Tax

Have a Tax Question? Ask a Tax Expert

Ask an Expert,
Get an Answer ASAP!

Tax
This answer was rated:

I am currently working on a new product where I have hired

an Engineer and a Patent...
I am currently working on a new product where I have hired an Engineer and a Patent Attorney for the design of drawings and writing a patent. I am a sole proprieter, not LLC or a corporation. Can I write these expenses off my taxes, or do I need to wait until the invention is complete and has been manufactured, starts selling etc. ?
Show More
Show Less
Ask Your Own Tax Question
Answered in 6 minutes by:
1/1/2009
Ed Johnson
Ed Johnson, Tax Preparer
Category: Tax
Satisfied Customers: 10,760
Experience: GPHR Cert; U.S. Treasury Tax Advocacy Panel appointee
Verified

Dear 1 Walnut,

 

Thank you for your question. I assume you are on cash accouning and your tax year is January to December.

 

As long as you have the intention of making money with this, even though the outcome is not certain, you can take the expenses in the year you pay for them.

 

You make the election to deduct research and experimental costs by deducting them on your tax return for the year in which you first pay or incur research and experimental costs. If you do not make the election to deduct research and experimental costs in the first year in which you pay or incur the costs, you can deduct the costs in a later year only with approval from the IRS.

 

If you are to take them in later years, you have to do so when you receive economic benefit.

 

the following costs are not included as research developmetn (product development):

 

Research and experimental costs do not include expenses for any of the following activities.

  • Advertising or promotions.
  • Consumer surveys.
  • Efficiency surveys.
  • Management studies.
  • Quality control testing.
  • Research in connection with literary, historical, or similar projects.
  • The acquisition of another's patent, model, production, or process.

AS a sole proprietor you would record expenses on schedule C.

If a partnership on schedule E.

Ed Johnson
Ed Johnson, Tax Preparer
Category: Tax
Satisfied Customers: 10,760
Experience: GPHR Cert; U.S. Treasury Tax Advocacy Panel appointee
Verified
Ed Johnson and 87 other Tax Specialists are ready to help you
Ask your own question now
Customer reply replied 9 years ago

thank you very much! This is very helpful. Could you specificy, what does this type of expense fall under on taxes? Is there a Research and Development section? Or is it under "other" or? I use TurboTax to do my taxes.

Thank you again.

These expenses would go into other. When it is over you may have excess net operating losses to carry forward anyway.

 

I forgot to mention you can also elect to amortize these over a 5 year period.

 

See the following instructions: http://www.irs.gov/pub/irs-pdf/i1040sc.pdf

 

 

Ask Your Own Tax Question
Ask Ed Johnson Your Own Question
Ed Johnson
Ed Johnson
Ed Johnson, Tax Preparer
Category: Tax
Satisfied Customers: 10,760
10,760 Satisfied Customers
Experience: GPHR Cert; U.S. Treasury Tax Advocacy Panel appointee

Ed Johnson is online now

A new question is answered every 9 seconds

How JustAnswer works:

  • Ask an ExpertExperts are full of valuable knowledge and are ready to help with any question. Credentials confirmed by a Fortune 500 verification firm.
  • Get a Professional AnswerVia email, text message, or notification as you wait on our site. Ask follow up questions if you need to.
  • 100% Satisfaction GuaranteeRate the answer you receive.

JustAnswer in the News:

Ask-a-doc Web sites: If you've got a quick question, you can try to get an answer from sites that say they have various specialists on hand to give quick answers... Justanswer.com.
JustAnswer.com...has seen a spike since October in legal questions from readers about layoffs, unemployment and severance.
Web sites like justanswer.com/legal
...leave nothing to chance.
Traffic on JustAnswer rose 14 percent...and had nearly 400,000 page views in 30 days...inquiries related to stress, high blood pressure, drinking and heart pain jumped 33 percent.
Tory Johnson, GMA Workplace Contributor, discusses work-from-home jobs, such as JustAnswer in which verified Experts answer people’s questions.
I will tell you that...the things you have to go through to be an Expert are quite rigorous.

What Customers are Saying:

I really was impressed with the prompt response. Your expert was not only a tax expert, but a people expert!!! Her genuine and caring attitude came across in her response...

T.G.WMatteson, IL

I WON!!! I just wanted you to know that your original answer gave me the courage and confidence to go into yesterday's audit ready to fight.

BonnieChesnee, SC

Great service. Answered my complex tax question in detail and provided a lot of additional useful information for my specific situation.

JohnMinneapolis, MN

Excellent information, very quick reply. The experts really take the time to address your questions, it is well worth the fee, for the peace of mind they can provide you with.

OrvilleHesperia, California

Wonderful service, prompt, efficient, and accurate. Couldn't have asked for more. I cannot thank you enough for your help.

Mary C.Freshfield, Liverpool, UK

This expert is wonderful. They truly know what they are talking about, and they actually care about you. They really helped put my nerves at ease. Thank you so much!!!!

AlexLos Angeles, CA

Thank you for all your help. It is nice to know that this service is here for people like myself, who need answers fast and are not sure who to consult.

GPHesperia, CA

< Previous | Next >

Meet the Experts:

Wallstreet Esq.

Wallstreet Esq.

Tax Attorney

586 satisfied customers

10 years experience

Mark D

Mark D

Enrolled Agent

1,300 satisfied customers

MBA, EA, Specializing in Business and Individual Tax Returns and Issues

Richard

Richard

Tax Attorney

4,338 satisfied customers

29 years of experience as a tax, real estate, and business attorney.

Robin D.

Robin D.

Senior Tax Advisor 4

13,980 satisfied customers

15years with H & R Block. Divisional leader, Instructor

Megan C

Megan C

Certified Public Accountant (CPA)

8,651 satisfied customers

Licensed CPA, CFE, CMA, CGMA who teaches accounting courses at Master's Level

jgordosea

jgordosea

Enrolled Agent

2,885 satisfied customers

I've prepared all types of taxes since 1987.

R. Klein, EA

R. Klein, EA

Enrolled Agent

1,839 satisfied customers

Over 20 Years experience

< Previous | Next >

Related Tax Questions
Can an LLC (partnership) pay taxes on income and avoid the
Can an LLC (partnership) pay taxes on income and avoid the partners having to pay the taxes?… read more
Chad EA, CFP ®
Chad EA, CFP ®
IRS Enrolled Agent, CFP(R),
Master\u0027s Degree
1,059 satisfied customers
Changing being taxed as an LLC sole proprietor to an LLC
changing being taxed as an LLC sole proprietor to an LLC taxed as an S-corp, do they need to file Form 8832 or Form 2553 or both?If both, in what order?THANKS… read more
abci168
abci168
Principal
27 satisfied customers
I have an LLC in CA. Originally it was a partnership, filing
I have an LLC in CA. Originally it was a partnership, filing a 1065 to the IRS. Now, the other partners have left and I want to file as a single member LLC, flowing back into my schedule c. The change… read more
Barbara
Barbara
Enrolled Agent, Paralegal
3,770 satisfied customers
I changed the structure of my sole proprietor business to a
I changed the structure of my sole proprietor business to a single member LLC mid year. Do I need to give my independent contractors 2 different 1099's? … read more
Richard
Richard
Tax Attorney
Doctoral Degree
4,338 satisfied customers
Under the new Tax Cuts and Jobs Act, does a Schedule C sole
Under the new Tax Cuts and Jobs Act, does a Schedule C sole proprietor qualify for the 20% deduction of qualified business income or is this only available to S Corp shareholders & LLC's?… read more
Patrick Mullis
Patrick Mullis
Masters
17 satisfied customers
I file taxes as a sole proprietor (as a single member LLC,
I file taxes as a sole proprietor (as a single member LLC, cash basis) - I would like to pay my son to help me with the business. The LLC has no employees by design so my son (under 18) would be an ou… read more
Chad EA, CFP ®
Chad EA, CFP ®
IRS Enrolled Agent, CFP(R),
Master\u0027s Degree
1,059 satisfied customers
I am a sole proprietor operating an LLC in Wyoming providing
Hello, I am a sole proprietor operating an LLC in Wyoming providing business to business services and supplies related to lighting maintenance. I have a customer that is insisting that I supply inform… read more
emc011075
emc011075
Senior Tax Specialist
Bachelor's Degree
16 satisfied customers
With the new tax laws, if I'm a sole proprietor, would it
With the new tax laws, if I'm a sole proprietor, would it make sense for me to become an LLC? … read more
NPVAdvisor
NPVAdvisor
CFP Licensee and Practitioner
Master's Degree
180 satisfied customers
Penalty for late filing of partnership LLC tax return, not
Penalty for late filing of partnership LLC tax return, not eligible for Rev Proc 84-35 relief because one of the partners is a foriegner… read more
Barbara
Barbara
Enrolled Agent, Paralegal
3,770 satisfied customers
I file taxes as a sole proprietor (as a single member LLC,
I file taxes as a sole proprietor (as a single member LLC, cash basis). I need to know if I can deduct the finance expense tied to a line of credit for my LLC from income. I generally understand that … read more
Robin D.
Robin D.
Senior Tax Advisor 4
Vocational, Technical or Trade School
13,980 satisfied customers
If you are a sole proprietor llc and contributing to a SEP
If you are a sole proprietor llc and contributing to a SEP should it be contributed from a personal account or business account? I would think personal since on your tax return it is deducted on the 1… read more
abci168
abci168
Principal
27 satisfied customers
On a schedule c who do you put as the proprietor if it is a
on a schedule c who do you put as the proprietor if it is a newspaper route and you are given a 1099-misc … read more
James Daloisio
James Daloisio
Attorney
Doctoral Degree
79 satisfied customers
I have a penalty for late filing of partnership LLC tax
I have a penalty for late filing of partnership LLC tax returns and looking for examples of reasonable cause Reading about the FTA and checking if we could be eligible … read more
Carter McBride
Carter McBride
LLM
227 satisfied customers
If I am a sole proprietor that starts a business using
If I am a sole proprietor that starts a business using personal equipment assets in my business. Are there any ways to establish those assets as depreciable assets and take the maximum allowable write… read more
Chad EA, CFP ®
Chad EA, CFP ®
IRS Enrolled Agent, CFP(R),
Master\u0027s Degree
1,059 satisfied customers
I have a client that was a Sole Proprietor. He formed an LLC
I have a client that was a Sole Proprietor. He formed an LLC and elected to be taxed as an S-corp on 8/1/17. He purchased a $39k vehicle in his sole proprietorship in 2015 and deducted Sec 179 and A/D… read more
LEV
LEV
Retired
Bachelor's Degree
14,896 satisfied customers
If an owner took a draw from the business (sole proprietor
If an owner took a draw from the business (sole proprietor llc) and the business is showing a loss excluding that draw then I assume no income or self employment taxes will be paid since there is a lo… read more
Barbara
Barbara
Enrolled Agent, Paralegal
3,770 satisfied customers
A sole proprietor with a tentative loss may deduct which of
a sole proprietor with a tentative loss may deduct which of the following for qualified business-use-of-home expenses:mortgage interest depreciation rent utilities… read more
Mark Taylor
Mark Taylor
Certified Public Accountant
Masters
2,264 satisfied customers
If a sole proprietor loans money to his schedule C does the
If a sole proprietor loans money to his schedule C does the loan increase his basis in the business and when the business is closed, can the unrepaid loans be taken as a loss ?… read more
Mark Taylor
Mark Taylor
Certified Public Accountant
Masters
2,264 satisfied customers
Disclaimer: Information in questions, answers, and other posts on this site ("Posts") comes from individual users, not JustAnswer; JustAnswer is not responsible for Posts. Posts are for general information, are not intended to substitute for informed professional advice (medical, legal, veterinary, financial, etc.), or to establish a professional-client relationship. The site and services are provided "as is" with no warranty or representations by JustAnswer regarding the qualifications of Experts. To see what credentials have been verified by a third-party service, please click on the "Verified" symbol in some Experts' profiles. JustAnswer is not intended or designed for EMERGENCY questions which should be directed immediately by telephone or in-person to qualified professionals.

Disclaimer: Information in questions, answers, and other posts on this site ("Posts") comes from individual users, not JustAnswer; JustAnswer is not responsible for Posts. Posts are for general information, are not intended to substitute for informed professional advice (medical, legal, veterinary, financial, etc.), or to establish a professional-client relationship. The site and services are provided "as is" with no warranty or representations by JustAnswer regarding the qualifications of Experts. To see what credentials have been verified by a third-party service, please click on the "Verified" symbol in some Experts' profiles. JustAnswer is not intended or designed for EMERGENCY questions which should be directed immediately by telephone or in-person to qualified professionals.

Show MoreShow Less

Ask Your Question

x