Just ignore the questions about income -- do NOT enter zeros. It's quite common for a business to have expense, especially start-up expenses, and no income for the first year.
You can deduct up to $5,000 of startup costs as a current business expense. The remainder is amortized over 180 months.
Start-up costs include:
- Survey of potential markets
- Advertising the opening of the business
- Consulting or other professional fees paid in connection with starting the business.
- Wages to employees being trained for the new business
- Analysis of possible facilities, labor force, supplies, etc.
- Travel and related expenses to secure distributors, suppliers and customers.
You can enter your startup expenses using these steps:
- Click on Income and Expenses and then click the Start/Revisit box in the Self-Employment section.
- On the Your 2019 self-employed work summary screen, click on Edit next to your business.
- On the Here's your [business] info screen, click on the box Add expenses for this work.
- On the Tell us about any expenses screen, click the radio button next to the most appropriate category for this payment -- Commissions, Contract Labor, etc.
- After making your selection(s), click Continue when done. TurboTax will walk you through the data entry.
Once you have finished entering your startup costs you will be brought back to the Here's your [business] info screen. Click the box Add expenses for this work, so to enter other expense categories.
NOTE: If you don't see Startup costs in the list of Business Expenses you need to indicate that the business was started or acquired in 2016. Please follow these steps:
- Click the Edit box next to General Info
- Click Edit next to General Info (On the again).
- On the Tell us about how long you've worked in [XX] mark the box I started [business name] in 2019 and enter the date you started or acquired this business.
- Click Continue and then Looks Good to get back to the Here's your [business] info screen.
If your business was not officially "open for business" in 2019 then you will not report anything concerning this business on your 2019 tax return. Period.
If your business was "in fact" open for business in 2019, then you will report it on SCH C as a part of your personal 1040 tax return. Doesn't matter that you had no income.
All expenses incurred before your official "open for business" date are startup expenses. All expenses incurred after the "open for business" date are business expenses and claimed in the section specifically for business expenses.
Just ignore the questions about income -- do NOT enter zeros.
That's just flat out wrong. If you leave it blank the IRS will assume that you forgot to enter your business income and it's a sure fire way to get audited. If you were "in fact" open for business in 2019 and had no income in 2019, then enter the digit zero for your business income.
Note that with no business income in 2019, it's perfectly possible (and very likely) that not one penny of your business expenses will be deductible - to include your startup expenses. Generally your businses expenses can only be deducted from business income (I say "GENERALLY" as this is not always true.)
So if you have no business income in 2019 to deduct your business expenses from that you paid in 2019, you still "claim" those expenses on the 2019 return. They just will not be "allowed" is all. They will get carried over to the next year where you can deduct them, provided you have the business income to deduct them from.
But if you don't "claim" those expenses on your 2019 tax return, then you can not carry them forward next year to your 2020 tax return.
For startup expenses, that's not a big deal. Startup expenses are deducted in the first year you are officially "Open for business" and it does not matter in what year you incurred those startup expenses either.
You are limited to deducting a maximum of $5000 of startup expenses in your first year of business. Any amount over that is amortized (not capitalized) and deducted (not depreciated) over the next 15 years.
"If you were "in fact" open for business in 2019 and had no income in 2019, then enter the digit zero for your business income."
I've tried that and it won't enter as zero... the turbo tax screen just goes back to "need to enter income"
so I'm set up as a sole proprietorship for a small farm...
"You are limited to deducting a maximum of $5000 of startup expenses in your first year of business. Any amount over that is amortized (not capitalized) and deducted (not depreciated) over the next 15 years."
I bought a small tractor in 2019 and formally set up my DBA business name and account in 2019... right now I don't have any income from it, just expenses coming from out of my own pocket. My tractor was more than $5000.. In turbo tax a tractor is an asset right? not a start up expense?
In turbo tax a tractor is an asset right? not a start up expense?
That is correct, @ryan-ms2372 and you enter the tractor in TurboTax as such, but you do not begin deductions for depreciation (or take the special allowance (aka bonus depreciation) or Section 179 expensing if available) until such time as the asset is placed in service.
what do you mean "until such time as the asset is placed in service." ?
It's in service now and has been since the summer of 2019 planting my orchards.
I apologize for that, but somehow I got the impression that you had not yet begun operations.
Clearly, if you had begun business operations, then the tractor was placed in service in 2019.