I started a business and provided consulting services in 2021. However, I was not paid for my work until 2022. Do I report any income for 2021?

[MinhT1]

No.

As an individual taxpayer, you report your income on a cash basis. So you will only report this income in tax year 2022.

[tec1078]

Thank you! As a follow up, I have business expenses that was I want to deduct for 2021, but TurboTax wont let me unless I enter income for 2021. But as stated above, i don't have any income for 2021. What do i do? 

[LenaH]

You can deduct start-up costs. Startup costs come from investigating the creation or acquisition of an active trade or business. They are paid or incurred before the business opens its door.

Examples include:
 - Market research
 - Travel costs
 - Salaries
 - Consulting fees
 - Accounting and legal fees
 - Pre-opening advertising expenses, and
 - Overhead

How these expenses are handled:
Up to $5,000 of startup costs paid or incurred can be deducted if the total startup costs incurred don't exceed $50,000. An election can be made to amortize costs in excess of $5,000 over a period of 15 years.

If total startup costs exceed $50,000, the excess over $50,000 reduces the amount you may deduct. For example: If you incur $52,000 worth of startup costs, you can deduct $3,000 ($5,000 - ($52,000 - $50,000 = $2,000)) and amortize the remaining $49,000 over at least 15 years.

To enter your startup costs, please follow the steps below: 

1. Open your return.
2. Search Schedule C.
3. Click on the Jump to link.
4. Click on Add a Line of Work.
5. Follow the on-screen instructions.
6. On the page titled, Your consulting Info, scroll to the bottom and click on Looks good.
7. On the page titled, Let's enter your income, click on Skip for Now.
8. On the page, First, select the expenses you know you had, click start-up costs.
9. Scroll down and hit continue.
10. Follow the on-screen instructions.
11. Click start next to Startup costs.
12. Answer yes to the question, Did you have start-up costs?
13. Follow the on-screen instructions. 

@tec1078

[Opus 17]

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@tec1078 wrote:

Thank you! As a follow up, I have business expenses that was I want to deduct for 2021, but TurboTax wont let me unless I enter income for 2021. But as stated above, i don't have any income for 2021. What do i do? 

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If you actively engaged in the business, you can file a schedule C and include your startup costs even though you have no income.  This should create a loss that is deductible against other income (you must indicate this is an "at-risk" business.).  You can deduct startup costs up to $5000.  Costs over that can be partly deducted and partly amortized over 15 years according to a complicated formula.  Assets are added to the business and depreciated according to the usual rules.

If you are having technical problems reporting the business in Turbotax without gross income, the Turbotax Pros should be able to help, or you can call customer support.