Just created a S corp and what to do with my tractor?

[davesl708]

I would go ahead and set money aside for your first IRS audit. That leasing game is a huge red flag.

My company has been leasing property, equipment, airplanes, rail cars, trucks, copiers and storage space for decades. Nothing the IRS gets to excited about.
As the former Director of Internal Audit for a large corporation I would be watching for high risk operations. The IRS looks at large leases or related leases for out of line fees and not much more.

 

[Handloader109]

If you are just starting out with this business, go get some goods tax advice. From other than here. Leasing back to yourself, uh, your Corp might not raise red flags, but you aren't a $10million Corp either.

 

[roadhunter]

You will be better off with two tractors. one business, one personal. You are on shakey ground mixing them together.

I would go ahead and set money aside for your first IRS audit. That leasing game is a huge red flag.

This happens all the time. It's hardly what you are making it out to be. Just got to play the game by the rules.

 

[bdog]

Don't know about NM but in Texas you have to pay property tax every year on all equipment owned by the business just like you pay property tax on a house. I too have an S Corp and I get to write a five figure check for business property tax each year on my equipment. Granted I get to write it off on fed taxes but the property tax bill hurts.

 

[jenkinsph]

Don't know about NM but in Texas you have to pay property tax every year on all equipment owned by the business just like you pay property tax on a house. I too have an S Corp and I get to write a five figure check for business property tax each year on my equipment. Granted I get to write it off on fed taxes but the property tax bill hurts.

In New Mexico you pay similar taxes to the county for business owned equipment. Just like any where else the OP will have to file gross receipts with NM taxation and revenue on a monthly basis. Don't forget to add the cost of paper work time to your pricing structure.

OP, a good accountant can help you decide how to best depreciate your equipment to your advantage. Since the accounting firm you use will likely represent you in an audit, I recommend you take their advice and follow their recommendations. One thing I have never felt works is home grown bookkeepers, not worth anything and seldom know the rules or abreast of changes in the laws. My best advice is to KEEP ALL RECEIPTS for all expenses you incur.

 

[alia176]

Good advice so far, thank you gents. To answer the fella who asked why the S corp, I created it primarily for my Engineering consulting business where I'm paying myself a salary. The tractor side of the business is something that I hope to dabble with. Since I'm making monthly payment on the darn thing, I was hoping to write off some of the expenses. I'll be looking into getting an umbrella policy for my S corp, hoping it won't break the bank!

Keep the good info coming as it'll help me others who have the same questions as me.

 

[LD1]

My truck, tractor, and trailer are all used for both personal and business.

You need to log hours on your tractor, and miles on your truck. And save ALL receipts.

At the end of the year, they take the total miles (or hours on the tractor) and figure the percentage of personal and business use. IE: you put 1000hrs on the tractor and can document and show 600 hours was for business....thats 60%. You can then claim 60% of the expenses. Fuel, repairs, etc. Same for the truck.

Allthough if you use a truck, most just take a mileage deduction. Saves on receipts. The mileage is meant to cover your fuel, repairs, insurance, maintenance, etc. I have a big diesel truck. 90% of the time it is either plowing snow or towing the trailer for business. I have found that with fuel, tires, repairs, insurance, etc I have more expense than the mileage allows for. So I itemize and save all my receipts.

Also consider the other implications of depreciating the tractor. If you depreciate it, (i dont remember what the term is) but lets use 5 years. And lets assume you paid 25k for it. You can depreciate 5k per year. But at the end of the year, the tractor is worth -0- in the eyes of the IRS. Now if you sell it for $15k......You have to show that $15k as profit.

 

[alia176]

My truck, tractor, and trailer are all used for both personal and business.

You need to log hours on your tractor, and miles on your truck. And save ALL receipts.

At the end of the year, they take the total miles (or hours on the tractor) and figure the percentage of personal and business use. IE: you put 1000hrs on the tractor and can document and show 600 hours was for business....thats 60%. You can then claim 60% of the expenses. Fuel, repairs, etc. Same for the truck.

Allthough if you use a truck, most just take a mileage deduction. Saves on receipts. The mileage is meant to cover your fuel, repairs, insurance, maintenance, etc. I have a big diesel truck. 90% of the time it is either plowing snow or towing the trailer for business. I have found that with fuel, tires, repairs, insurance, etc I have more expense than the mileage allows for. So I itemize and save all my receipts.

Also consider the other implications of depreciating the tractor. If you depreciate it, (i dont remember what the term is) but lets use 5 years. And lets assume you paid 25k for it. You can depreciate 5k per year. But at the end of the year, the tractor is worth -0- in the eyes of the IRS. Now if you sell it for $15k......You have to show that $15k as profit.

Great info, thank you. I *think* depreciation comes into play when the business owns the equipment and correct me if I'm wrong here. My leasing the tractor to the S corp, I don't think I'll be able to depreciate it but the monthly rental fee should help with the year end taxes. Again, I maybe misstating the facts here!

 

[davesl708]

Great info, thank you. I *think* depreciation comes into play when the business owns the equipment and correct me if I'm wrong here. My leasing the tractor to the S corp, I don't think I'll be able to depreciate it but the monthly rental fee should help with the year end taxes. Again, I maybe misstating the facts here!

You are correct. The lease is an expense.

 

[LD1]

The lease is an expense on the business. But an income on your personal stuff. Tax stuff is way more complicated than it needs to be, which is why its best to let a pro do your taxes when they start getting more complex like this. But on the surface, whatever your business pays YOU, I would think you need to claim as personal income. Then since the tractor is your "personal" tractor, on your personal taxes since you will be claiming income from the business for the tractor, you can deduct expenses and depreciation.