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emc011075, Tax adviser
Category: Tax
Satisfied Customers: 2196
Experience:  IRS licensed Enrolled Agent and tax instructor
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I decided to open a business last year (2015) which is set

Customer Question

I decided to open a business last year (2015) which is set up as a partnership. I have a current full-time job that pays well. I dedicated and set up a substantial portion of my home to allow for development of my business. I have an EIN, set up logo and web domains, build p and l's and worked to be successful during that year. Unfortunately, we did not see any returns (sales) year one, and all I have is expenses to report. That additional expense has created a return that is substantial (10k) vs the standard 4k I usually get. My CPA has suggested rolling the return to next year and exempting my federal withholding rather than getting such a large return, which might trigger an audit. My question, is this an appropriate strategy and do am I operating within the the letter of the law?
Submitted: 4 months ago.
Category: Tax
Expert:  emc011075 replied 4 months ago.

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

This is in a gray area and you and your partner will need to decide if you want to take the risk.

According to IRS:

From what you are describing, you had operating expenses that should be treated as deductions. I believe I know your CPA is proposing; roll all the expenses into start up cost and deduct it next year. But the issue I see is that you and your partner are already running the business, so those expenses will not qualify as star up and there's 5K limit on start up expenses, the rest will have to be depreciated.

Expert:  emc011075 replied 4 months ago.

I see you read my respond. Do you have any questions? Is there anything else I can help you with today?

Expert:  emc011075 replied 4 months ago.

Scott, 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.

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