November 30, 2018
Q: Since I was just barely able to pay my taxes and my trucking business did well, I’m concerned I’m spending too much money. How do I go about figuring what I’m spending on my personal living expenses?
A: Since you just completed your 2017 income tax return, you should determine what your personal living expenses for 2017 were. Assuming you have a personal checking account, all the money you spent during 2017 should be in that checking account. For example, checks written for personal bills including your food, rent or mortgage, credit card payments, checks to yourself, to utilities etc. will be listed on your check register. You will need to include debit card expenses and all fees such as bank and ATM, except those that pertain to your trucking business. Therefore include all personal expenses incurred for the year. Do not include business expenses. Allocate each item to categories such as mortgage payments, health insurance, telephone, insurance, heat, water, gardening, food and entertainment. Don’t forget to allocate your credit card charges and to account for ATM withdrawals used for personal expenses. Also include payments for income taxes.
Then add the totals of each category together to find all the money you spent personally for 2017. I bet you will be shocked. You can now take your annual personal expense and compare that total to the net profit from your business which you will find on your Form 1040 Schedule C of your income tax return. Then subtract your living expenses for the year from your net income on your tax return. If your personal expenses are higher than your net profit, maybe you are spending too much. It’s possible you took out a loan to cover expenses. It’s also possible that your beginning of year cash in bank and savings was more than at the end of year. And it’s also possible your net income from your business was overstated and you missed some expenses. If your personal expenses are less than your net profit, you should have had the money necessary to pay the balance due. If you don’t you need to find out why.
Q: What does this all mean?
A: You will be verifying what your annual living expenses are for various purposes including loss of income, disability insurance protection, and to satisfy yourself that the net profit you are paying taxes was correct also for credit purposes in obtaining loans. And you will know if what you owed to the IRS was accurate. So take the business net profit and compare it to your personal expenses. If what you spent personally is approximately what your net income was then your net profit is probably accurate as well as your annual living expenses, assuming the comparison of beginning of year cash to end of year cash accounting, for loans and withdrawals make sense.
Q: I still haven’t received my tax refund. What should I do?
A: If you haven’t received your tax refund you can go online and check with your E-filing Service (if you E-Filed) to see the status of your return. If everything checks out, you also can call the IRS at 1-800-829-1040. Make sure you have a copy of your return on hand when you call or go online because you will need your social security number, filing status, and exact dollar amount of the refund. If the IRS never received the return, file another copy. There will be no penalty since you are getting money back.
Next, check your federal tax refund status on the IRS website and go to “Where’s my refund”. If everything still checks out via the IRS website and you still have not received your refund call the IRS @ 1-800-829-1954 to check your refund status.