as "cost of goods sold"
when it's actually sold, not when it's held.

Or are you saying "should" in the sense of "Congress should
change the tax code"?

- quote -

Why? He seems to be getting it right so far.

Seth

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dukecola wrote:

- quote -

Way around it: Incorporate.

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dukecola wrote:

- quote -

If you spent money on inventory, that should be deductible
and is not considered profit. Perhaps you should have a
professional do your taxes.

Stu

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dukecola wrote:

- quote -

Sole proprietors don't pay themselves salary. You will owe
SE taxes on 92.35% of your business net profit.

Half of your Se tax is deductible above the line. You can
also deduct your SE health insurance premiums above the
line. You can also shelter some income from tax via creation
and contribution to a retirement plan. I sense that you
don;t have any funds to accomplish the last item.

--
Alan
http://taxtopics.net

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dukecola wrote:

- quote -

This isn't unusual for a beginning business.

Since you have a profit, you pays the taxes, income and SE
taxes. Doesn't matter what the excess cash left over is used
for, whether to spend on your favorite paramour, or to plow
back into the business. (your choice! lol)

ChEAr$,
Harlan Lunsford, EA n LA

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"dukecola" <dukecola[at]adelphia.net> wrote:

- quote -

Sole proprietors don't pay themselves. You are taxed on the
profit, regardless of what you did with it. Purchasing
inventory in and holding it in and of itself isn't a
deduction.

--
David M. Woods, EA, ChFC, CLU
Woods Financial Services
Norwood, MA 02062
www.woods-financial.com

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dukecola wrote:

- quote -

Businesses that need to reinvest capital (as per your
example) would probably do better tax-wise if organized as a
"C" corporation, rather than as a sole proprietorship or
"pass thru" entity. You would probably benefit from
consulting with a knowledgeable tax professional.

MTW

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"dukecola" <dukecola[at]adelphia.net> wrote
- quote -

First, you wouldn't ~pay~ yourself a salary in a sole
proprietor.

Second, inventory isn't a deduction of the business. I mean
that it isn't an expense until you actually sell that
inventory item(s).

- quote -

Yes, that's about the size of it.

- quote -

Not really.

The best thing you can do is monitor your income and
expenses a little more closely, and plan for any taxes due,
and if necessary make estimated tax deposits.

--
Paul A. Thomas, CPA
Athens, Georgia
taxman at negia.net

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"dukecola" <dukecola[at]adelphia.net> writes:

- quote -

Did you have a profit? If so, you'll have SE tax.

- quote -

Doesn't matter. There's no concept of "salary" with a sole
proprietorship. The sole proprietorship *is* you. If you
have a profit, you pay both income tax and SE tax on that
profit regardless of what happens with the money.

- quote -

That doesn't matter, either.

- quote -

Bingo! (And income tax on the profit, too.)

- quote -

Don't have a business which makes money?

But seriously, no, there's no way around it.

--
Rich Carreiro rlcarr[at]animato.arlington.ma.us

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I am a sole proprieter, 2nd year. I just did my taxes and
it appears I owe a large SE tax. I did not take a salary
and all profits were reinvested back into purchasing
inventory. I'm assuming they are making me pay SE tax on
the profit, even though it's in inventory, correct? Any way
around this?

Thanks

With best regards, dukecola. E-mail: dukecola[at]adelphia.net

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