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I started a business at the end of 2006 in which I purchased a few thousand dollars of equipment and supplies. I didn't provide any services or collect any money until 07'....can I write off some of my business expenses on my return for 06' even though I didn't actually provide any services until 07'?

2007-01-24 11:36:41 · 4 answers · asked by thedude1179 2 in Business & Finance Taxes Other - Taxes

4 answers

You have to capitalize those costs.

Capitalize means you combine those costs into an asset called "Organization Costs" and you amortize those costs over fifteen years (180 months). You capitalize because you have no revenue to take these expenses against in full this year.

If your startup costs are under $50,000, the law does allow you to write off $5,000 and then amortize the rest over 180 months, or 15 years.

The H&R Block guys are not necessarily the best. I audited many returns and assessed a lot of tax on H&R Block returns. . .

2007-01-24 11:50:47 · answer #1 · answered by Anonymous · 2 0

Capitalize those assets.
You can begin depreciating the equipment as expense in the year when they are placed in service.
Your supplies will turn to cost of goods sold or operating expense depending on the character of the supplies in the year you actually started your business.

Good luck with your business!

2007-01-25 01:09:35 · answer #2 · answered by ichyleg 1 · 0 0

You'd be wise to see a CPA, not just to answer this question but to find out what kind of records you need to keep, and what items you can deduct on your tax return not just for 2006, but for future years. And that's a CPA, not someplace like H&R Block.

2007-01-24 11:43:21 · answer #3 · answered by Judy 7 · 0 0

Judy stole my answer. Vote for her for best answer because she's right and she was right on time. Do the CPA. It will feel like it will cost money but it will save money in the long run (when you don't have to pay fees and fines for not doing things right)

Best of luck with your endeavor.

2007-01-24 11:45:50 · answer #4 · answered by JohnCub 2 · 0 0

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