started (acquired) my business in 2021 selection

[meg4246]

I am expanding my business and I started renovations in 2021 for two restaurant buildings however I will not be opening until this summer 2022. I am trying to enter my expenses that I have paid contractors for in 2021 but I am confused on whether I should select "I started (or acquired) my business in 2021 and the date I should enter. Also just to verify I will enter all locations as separate businesses even though I will not have income in two of them only expenses.

[ThomasM125]

You shouldn't enter or deduct expenses for a business that isn't up and running in the current year. Contractor expenses for improvements should be tracked and then entered as an asset when the business opens.  Other expenses are considered start-up expenses and should also be tracked and entered as such in the year the business is up and running.

You can expense $5,000 of start up costs in the year the business opens, provided the total is less than $50,000. The rest you have to amortize over fifteen years.

[meg4246]

Thank you for your response.  I am still a little confused.  I currently own a restaurant and decided to open two other locations. 

I issued 1099s to the contractors (who did all the plumbing, electrical, and interior work) was this incorrect?  Instead I should have kept track of the expenses and enter them as assets in tax year 2022? This includes rent I paid in 2021 as well?

[Vanessa A]

You can still issue the contractors 1099's.  That doesn't change when you can deduct the costs.  You still paid them in 2021, so that is when you would report that you paid them, you simply can't take the deduction for paying them yet. 

You will continue to track these expenses until you actually open for business.  You will do this with rent as well, if the rent is part of your start up costs. 

[meg4246]

Thank you for your response, this has helped. 

[Carl]

I currently own a restaurant and decided to open two other locations.

Actually, how you report this (that is, "if" you report this) on your 2021 tax return depends on quite a number of factors, since you already have one restaurant location that was up and running in 2021 or before. I would highly suggest you seek professional help ASAP. This could be even more crucial if your state also taxes personal income, or if any of the other two locations are in a different state.

When it comes to taxes, perfection in that first year is not an option; it's a must. So you should seek professional help for at least that first year. After that, once everything is "established", you should be able to continue future years on your own.

Also, having three restaurants, I would expect you to be incorporating the business if you haven't already. But just because I expect it, doesn't mean it's best for your situation. That's why professional help would be best.