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lzo
Level 2

Small side company - best to enter expenses under business or personal?

Hi -

Got a question. 

Typically I've been employed by an employer as a w2 employee.  2018 was an exception, as I didn't work for a company from January 1st through the end of May.  From that point on I started working for a company, so will have W2 income.  However, during the first 5 months of the year, I started a small LLC.  Tried to support myself, so I have some income, as well as expenses.

Typically in my work, I'm required to have and maintain a home office, with phone, internet, computers, etc.  In the past I've entered these expenses in the 'personal' section of TurboTax.  However, is there any benefit to me breaking the expenses for the first 5 months out and making them purely business expenses?

The LLC doesn't have any employees, and since I'm the sole owner of the LLC, I was the only one withdrawing funds. 

Just trying to do whatever I should to both do the right thing, but also maximize the deduction. 

Is it possible to enter all the business income as personal income, since I was the only one working (under the company) to bring in the income?  Or does it have to be business income?  Would imagine the latter, as I know there's self-employment tax.

4 Replies
Texas Roger
Level 15

Small side company - best to enter expenses under business or personal?

Assuming your are treating your LLC as a disregarded entity for tax purposes, you must report your self employment income and expenses on Schedule C. This is totally separate from your W-2 income but Schedule C is filed together with your other information on one 1040 tax return. You must pay self employment taxes in addition to ordinary income taxes on your LLC net income.

As of 2018, you can no longer deduct home office expenses for a W-2 job. You will have to break out the deductible expenses that you incurred while you were operating your LLC because those are the only expenses you can deduct. 

You are posting from TurboTax Home & Biz and that version will give you the most guidance for entering your Business Income and Expenses from your LLC. 

lzo
Level 2

Small side company - best to enter expenses under business or personal?

Thank you for the comment.  That's unfortunate, as I'm required to do a percentage of my work from home, so things like internet access, my computers, desk chair, etc. are historically things I've been able to deduct.  I did have SOME (<$2000) income come from just small side jobs, not done through the LLC.  Would that just be regular income, right?  It's the same type of work my LLC did, but was not billed through the LLC (either because the job was so small, or because the LLC wasn't set up yet).  I have Home and Biz 🙂
Texas Roger
Level 15

Small side company - best to enter expenses under business or personal?

As I understand it, if the activity code was the same for LLC income and side jobs not done through the LLC, all the income and expenses can be entered on the same Schedule C.
lzo
Level 2

Small side company - best to enter expenses under business or personal?

That works for me; thank you very much!

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