Tax season has passed this year, but how about planning for 2008 taxes? Do laundry operators really need professional tax advice?

 

The answer is :Yes!

Because so many laundry owners are also employed by others in a full time job, or are engaged in other businesses or careers, they often feel too busy to keep accurate tax records. Bookkeeping systems used are mostly the result of trial and error, not tax planning. Many, if not most, operators use bank records, plus memory, as their bookkeeping system. Some, if you can believe it, actually have a single combined account for both personal and business use.

They may be able to file and stay out of trouble, but are they able to get maximum advantage from owning a business? Here is where good tax planning and accurate record keeping come in.

First, don’t even think about co-mingling your personal and business records. Only use separate bank accounts and use these accounts only for the purpose intended. For one reason if no other: If the IRS were to decide to audit your laundry, would you also want them to audit you personally?

By keeping things businesslike and records separate, a laundry owner can take advantage of tax breaks, such as the mileage driven for business purposes.

Listen to what the professionals tell us about the tax advantages being in business offers. Listen even more intently about the risks being in business brings.

IRS requires that you maintain an up-to-date log or daily record of miles driven, not reconstructions based on memory. The mileage allowed is for trips made for the business, such as travel to buy parts or supplies. Home to business mileage usually is not allowed, but travel between laundries owned usually is.

One suburban owner was a corporate employee with an office in the city some fifty miles away. He purchased another laundry near his office and began to deduct the daily mileage driven between the two laundries. Not surprisingly, this cut down on his non business gas mileage.

An operator’s mother lived 153 miles away, near a major vend supplier. He visited her weekly. He began buying vend supplies too, in order to make the mileage driven deductible as a business expense. Yes, he survived the audits. He just never explained that he also was visiting his mother.

Smart laundry owners will look at which choice offers them the best tax advantage. Most new laundry equipment purchased to either expand, or replace existing units will qualify as an expense in the year purchased, so long as the sum total is under $20,000.

If you go over that, then it must all be depreciated over the 5 to 7 years depreciation periods allowed by IRS. The key is to anticipate what your tax burden will be and decide which method will give you the greatest net income over time.

When they are getting good professional advice, laundry people can sleep better at night because they know that they are not in violation of any tax laws nor at risk for accumulating interest charges and penalty payments.

Plus, there is an old expression that those who represent themselves in court have a fool for a lawyer. The same can be said for those who attempt to represent themselves in front of an IRS audit. Everyone we have ever spoken with recommends that laundry business owners only speak with an IRS auditor with a professional tax advisor there to speak on behalf of the business. Representation is a valuable benefit in case there ever is a need.

In addition to the peace of mind a laundry owner gets dealing through professional tax experts, there is the probability that these professionals will save them money, and a lot of heart ache too.

Word is that a true professional should save their clients more in taxes than they charge for services.

Talk to most successful laundromat owners today and you will find that they all seem to use tax professionals. Maybe it’s one of the reasons they’ve become successful. The old adage that “A penny saved is a penny earned” would apply especially to tax savings.