Any tax people who might be willing to give advice?

[naturally]

I'm hoping to find someone who might be willing to help a little.

DH tried to start a new business this year. Took a couple courses/exams, bought some supplies, gas for training classes, etc. But it didn't work out.

Now we are wondering if it is worth it to claim anything. He didn't make a penny. It was all expenses but not an outrageous amount (think $2000, not $20,000).

I don't want to spend money to go have our taxes done if the business stuff isn't going to make a difference. I can do basic 1040 myself because everything else of ours is just straight forward deductions, nothing special.

Does that make sense? I don't have the extra money to spend if I don't have to.

[TravelingChris]

I am not a tax expert but I think that there are a few rules you need to consider- first, business and workplace expenses have to go over a certain threshhold and you can find what that is on the internet. It has to do with percentage of income. Second, I know that with jobs that are often considered hobbies- woodworking, photography, sewing, etc,, the rule is that the income must exceed the expenses. I don't know if that rule applies to a non hobby oriented business too. You can find that out. IF not, then you can still file a normal 1040 and take itemized deductions, if those count. There may be some other way to do this if you did have income and expenses but not enough deductions for itemized but I don't know about that.

[SKL]

File a schedule C with your tax return. You can deduct business expenses if you were actually in a business that intended to be for profit. Keep good records, though.

[milovany]

Agree with SKL. You can probably do a Schedule C listing both income and expenses. Just note (if it asks) that the business both opened and closed in 2012. With a small sole proprietorship, its straight income less expenses (the form has a little more detail). This will result in a loss for the business that will help you owe less on the rest of your taxes, which of course you'll want to take advantage of.

[naturally]

I think these are my 2 biggest questions -

Cell phone usage - for those months, about 75% of his usage was business.

Laptop - he bought one for the business. Now that he's not doing it, it's personal use. But if he hadn't tried the business, he wouldn't have bought the laptop.

 

Guess I'll be doing lots of 1040 reading. :-)

[milovany]

From what I recall, unless he had a cell phone dedicated solely to the business, you'd have to show (not guess) at useage percent. You'd have to go through the bills and show which calls were for business and which were personal.

 

As for the laptop, if it was genuinely purchased for business use, I'd deduct it (you may have to amortize if it was over a certain limit cost-wise). It's okay to use it for other things after the business closed as far as I know.

 

All my comments are based on working in a tax office for two tax seasons (many years ago), and doing our own taxes (both business and personal) for 20+ years. We've been self-employed most of that time, whether in full or in part. I'm not an expert and don't study the tax laws and changes.

[naturally]

Thanks Milovany, you've given me a place to start.

 

I don't even know if the "experts" are really experts on the laws! :tongue_smilie:

[SKL]

I think if you pull the form an instructions from the internet (schedule C for the 1040), and just use common sense, it should not be too hard. Was the business entered into for profit (not a hobby)? If so, then which of your purchases were reasonably made in support of the business? You can take 100% of clear business expenses such as advertising. You can apportion some of the stuff you use for both business and personal use, such as printer ink/paper, cell phone/internet, and use of your vehicle.

 

(There is also a form you can fill out if you used a part of your house exclusively for business (home office deduction). If you didn't make a profit, the home office deduction is limited to an apportionment of real estate tax and mortgage interest, which is helpful only if you don't itemize.)

 

If you are nervous about doing this without step-by-step guidance, some tax software packages include schedule C. You have to check the box to see whether it's included or not. The ones I buy are usually around $100, but there might be cheaper ones out there.