Does my small business need to file a tax return?

Question

I am a small business owner and have been developing my company for the past year. Because I left my previous job to start this business I do not have a current income and because my company only recently officially "opened for business" we do not have a profit line. Do I need to file? What about the business expenses that I incur?

Answer 1

Definitely keep track of your expenses. Most start-up expenses should be capitalized until operations begin. This means that you cannot deduct certain expenses until the date the business started, even if you paid them last year. Some expenses should be amortized over a period of time.

Business start-up costs are the expenses you incur before you actually begin business operations. Your business start-up costs will depend on the type of business you are starting. They may include costs for advertising, travel, surveys, and training. These costs are generally capital expenses.

You usually recover costs for a particular asset (such as machinery or office equipment) through depreciation (discussed next). You can elect to deduct up to $5,000 of business start-up costs and $5,000 of organizational costs paid or incurred after October 22, 2004. The $5,000 deduction is reduced by the amount your total start-up or organizational costs exceed $50,000. Any remaining cost must be amortized.

For more information about amortizing start-up and organizational costs, see chapter 9 in Publication 535.

Answer 2

You would probably want to list your new business on a Schedule C. If recieved no money in the course of the business last year, that is OK. You would still want to write off any expenses you had in starting the business. You say you were not open for business until this year. You could still write off startup expenses that you incurred in tax year 2006. This would lower your tax burden on other income.

Answer 3

It depends on the type of business. If you are an entity other than a sole proprietorship or single member LLC, you probably have a federal filing obligation.

You may have state tax filing obligation for sales or use taxes, payroll taxes, or other non tax filings. I would find a professional tax preparer.




Any tax advice included in this written or electronic communication was not intended or written to be used, and it cannot be used by the taxpayer, for the purpose of avoiding any penalties that may be imposed on the taxpayer by any governmental taxing authority or agency.

Answer 4

I found a site I used to answer this and similar questions I had about the small business I just started from my home... I think it might help you too.

http://wehow.ehow.com/how_2029144_home-office-tax-considerations.html