Small Business Taxes & ManagementTM--Copyright 2010-2015, A/N Group, Inc.
The Study. If you do business as a sole proprietorship (or as an LLC with only a single member), you'll file your business taxes on Schedule C and attach it to your Form 1040. The Government Accounting Office has done a statistical study of Schedule Cs to determine the income and expenses (on a combined basis) for businesses in various industries. For the year 2012 (latest year available) there were some 23.6 million nonfarm sole proprietorships, with single member LLCs accounting for about 1.3 million of that total.
We've computed the percentage of expenses based on the overall results. Thus, the expenses for mining companies were added to CPA firms, fishing, hunting and trapping, etc. As a result, the totals are broad averages. You can download an spreadsheet file from the IRS Web site with the raw data for over 125 industries at Sole Proprietorship Returns, 2012. Select the table for 2012 (the latest year) under Income Statements.
The tables below show the expenses as a percentage of gross receipts and as a percent of cost of goods sold plus other deductions.
Expenses as Percent Expenses as Percent
Gross Receipts of CGS plus Other Deductions
Cost of Goods Sold
Cost of Labor 2.4 3.1
Purchases 19.3 25.2
Materials and Supplies 3.8 5.0
Other costs 4.6 5.9
Other Deductions
Advertising 1.1 1.4
Car/truck 6.6 8.6
Commissions 1.1 1.4
Contract labor 3.2 4.2
Depletion 0.1 0.1
Depreciation 2.6 3.4
Employee benefit programs 0.2 0.3
Home office business deduction 0.8 1.0
Home office depreciation 0.1 0.1
Insurance 1.3 1.7
Legal/professional services 0.8 1.1
Meals and entertainment 0.7 0.9
Interest on mortgage 0.3 0.4
Interest on other business debt 0.4 0.6
Office expenses 0.9 1.2
Pension/profit sharing plans 0.1 0.1
Rent on machinery/equipment 0.7 0.9
Rent on other business property 2.6 3.4
Repairs 1.3 1.7
Salaries and wages 6.1 8.0
Supplies 2.6 3.4
Taxes 1.4 1.8
Travel 1.0 1.4
Meals/entertainment 0.7 0.9
Utilities 2.1 2.8
Other deductions 8.4 11.0
Other Points. The results presented represent those for a range of business sizes. The percentages change when the analysis is broken down by business size. For example, when the study looked just at businesses with higher dollar volume, the percentage of expenses for pension and profit sharing expenses increased.Finally, while the statistics are interesting, they clearly shouldn't affect your deductions. You should take all the deductions you're entitled to and none that you're not. Just make sure you keep good records and can substantiate your expenditures.
Copyright 2010-2015 by A/N Group, Inc. This publication is designed to provide accurate and authoritative information in regard to the subject matter covered. It is distributed with the understanding that the publisher is not engaged in rendering legal, accounting, or other professional service. If legal advice or other expert assistance is required, the services of a competent professional should be sought. The information is not necessarily a complete summary of all materials on the subject.--ISSN 1089-1536
--Last Update 03/09/15