Do I qualify to file Schedule C this year?

Question

I just graduated from Massage School and have spent nearly $1500 in supplies and equipment (start up costs) in 2006. I passed my national exam the 6th of January and am still waiting for my actual license. My question is - can I file schedule C in 2006 or do I lose all of the start up expenses that I have already spent?

Answer 1

You will not LOSE your expenses but must wait to use them AFTER you start your business. The equipment you purchase can be depreciated BEGINNING in the year you place it in service.

In other words, if you start your business February 15, 2007, (remember the date you start the business - you will need it later for many reasons) then the date you place the equipment that you have already purchased in service will be the day inwhich depreciation begins.


FOR NEW EQUIPMENT AFTER BUSINESS BEGINS:

Ex: You purchase a massage table March 3, 2007 for 2000.00.

When you file your 2007 taxes, you will "depreciate" the massage table using 03/03/2007 as date placed in service until the end of the year or you may "write off" the entire $2000.00 for tax year 2007 through Section 179 depreciation.

Make sure you keep receipts for all purchases in case you are audited.

Answer 2

To add on to what Wayne Z said, when you do start your business (2007), you do not deduct all of your start up expenses in one year. Start up expenses are capitalized and amortized evenly over a period that you can choose, but it cannot be less than 60 months. Your equipment have to be capitalized anyways and depreciated over it's useful life (equipment is generally 5 years, although office equipment such as desks, filing cabinets, etc. are depreciated over 7 years). Depreciation starts when the equipment is placed in service (begins to be used), not when it is purchased. You do have the option to elect Section 179 on the capital assets and fully depreciate it in one year, provided that you have the income to deduct it against. Therefore only the supplies that you purchased should be capitalized as start up expenses. However, since supplies are consumables that you would typically use up and have to replenish before the tax year is up anyways, you would have a good argument that the supplies should not be capitalized as start up expenses and amortized over 5 years. So, in your case, I would just report the $1,500 (split it out between your supplies and your equipment) on your 2007 tax return as deductions against your massage income.

Answer 3

Did you operate your business in 2006? If not, don't worry about a Sched C until tax time in 2008. You won't lose your start up expenses. Keep any receipts and documentation of purchases because you'll need all of that for your tax pro. Don't rush it with the Sched C because you don't want to end up owing Uncle Sam unnecessarily.

Answer 4

you do not say what the "nonemployee repayment" is yet i visit anticipate it truly is for artwork executed as an "independant contractor". operating as an independant contractor isn't sensible if the salary ratr is an similar as a peon worker. a minimum of a peon worker receives SS and income taxes held out of his paycheck. you're making peanuts and paying taxes on the discarded husks. in case you record a form Schedual C you want to both declare artwork proper milage (no longer the milage to and from artwork, yet milage traveled even as appearing artwork) or take the IRS universal deduction (fifty 2 cents in step with mile??) for the miles you drove for artwork proper function. be positive to have the ability to produce a authentic time milage log (a log saved wide-spread) in case you opt for to declare the universal deduction. also, in case you take advantage of the truck as portion of your artwork (carrying equipment and or components) you could amortize the bought fee (that value you paid once you first bought the truck) over a 7 3 hundred and sixty 5 days era OR take a one time deduction for the cost of the truck as a 729 deduction (as a lot as $17,500 each and each 3 hundred and sixty 5 days). After this the code receives slightly puzzling and can want to be beyound the scope of maximum human beings to attain it. My sincerest propose is to purchase the 2007 TurboTax CD and persist with the education. This application will hit each tax trick and loophole you coule ever imagine. And the IRS is fairly loathed to opt for to audiit those returs as they math and procedure are really a lot locked in. For 35-40 greenbacks it truly is money properly spent. you need to have the ability to spoil out without TAX DUE the IRS in accordance along with your restricted statements of income. sturdy success.

Answer 5

Start Up expenses are deductable after you start your business.

You don't lose them, but you can only tax them after you officially open for business.