New Business – Deductions

Today TaxMama hears from Peg in New Mexico, who tells us, “I am into my small business online for approximately $12,000 (began in Mar ‘07) and have no income from it as yet. Am I able to deduct my business expenses from my total income to arrive at a total adjusted income? I am lost at this point.”

Dear Peg,

You have a month and half left this year.

SELL SOMETHING!

If you must, have a home party at your place or a friend’s place.

Until your business starts to sell something, all your costs are start-up costs. And you can’t deduct those until the business is actually in operation. It’s in operation, when it’s ready to sell something (product or service). One way to prove that you’re in operation, is to sell something.

Read about Start Up expenses here
http://www.irs.gov/publications/p535/ch07.html#d0e4966
and here http://taxquips.com/index.php?id=255

Get that going and you’ll be able to deduct regular operating expenses, and up to $5,000 worth of start-up costs for this year.

If you need a good advisor to help you make this work before the year is up, let me know. Otherwise, you can find someone locally by going to the National Association of Enrolled Agents website www.naea.org , or the National Association of Tax Professionals website http://www.natptax.com or the American Institute of Certified Public Accountants website – http://www.aicpa.org (click on Consumer Information).

And remember, you can find answers to all kinds of questions about deducting business expenses, and other tax issues, free. Where? Where else? At TaxMama.com

File Download (0:00 min / 0 MB)

Leave a Reply