Lorenzo Landscaper's Business

June --

I'm from Woodbridge, VA. I am a full time fireman who does side work cutting lawns. I've been doing lawns for 3 years. My brother and I who is also a fireman cut lawns together and split things 50/50. We don't have a business license or TAX EIN because we have never made enough money to claim until this year.

This year we will receive our first 1099MISC form ever and will be claiming our side income as well. When we get paid the check comes to me in my name as will the 1099 for the full amount we were paid. Is there anyway for me to claim half that total on my income taxes as other income and somehow let the IRS know my brother is claiming the other half?

I tried calling the IRS and got no where, but was told I could send my brother a 1099 from myself to make it happen is that true?

If so what are the logistics? Would we be better off filing for a tax# and doing a completely separate business return although we don't have records for any deductions?

Thanks for you time.
Herb The Fireman


Hello Herb,

First, let's go over a few things.

You said "we have never made enough money to claim." Know that no matter how much you make, you must claim it all.

The feds do not require you to have a business license nor a tax ID #. Although your town or county might.

The income that you and you brother earn is not "other income" it is self-employed income.

You each must claim the income on Schedule C: Profit or Loss From Business which is part of your personal/individual tax return.

Since the income comes to you then you should send your brother a 1099MISC for his 1/2 of the income. If you don't send him a 1099 it is not a big deal. You could be fined $50 for not filing that form. In 30 years I've yet to see that happen. You should give him his 1/2 via a check from you so that you have a record of payment. Since this is after the fact -- i.e. after 12.31.09 -- at least have some paperwork, such as an invoice from your brother marked paid, attesting to the transaction.

I do not give specific, line-by-line tax return instruction so I can't give you more "logistics."

One of the characters in my book Self-employed Tax Solutions is Lorenzo Landscaper. You might want to check out the book to see if Lorenzo's deductions give you any ideas on what yours might be.

Best,
June

How does a self-employed pay himself?

Hi June,

Just started a new business – irrigation installation. When you own your own business is it more beneficial to pay yourself a salary or are you able to write yourself checks as needed for living expenses from the profits?

Shawn in Oklahoma


Dear Shawn,

You, like many self-employed, use the wrong term when referring to money you want to take out of your business. The only people who can earn a salary are employees. You’re a new business and you didn't say that you are incorporated so then you must be a sole proprietorship. And you can’t be an employee of your own sole proprietorship.

You are your business. Your business is you. You bring in money from clients. You pay out expenses. What’s left is profit. Profit is what you’ll pay tax on and profit is your “income.” How you take money out of your business, or when you take it, or how much you take has no effect on your profit. If the money is there you can take it out whenever you want.

Here’s an example: In one month a client pays you $5,000. You purchase $5,000 worth of supplies on a credit card. Your profit for the month is zero. That’s $5,000 income minus $5,000 expense. But you still have $5,000 in your pocket because you took none of it out of your pocket for supplies – you put it all on credit card and haven’t paid the credit card company yet. You can take that $5,000 and go on vacation to Tahiti. Not a good idea but you could do it!

And, as always, read the book that can simplify your tax and financial life, AND save you money! SELF-EMPLOYED TAX SOLUTIONS .

Best,
June