Tax Form Question.....What A Joke!

[capesams]

Better read the fine print,,thats only good for a loss up to 3 years on deductions...then you better start showing a profit or they'll hit you from both sides..

accountants arn't responsible for their accounting work that they do for you...cause you gave them the paper work..if a red flag goes up..your on your own.Every account will tell you a different story when it comes to what you can and can't take....there is no list/book to go by..you just guess and hope your not called in.

[RIJIMMY]

Originally Posted by capesams

Better read the fine print,,thats only good for a loss up to 3 years on deductions...then you better start showing a profit or they'll hit you from both sides..

accountants arn't responsible for their accounting work that they do for you...cause you gave them the paper work..if a red flag goes up..your on your own.Every account will tell you a different story when it comes to what you can and can't take....there is no list/book to go by..you just guess and hope your not called in.

no, you're thinking if its a loss. You can only claim a loss for 3 years. your profits are always less your expenses.
If a plug costs 10 to make and you sell for $20, you dont pay tax on 20, you pay on 10. That 10 should include ALL costs associated with your business.

[capesams]

What I was saying is that if you sink[spend] $10,000.00 in setting everything up..they give you 3 years to break even on what you've spent...expenses vs profits....after those 3 years are up that you should be making a profit beyond expenses..otherwise something starts to smell fishy to them.You can't have a loss in your operation year after year after year.

Everything you buy to set up shop with that you'll need to make that product that doesn't go out to get sold ,the state will tax you on it[in manufacturing]..they call it use tax..your town will tax the same items too...it's called excise tax.Everyone going to get a cut of your money but you.

[Gloucester2]

Originally Posted by capesams

What I was saying is that if you sink[spend] $10,000.00 in setting everything up..they give you 3 years to break even on what you've spent...expenses vs profits....after those 3 years are up that you should be making a profit beyond expenses..otherwise something starts to smell fishy to them.You can't have a loss in your operation year after year after year.

Close - but no cigar Steve. You're referring to the IRS "hobby/loss" rules . . . the general guidance is that if you don't generate a profit in 3 out of 5 years the IRS may question whether the "business" is just a "hobby". The usual example in business school is and "artist" that goes into business . . . may sell a painting or two generating some income but expenses greatly exceed income. The IRS will let it slide for several years but may question it at some point as a hobby. The best way to demonstrate it is a "business" is advertising, business cards, a store location, etc.

I can think of many businesses that go thru cycles of loosing money for many years . . . hospitals for instance.

Some one page JPowers - he's the real accountant around here

[BigFish]

My biggest question is the tools I have....I bought them all before I became a "business".....they were not a write-off so how can they tax me on them???

[Gloucester2]

"Technically" <someone better really call JPowers now> they should be "converted" from personal property to business property at their fair market value when the business commenced . . . I know, I know a quagmire when we're talking about dozens of hand tools, uncertain values, mixed business and personal use, etc. - but accountants gotta eat too


Create an inventory, come up with a reasonable value, take a deduction for depreciation (3 years seems like a reasonable useful life) and the savings will more than offset any excise/use tax you may incur.

That will be one plug please Just kidding !

gOOD LUCK.

[Karl F]

yep G2..
BigFish INC. buys out BigFish Larry Hobbyist.... Corparate aqusition, so to speak

[Raven]

Larry you should have that tool inventory on paper in a safe place
in case of fire or theft anyways.