Why sign in to the Community?

  • Submit a question
  • Check your notifications
Sign in to the Community or Sign in to TurboTax and start working on your taxes
Returning Member
posted Oct 13, 2024 6:00:12 AM

Foreign disregarded entity has expenses but little income

 

I started a 1 person foreign disregarded entity 3 years ago, but it has been dormant as I haven’t had time to work on it. I’ve been filing simplified 8858s as a dormant business.

 

My business has an EIN number. Last year (2023) I manufactured some products but haven’t had time to finish designing the package (I’m doing everything myself, except accounting in the foreign country where the business operates). So I haven’t sold any products yet, and anticipate I will start selling them in November of this year (2024)

 

I have about $2000 in expenses for 2023. I have other income for 2023 that the expenses can offset to save me about $200 in taxes.

 

But, because I haven’t made a profit yet, I am worried that if I try to deduct these Schedule C expenses for 2023, IRS will think it’s a hobby, not a business, because 2023 is my business’s third year of operation without a profit.

 

In 2022 I also had some expenses but did not declare them because the small amount was not worth the trouble to offset a little bit of income from other sources.

 

So I wonder if I should not enter these expenses on Schedule C, and instead carry them forward to a future year when I start making profits. Is that possible?

 

I don’t want to lose use of these legitimate expenses to offset income. But I also don’t want to be deemed a hobby.

 

I have a filing extension to October 15. What do you think I should do? Thanks for any help.

0 1 29511
1 Replies
Returning Member
Oct 13, 2024 6:46:07 AM

I can't seem to edit the previous post, so let me add this information if it's relevant:

 

My business has its own bank accounts in the country where it's located.

It's licensed as a LLC business in that country.

It has an EIN number in the US.

Maybe this makes a difference, I don't know.