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emc011075
emc011075, Tax adviser
Category: Tax
Satisfied Customers: 2307
Experience:  IRS licensed Enrolled Agent and tax instructor
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I started two Independent Consultant businesses and spent

Customer Question

I started two Independent Consultant businesses and spent thousands on supplies, marketing, events, gas, etc. to start them up. I have not made one cent on either. Will this help me tax wise and how do I prove a loss? I even purchased a desk, printer, chair, office supplies, business cards. All the things you need to work on growing your business. I lost about 5,000 in supplies and misc. Can I recoup anything?
Submitted: 9 months ago.
Category: Tax
Expert:  emc011075 replied 9 months ago.

Hi. My name is ***** ***** I will be happy to help you.

Assuming you didn't create any LLC or corporation, you can claim the expenses on Schedule C with your 1040. How and when to deduct those expenses depends on timing. You don't necessary have to have sales/income to deduct expenses as long as your business is up and running, meaning you are offering your services to the public and advertising it as such. Once you determine a starting date, you will divide the expenses between before and after the starting date. All expenses before you opened your business are start up expenses. You can deduct up to 5K of those expenses on your first year return, the rest will be amortized over the next 5 years. Expenses you had after you opened your business are currently deductible, except capital expenses. Capital expenses like furniture, fixture and equipment that is expected to last for more than 1 year have to be depreciated unless you use section 179.

Expert:  emc011075 replied 9 months ago.

If you don't know much about tax preparation I would suggest to hire a tax professional to help you with the first year filing to maximizing your deductions. Deducting what you can in the first year is sometimes not the best strategy, especially if your income is very low. You may want to leave some depreciation deductions for the future years to offset future income.

Customer: replied 9 months ago.
Thank you, ***** ***** I able to claim my phone, internet, gas? My phone and e mail are dedicated to the "businesses"? Would these deductions have w significant influence on our income tax return or will it likely get me $5 more back?
Expert:  emc011075 replied 9 months ago.

If the phone is 100% for business and you have another phone/vehicle for personal use than yes, you can deduct the 100% expenses. The same would apply to internet.

Deduction is not a credit. Deduction will reduce you taxable income so the actual benefit depends on your tax bracket. $1000 deduction in 15% tax bracket will result in $150 refund. In 25% tax bracket it will be $250.

Expert:  emc011075 replied 9 months ago.

I see you offline now. So if this answered your question, please take a moment to rate my response so that I may receive credit for assisting you today. You find the rating bar on the top of the page – 5 stars. However, if you need clarification, or want to discuss this issue further, let me know. Thank you.