Join Early Retirement Today
Reply
 
Thread Tools Search this Thread Display Modes
Can Any Small Biz Owners Explain Why I Should Retire if I Can Write Off So Much?
Old 10-19-2012, 08:20 PM   #1
Recycles dryer sheets
 
Join Date: Sep 2012
Location: Madison
Posts: 161
Can Any Small Biz Owners Explain Why I Should Retire if I Can Write Off So Much?

I have had my own small video business for 33 years with a home office, I am 59 (DW is a 55 year old teacher and would like to retire ASAP) and thought I would "retire" in a couple of years just so I can enjoy more of life before the inevitable deterioration sets in. I love my work (although it's high stress), it's exciting, pays very well but much more importantly: I can write off a LOT, all legal. I was once audited so I know what I can write off.

I was thinking of taking far fewer projects at 62 and using my super powers to help charities and other worthy causes rather than help mega companies sell products, services or manipulate public opinion which is what I spent my career doing.

So I would like the opinion of folks that had or still have their own small business and ask what sense does it make to "close up shop" if we can still have all these legal write offs? For instance, one car and ALL it's expenses and gas, the land line, two smart phones, the high speed internet connection, a portion of the mortgage, most trips to Radio Shack and Lowes, cable TV, much of the parking downtown...they are all legally deductible and add up to around $700 a month.

Would love to hear from people in a similar situation. I understand if you don't turn a profit in 7 years the IRS gets upset...
__________________

__________________
Cheesehead is offline   Reply With Quote
Join the #1 Early Retirement and Financial Independence Forum Today - It's Totally Free!

Are you planning to be financially independent as early as possible so you can live life on your own terms? Discuss successful investing strategies, asset allocation models, tax strategies and other related topics in our online forum community. Our members range from young folks just starting their journey to financial independence, military retirees and even multimillionaires. No matter where you fit in you'll find that Early-Retirement.org is a great community to join. Best of all it's totally FREE!

You are currently viewing our boards as a guest so you have limited access to our community. Please take the time to register and you will gain a lot of great new features including; the ability to participate in discussions, network with our members, see fewer ads, upload photographs, create a retirement blog, send private messages and so much, much more!

Old 10-19-2012, 08:44 PM   #2
Thinks s/he gets paid by the post
target2019's Avatar
 
Join Date: Dec 2008
Posts: 3,705
My F-I-L is past 80 and still getting it done. Up until 75 or so he was very busy with volunteer groups, and made some pocket change for doing print publications. At 82 he has finally given up the bulk of the volunteer work. His business was not as profitable as yours, but it could have been.

I am not retired, but still consult, even with a full time job now. I will try to maintain this business throughout retirement, as it funds my technology upgrades, and allows me to throw additional monies at my SEP-IRA.

I would not give up anything that I love, and if it pays some bills all the better.
__________________

__________________
target2019 is offline   Reply With Quote
Old 10-19-2012, 08:56 PM   #3
Recycles dryer sheets
 
Join Date: Sep 2012
Location: Madison
Posts: 161
Good points. Also, my biz is so much of my identity, who I am, it would be hard to just fold up the tent.

I read one book about retirement planning each week and I am presently reading The Number by Lee Eisenberg:

The Number: What Do You Need for the Rest of Your Life and What Will It Cost?: Lee Eisenberg: Amazon.com: Books

In it he makes a point I never considered: Execs living high on the hog with expense accounts at mega corps (usually sales and marketing types) take a big psychological fall when retiring because so much of the glitzy, fun part of their life is lost due to not being able to entertain clients for free. No more NASCAR infields, Super Bowls, steak houses, etc.

So, if us micro business owners keep the tent up and some revenue coming in every now and then, at least we can write many things off.

Thanks
__________________
Cheesehead is offline   Reply With Quote
Old 10-20-2012, 06:41 AM   #4
Recycles dryer sheets
 
Join Date: Sep 2006
Location: clearwater
Posts: 223
What the IRS will look at is " has your business turned into a hobby" in other words are you no longer in it to earn a profit. ( this if you show repeated losses) so be very careful to continue to conduct your business in a manner that shows that you are making every effort to make money. Bookkeeping, advertising, and that sort of thing.
__________________
rothlev is offline   Reply With Quote
Old 10-20-2012, 06:46 AM   #5
Full time employment: Posting here.
 
Join Date: Jan 2010
Location: dubuque
Posts: 618
I have a small business and really enjoy the write offs. without something to level the playing field the irs will take everything.
__________________
frank is offline   Reply With Quote
Old 10-20-2012, 07:44 AM   #6
Thinks s/he gets paid by the post
Spanky's Avatar
 
Join Date: Dec 2004
Location: Minneapolis
Posts: 4,046
Cheesehead,
You seem to ask for confirmations to stay in business and not ready to close your small business. IMHO, you should continue to do what you love.
__________________
May we live in peace and harmony and be free from all human sufferings.
Spanky is offline   Reply With Quote
Old 10-20-2012, 08:04 AM   #7
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
 
Join Date: May 2005
Posts: 13,256
Sounds to me that you got lucky in your audit....

IOW, having a car for business and using it for anything else means you do not get to write off the personal use...

Having a cell phone and using it for anything but business means you do not write off personal use...

If you go downtown and park for personal business.... guess what, you are not supposed to write it off...

I have no idea what you are writing off from Radio Shack and Lowes, but if it if for personal use, again, not supposed to write it off....




So, I do not think you are as legal as you claim...



As far as your original question.... why do something that is high stress to take tax write off you should not.... why not start a low stress business and do the same thing....
__________________
Texas Proud is offline   Reply With Quote
Old 10-20-2012, 08:07 AM   #8
Thinks s/he gets paid by the post
 
Join Date: Mar 2009
Posts: 1,433
Quote:
Originally Posted by Cheesehead View Post
Good points. Also, my biz is so much of my identity, who I am, it would be hard to just fold up the tent.

I read one book about retirement planning each week and I am presently reading The Number by Lee Eisenberg:

The Number: What Do You Need for the Rest of Your Life and What Will It Cost?: Lee Eisenberg: Amazon.com: Books

In it he makes a point I never considered: Execs living high on the hog with expense accounts at mega corps (usually sales and marketing types) take a big psychological fall when retiring because so much of the glitzy, fun part of their life is lost due to not being able to entertain clients for free. No more NASCAR infields, Super Bowls, steak houses, etc.

So, if us micro business owners keep the tent up and some revenue coming in every now and then, at least we can write many things off.

Thanks
That expense account is a major consideration. You don't need to be a high level exec to benefit greatly. I struggle to forecast my post retirement expense when I add in a car, gas, maintenance, meals for about 200 days a year, prepaid hotel stays for vacation, free flights not to mention buying my own health insurance.
__________________
Retired in 2016. Living off dividends / interest and a mini pension. Freedom.
foxfirev5 is offline   Reply With Quote
Old 10-20-2012, 08:52 AM   #9
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
pb4uski's Avatar
 
Join Date: Nov 2010
Location: Vermont & Sarasota, FL
Posts: 16,407
I see the pros as being able to continue doing something that you love and has been part of your identity and the tax benefits (which can be easily managed IMO as long as you continue to do a certain amount of work).

The con might be still having certain implicit or explicit obligations and the consraints those cause. I worked 80% and 50% prior to retiring, and even at 50% I felt like I was "on call" all the time so I quit.
__________________
pb4uski is offline   Reply With Quote
Old 10-20-2012, 09:19 AM   #10
Full time employment: Posting here.
cardude's Avatar
 
Join Date: Feb 2006
Posts: 599
I closed our business back in 2008 after about 15 years. The business dad become a huge strain on me, I had made my "number", and I was just plain sick of it.

However, I didn't do enough research on the "what to do now?" question, so now I'm back in business, but on much better terms, low stress, and short hours (2-3 per day on average).

So my advice would be if you are having fun, it's not stressful, and you are making money don't shut down the business.
__________________
ER'ed from the new car business Feb 2008. I'm 47, she's 45. Two boys ages 15 and 13. DW is SAHM. I've got a part-time used car lot I w*ork at 3 hours a day that keeps me in beer money.....
cardude is offline   Reply With Quote
Old 10-20-2012, 09:21 AM   #11
Recycles dryer sheets
 
Join Date: Sep 2012
Location: Madison
Posts: 161
Hi Texas Proud,

The car I write off is a van that carries equipment, totally business, beat to hell, I keep a mileage log of what job uses what miles. We have a separate car for our personal use. Parking downtown is $30 at least. We have a regular cell phone, the smart phones are all biz. Since I am in an electronics business most everything I get at Radio Shack is for work and justifiable. I need to build a lot of rigs and supports so I am in Lowes a lot. I keep meticulous receipts.

That's why I wanted just small business owners to respond...
__________________
Cheesehead is offline   Reply With Quote
Old 10-20-2012, 09:39 AM   #12
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
RunningBum's Avatar
 
Join Date: Jun 2007
Posts: 5,164
Quote:
Originally Posted by Texas Proud View Post
Sounds to me that you got lucky in your audit....

IOW, having a car for business and using it for anything else means you do not get to write off the personal use...

Having a cell phone and using it for anything but business means you do not write off personal use...

If you go downtown and park for personal business.... guess what, you are not supposed to write it off...

I have no idea what you are writing off from Radio Shack and Lowes, but if it if for personal use, again, not supposed to write it off....




So, I do not think you are as legal as you claim...

.... why do something that is high stress to take tax write off you should not....
Jeez, you think you could make any more assumptions and accusations against the OP? Not only do you have a lot of "if you do this" statements, but you conclude for yourself that he does indeed do some or all of these things and is cheating on taxes. Nice. How can you possibly know these aren't all legit?

To the OP, sounds like you can pick and choose more worthwhile and low-stress projects and keep doing what you love. Maybe take enough paying jobs with the charity work to break even. Why give up something you love doing?
__________________
RunningBum is offline   Reply With Quote
Old 10-20-2012, 09:52 AM   #13
Thinks s/he gets paid by the post
target2019's Avatar
 
Join Date: Dec 2008
Posts: 3,705
Quote:
Originally Posted by Cheesehead View Post
I keep meticulous receipts.
That is worth repeating. Also, if you have a number of years in the business, and reduce the amount of business intentionally, you are on strong ground in an audit. Of course the ratio of expenses to receipts is something to watch as you reduce billings.

To get back to the original post, how does your spouse feel about the p/t business strategy? As mentioned, my F-I-L did similar. He also got drawn into various volunteer activities, and as I'm sure you are aware, once organizations find out you are 'free' help, they turn on the fire hose.
__________________
target2019 is offline   Reply With Quote
Old 10-20-2012, 10:02 AM   #14
Recycles dryer sheets
 
Join Date: Sep 2012
Location: Madison
Posts: 161
Hi Target 2019,

Yes I foresee the problem of just doing work for charities in retirement is that I will not have enough billable revenues to justify the write offs, since they expect it for free or give just a little money for some hard costs. I also know what you mean about the firehose, some non-profits then consider me the "Go To Guy" for any freebies and they are time consuming so I tend to choose small charities and do their one off yearly fund raising video.

My DW expects me to keep up the game because its also a hobby/passion and since it's quite physical it's good exercise. I just didn't know how others, one man bands and freelancers, continue into semi-retirement and still have their write offs. I suppose if revenues exceed expenses I'm OK, I'll check with my CPA but it's still two years off.

But I know what's legal and justifiable because I've been doing it so long. Records are what's important.
__________________
Cheesehead is offline   Reply With Quote
Old 10-20-2012, 11:49 AM   #15
gone traveling
 
Join Date: Apr 2009
Location: Eastern PA
Posts: 3,851
Quote:
Originally Posted by Cheesehead View Post
Yes I foresee the problem of just doing work for charities in retirement ...
"Charity work" in retirement is not work, IMHO.

DW/me drive/deliver for our local Meals on Wheels organization, delivering life substaining meals for shut in's (physically/mental disabled) and those elder folks that don't have family around to see to their needs.

My DW partipates in a "Nobody Dies Alone" program with the local hospital, sitting with those that have nobody in their lives, in their last days.

She also attends sing-alongs in our local nursing homes to try to improve those that are there (and we may be there, tomorrow).

Yes, it cost us money to do all these functions (our time, our vehicle expenses - including insurance requried by the organization), but we don't do it as an "income scam", nor do we deduct our "expenses" against any income.

We do it because the need is there.

If you want to run a business in retirement (IMHO, you are really not retired), than so be it.

Just don't confuse those of us who look to the greater good as a "tax scam", as you are trying to portray it...
__________________
rescueme is offline   Reply With Quote
Old 10-20-2012, 12:01 PM   #16
Thinks s/he gets paid by the post
target2019's Avatar
 
Join Date: Dec 2008
Posts: 3,705
I know my F-I-L retired, and continued to receive a small pittance in return for many hours of volunteer work. There were also some miles on schedule A for volunteer work that had no basis in his business.

I think it is possible to be retired and still work in some capacity. If this doesn't fit everyone's definition, it is fine with me.
__________________
target2019 is offline   Reply With Quote
Old 10-20-2012, 12:05 PM   #17
Moderator Emeritus
Bestwifeever's Avatar
 
Join Date: Sep 2007
Posts: 16,372
Quote:
I can write off a LOT, all legal. ...

So I would like the opinion of folks that had or still have their own small business and ask what sense does it make to "close up shop" if we can still have all these legal write offs? For instance, one car and ALL it's expenses and gas, the land line, two smart phones, the high speed internet connection, a portion of the mortgage, most trips to Radio Shack and Lowes, cable TV, much of the parking downtown...they are all legally deductible and add up to around $700 a month.
I guess I don't understand what is the problem--if you would no longer be spending $700 on these business expenses, why will you be sorry to not have them to write off? I must be missing something (not unusual for me).
__________________
“Would you like an adventure now, or would you like to have your tea first?” J.M. Barrie, Peter Pan
Bestwifeever is offline   Reply With Quote
Old 10-20-2012, 12:12 PM   #18
gone traveling
 
Join Date: Apr 2009
Location: Eastern PA
Posts: 3,851
Quote:
Originally Posted by Bestwifeever View Post
I guess I don't understand what is the problem--if you would no longer be spending $700 on these business expenses, why will you be sorry to not have them to write off? I must be missing something (not unusual for me).
Sort of like paying $100 in mortgage/note intrest to get a $25 return/deduction?

I'm sure I'm missing something...
__________________
rescueme is offline   Reply With Quote
Old 10-20-2012, 12:22 PM   #19
Moderator
Alan's Avatar
 
Join Date: Jul 2005
Location: Eee Bah Gum
Posts: 21,079
Quote:
Originally Posted by Bestwifeever View Post
I guess I don't understand what is the problem--if you would no longer be spending $700 on these business expenses, why will you be sorry to not have them to write off? I must be missing something (not unusual for me).
+1

If they are business expenses and you no longer have the business...

If you really like having the business then I can fully understand not wanting to fully retire. Do what you want to do, you don't need to justify the desire to keep working, and it sounds like you understand the difference between a hobby and a business for tax purposes.
__________________
Retired in Jan, 2010 at 55, moved to England in May 2016
Now it's adventure before dementia
Alan is offline   Reply With Quote
Old 10-20-2012, 12:30 PM   #20
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
 
Join Date: May 2004
Posts: 11,615
I agree that we seem to be talking about the fantastic benefits of having business write-offs--when there would be no need to spend the money in the first place if there were no business. Spending $700 to lower taxes by $173 (i.e. if you are in the 25% bracket) is no great deal. Lots of folks fixate on write-offs, losing sight of the bigger bottom-line picture.

I have a small business. If you've got one that is easily "throttleable", then I think one advantage is that it can somewhat reduce the need to keep cash in the retirement portfolio. When equities are down, you can increase the amount of work you do to avoid selling them at depressed prices. Psychologically, there's also some comfort to getting the money for luxuries and "nice-to-have" stuff from the biz rather than the nest egg. If I want to go on that nice vacation that's a bit above the spending I'd figured in retirement (and my withdrawal rate), I can do XX days of extra work and enjoy the trip with a clean conscience. I know it's just a mind game, but I never said I was rational.

Even charity stuff: If I work a day or two and earn a few hundred bucks after taxes, donating it to the local soup kitchen, I'm probably doing them much more good than if I volunteered two days and ladled soup myself. They can use the bucks to buy a lot of food at their discounted rate, and even pay a guy/gal that really needs the money to ladle the soup.
__________________

__________________
"Freedom begins when you tell Mrs. Grundy to go fly a kite." - R. Heinlein
samclem is offline   Reply With Quote
Reply


Currently Active Users Viewing This Thread: 1 (0 members and 1 guests)
 
Thread Tools Search this Thread
Search this Thread:

Advanced Search
Display Modes

Posting Rules
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts

BB code is On
Smilies are On
[IMG] code is On
HTML code is Off
Trackbacks are Off
Pingbacks are Off
Refbacks are Off


 

 
All times are GMT -6. The time now is 04:22 AM.
 
Powered by vBulletin® Version 3.8.8 Beta 1
Copyright ©2000 - 2017, vBulletin Solutions, Inc.