Tax

Have a Tax Question? Ask a Tax Expert

Ask an Expert,
Get an Answer ASAP!

Tax
This answer was rated:

If I get into starting an internet business and form an LLC,

and pay LLC formation fees...
If I get into starting an internet business and form an LLC, and pay LLC formation fees, take education/training to get the internet business set up and pay for a business plan in year 1, and year 2 have some additional expenses. Then I determine this is really more of a scam and never end up earning any revenue and close the business in year 2, how do these expenses get reported on tax return? It is a sole member LLC, reported on Schedule C.
Are these business start up?
If the business failed, are they capital losses per IRS Pub. 535?
When do they get deducted?
Show More
Show Less
Ask Your Own Tax Question
Answered in 5 minutes by:
10/2/2013
Megan C
Megan C, Certified Public Accountant (CPA)
Category: Tax
Satisfied Customers: 16,593
Experience: Licensed CPA, CFE, CMA, CGMA who teaches accounting courses at Master's Level
Verified

Megan C :

Hello! I am a CPA here to assist you with your tax questions. My goal is to provide you with excellent service today.

Megan C :

How are you today?

Megan C :

If this business was a true business, then yes - you can deduct the startup costs as a capital loss on Schedule D of your 1040.

Megan C :

However, the IRS has a habit of claiming that failed businesses were really hobbies, and if they rule that your business was a hobby the hobby loss rules would prevent you from deducting any losses, because you have no revenue.

Megan C :

You can read about what the IRS says about businesses vs hobbies by clicking HERE.

Megan C :

A good article on this topic (failed businesses) can be found, HERE

Customer:

Yes, the intent was for it to be a true business to make money. So I do believe it would not be a hobby.

Megan C :

Okay, if that is the case then you would be able to take a capital loss

Customer:

Would this all get deducted on Schedule D in the year it was determined the business failed, i.e. year 2?

Megan C :

Yes, it would be the year the business failed

Megan C :

Do you have further questions about this?

Customer:

One more question - if some expenses were paid in year 1 and some year 2, is it all reported as one loss, with the initial date money was spent, or is it separated out into when expenses were paid - i.e. some may be long term and some may be short term.

Megan C :

It is all treated together. It's a capital loss, though so it doesn't matter if it's short or long term

Megan C :

the loss is still treated the same.

Megan C :

Is there anything else you need assistance with?

Megan C :

If you have the information you need, please rate as "excellent" so that I may receive credit for asssisting you todya

Customer:

Ok thank you.

Megan C
Megan C, Certified Public Accountant (CPA)
Category: Tax
Satisfied Customers: 16,593
Experience: Licensed CPA, CFE, CMA, CGMA who teaches accounting courses at Master's Level
Verified
Megan C and 87 other Tax Specialists are ready to help you
Ask your own question now
Thanks, Diane for your positive rating. Please come back and visit me any time you have a question that needs answered. It was a pleasure working with you today..
Ask Your Own Tax Question
Ask Megan C Your Own Question
Megan C
Megan C
Megan C, Certified Public Accountant (CPA)
Category: Tax
Satisfied Customers: 16,593
16,593 Satisfied Customers
Experience: Licensed CPA, CFE, CMA, CGMA who teaches accounting courses at Master's Level

Megan C 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)

16,593 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
I have formed an LLC in California. -Me and my wife are the
I have formed an LLC in California. -Me and my wife are the only partners in this company. -We are both alien non-residents of US. -I have a SSN but my wife does not.What is the tax situation of this … read more
Barbara
Barbara
Enrolled Agent, Paralegal
3,804 satisfied customers
I am a sole propriortor and file Schedule C. How will that
I am a sole propriortor and file Schedule C. How will that change under the new Tax Plan … read more
abci168
abci168
Principal
27 satisfied customers
What are the forms for reporting Rental Income to the IRS on
What are the forms for reporting Rental Income to the IRS on foreign properties - we collect each month? Is this filed separately from our personal returns?… read more
Chad EA, CFP ®
Chad EA, CFP ®
IRS Enrolled Agent, CFP(R),
Master\u0027s Degree
1,083 satisfied customers
A partner and I formed a LLC we each own 50/50 of the LLC. A
A partner and I formed a LLC we each own 50/50 of the LLC. A relative gifted me 70k to start up business. Will the LLC need to pay tax on that amount ?… read more
LEV
LEV
Retired
Bachelor's Degree
14,896 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
18 satisfied customers
I have a capital loss carryover from GM bankruptcy that will
I have a capital loss carryover from GM bankruptcy that will not be retired yet by some capital gain from sale in 2017. Can I use the balance of carryover from a sale in 2017 even tho I may not need t… read more
emc011075
emc011075
Senior Tax Specialist
Bachelor's Degree
16 satisfied customers
Is there a form to file with the IRS for tax periods that
Is there a form to file with the IRS for tax periods that have ran past the statute of limitations from the date of assessment … read more
LEV
LEV
Retired
Bachelor's Degree
14,896 satisfied customers
Lev we spoke on the phone regarding the amended schedule c
Lev we spoke on the phone regarding the amended schedule c questionnaire. When I do my schedule c business again, will I use the schedule C form 2017?I am assuming that is correct, the C4 questionnair… read more
LEV
LEV
Retired
Bachelor's Degree
14,896 satisfied customers
On Form 706 Schedule D, if the proceeds were paid directly
On Form 706 Schedule D, if the proceeds were paid directly to a funeral home to pay for funeral expenses should the face value of the policy be included on this schedule? Also should the funeral expen… read more
NPVAdvisor
NPVAdvisor
CFP Licensee and Practitioner
Master's Degree
180 satisfied customers
A law firm (which is a Schedule C filer) has gross income of
A law firm (which is a Schedule C filer) has gross income of 1,000,000 & Net Income 0f 280,000. In the tax reform just passed, there is a 20% deduction for law firms that have income less than 315,000… read more
Chad EA, CFP ®
Chad EA, CFP ®
IRS Enrolled Agent, CFP(R),
Master\u0027s Degree
1,083 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
3,804 satisfied customers
Under the new tax plan, can a Schedule C proprietor still
Under the new tax plan, can a Schedule C proprietor still deduct her health insurance premiums on page 1 of Form 1040 & are there any medical expenses she can still deduct on Schedule A (if they excee… read more
Chad EA, CFP ®
Chad EA, CFP ®
IRS Enrolled Agent, CFP(R),
Master\u0027s Degree
1,083 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
84 satisfied customers
2 Member LLC now 1 Member LLC. What forms to file to IRS? I
2 Member LLC now 1 Member LLC. What forms to file to IRS?I have an LLC that was Me and Member B. Member B has now left the LLC and sold his ownership to me for no consideration. I am now the sole owne… read more
Barbara
Barbara
Enrolled Agent, Paralegal
3,804 satisfied customers
I am a personal injury attorney doing a schedule c as we
I am a personal injury attorney doing a schedule c as we speak. . … read more
LEV
LEV
Retired
Bachelor's Degree
14,896 satisfied customers
Small schedule c business donates fully depreciated
small schedule c business donates fully depreciated furniture to charity. They've been told that the FMV is $1,000. What is the deduction for contributed property? … read more
NPVAdvisor
NPVAdvisor
CFP Licensee and Practitioner
Master's Degree
180 satisfied customers
A taxpayer, Form 1040 Schedule C, is on the cash basis. The
A taxpayer, Form 1040 Schedule C, is on the cash basis. The average revenue for the last 5 years is $5,100,000. There is no inventory. The NAICS is 423600Can he remain on the cash basis?… read more
NPVAdvisor
NPVAdvisor
CFP Licensee and Practitioner
Master's Degree
180 satisfied customers
THE irs STATED THAT TE TAXCALULATED ON SCHEDULE D WAS
tHE irs STATED THAT TE TAXCALULATED ON SCHEDULE D WAS INCORRECT . i CAN NOT ACCERSS dD. p;EASE DVISE HOW I CAN ACEESS THE SCHEDULE … read more
NPVAdvisor
NPVAdvisor
CFP Licensee and Practitioner
Master's Degree
180 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