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Lev
Lev, Tax Advisor
Category: Tax
Satisfied Customers: 29558
Experience:  Taxes, Immigration, Labor Relations
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Hi, I made a big mistake and now need advice. I am a US

Resolved Question:

Hi, I made a big mistake and now need advice.

I am a US citizen sending a cargo container of used bicycles from Japan to Ghana. Once I sell them in Ghana, my friend's company that I am selling to is going to wire me back the money.

The problem is since this was my first container I didn't form a company and paid for the container which cost me $8,467 USD out of my own personal checking account. My profit is going to be $1,660 USD. Which means I am going to be wired $10,127 USD all together.

The truth is I'm actually losing money on this container. I had to fly to Japan, fly to Ghana, and pay for the shipment. This is my tester container so I am okay with that but I want this to be represented in my tax form.

If I form a company now, can I use my previous receipts as write offs before the company was formed? I don't want to make this look like I am profiting $10,127 USD when I'm not!

What do I do?
Submitted: 5 years ago.
Category: Tax
Expert:  Lev replied 5 years ago.

LEV :

Hi and welcome to Just Answer!
I do not see much to worry about. You do not need a company to run the business. As a solo proprietorship - you will report all your income and qualified expenses on the schedule C - www.irs.gov/pub/irs-pdf/f1040sc.pdf.
You will deduct your gross receipt $10,127 in line 1.
The cost of good sold $8,467 will be determined in Part III line 42 - and will be deducted on line 4.
Gross profit on lines 5 and 7 will likely be $1,660.
Then you will claim deduction of other business expenses on lines 8-27 - in particular travel expenses will be reported on line 24. And finally - your net loss will be recorded on line 31 - and will be transferred to your tax return - from 1040 line 12.
I do not see any mistakes from your side. Just be sure to keep all supporting documents.
Let me know if you need any help or clarification.

Customer:

hi

Customer:

I didn't register as a solo proprietorship either

Customer:

hi Lev are you there?

LEV :

There is no requirements to register your business. As long as you will report your business transactions on your tax return and file your tax return before the deadline - you are OK. I do not see any reason for you to worry.

Customer:

when is the dead line?

LEV :

For 2011 tax year - you have to file your tax return by Apr 15, 2012.

Customer:

okay if I feel an LLC now

Customer:

If I pay taxes in Ghana can I deduct them from my US taxes and if so how?

LEV :

You may register the LLC - if you want to separate your personal and business matters. In general - that will not make any difference as taxes are concern. A single member LLC for federal income tax purposes is disregarded entity - means you will report all your business transactions as if you were a solo proprietorship - exactly as I mentioned above on the schedule C attached to your tax return.

Customer:

wait lev

LEV :

If the same income is taxed in the US and abroad - you may claim a credit for foreign tax paid - thus effectively will avoid double taxation.
If also may deduct taxes paid in connection with your business activities on schedule C, line 23.

Customer:

thank you

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