What is Margin and Affect on Income Tax
What is meant by Margin on a business financial statement and how it affects income tax.
Margin is gross revenue less cost of goods sold. (COGS)
Gross revenue is revenue before any expenses and cost of goods deducted.
Cost of goods sold is the product purchased for the purpose of selling that product.
Now that we have an idea of what gross revenue and COGS is, let’s continue to figure out the margin.
EX:
Gross revenue $250,000.
Less: Discount $50,000.
Total Gross Revenue $200,000.
Less: Cost of Goods Sold $100,000.
Total Gross Revenue $100,000. this is the margin (revenue less COGS)
Expenses:
Wages $30,000.
Heat 1500.
Rent 15,000.
Total Expenses $46,500.
Net Income $53,500. This is your net income and taxable income.
You need to have a healthy margin so the business can pay for overhead expenses such as rent, heat, wages etc and pay you, the business owner as well.
Consider the Following Tax Tips
End of The Year Tax Considerations
As we roll into the final quarter of 2010, there are a few things you should know as we near the end of the year. Bear in mind that filing your taxes is coming up shortly. Don’t wait to get all the necessary paperwork lined up. Instead, take time to consider what you will need in order to file your 2010 taxes. Here are some basic things you may have forgotten:
For starters, remember that you should get in all of your charitable donations. Several charities will be asking for your help, especially around the holidays. So keep in mind that you will want to walk away with the necessary paperwork once you donate. If you have household goods to donate, make sure you get a receipt. You will want a letter from the charity stating the amount of money you have given them this year. Also know how much you can legally deduct. Talk to your tax adviser to determine this number. It will all depend on previous donations and whether you are filing with your spouse or as an independent filer. Donations from a business will also differ so determine these things before you run into tax problems later.
If you are a student yourself or have a dependent in school, make sure you get student loans nailed down. Know exactly what has been borrowed in anticipation of this statement. You may be qualified to receive interest deductions from federal student loans.
If you have moved for a job, make sure that you have all of the necessary paperwork and receipts in order. Even if you do not itemize, you can deduct the cost of moving to a new job, given that you moved more than 50 miles.
Deductions for home improvements may be deducted. As part of new green initiatives enacted by Congress, certain improvements to make your home more energy efficient can be deducted from your taxes. So if you are considering adding new solar energy mechanisms or adding more energy efficient windows to your property, try doing them before the end of the year.
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