Business & farm

Nothing to be scared of here. In fact, the IRS *expects* you to not make a dime of profit for your first 3 years of business. So don't worry. I've been self-employed for going on 13 years now, and working out of my home as I assume you are, doing my own taxes was actually easier than I expected. I've been using TurboTax since 2003, started my business in 2005 and because I kept detailed business records, it was a piece of cake. I see you're keeping detailed records from day one, and that makes all the difference in the world. So I don't really see a problem for you. The fact you're showing a loss your first year is common and expected. But I do have some advice I'd like to offer that may make future years even easier and simpler for you. Especially since you'll be going into your 2nd year of business in a few days.

1) If using credit, obtain a credit card for BUSINESS USE ONLY! Nothing else.....EVER!

2) All money received by the business needs to go into ONE BANK ACCOUNT that is for the business only.

3) All bills paid by the business needs to come out of that same ONE BANK ACCOUNT that is for the business only.
Items #2 and #3 give you easy one-stop reference for the movement of all business related funds on one single bank statement that way.

4) Do NOT EVER UNDER ANY CIRCUMSTANCES give a vendor or customer your social security number. EVER! Instead, obtain an EIN (Employer Identification Number) for use with any and all business transactions where a tax ID number may be required. You'll also use that EIN on the SCH C when filing your tax returns. If your business has an EIN, then nobody has any legal need for any SSN. If they need a tax identification number, you give them the EIN instead. If they don't like it, then you don't do business with them. Period. You can obtain an EIN for your business absolutely free at https://www.irs.gov/businesses/small-businesses-self-employed/apply-for-an-employer-identification-n... and it only takes about 10 minutes if you type slow.

5) Understand how inventory works as it relates to taxes. DOING THIS WRONG WILL COST YOU $$$MONEY$$$.
When it comes to inventory, you can only deduct what you paid for that inventory, in the tax year you sell that inventory. It does not matter in what tax year you purchased the inventory. So if you purchased 1000 widgets in 2016 for $1 each, and you only sold 500 widgets in 2016 at a price of $5 each, then when the program asks you for your COST OF GOODS SOLD, it's asking what *you* paid for the 500 widgets you *actually sold* in 2016. At $1 each, your COGS would be $500. You can not deduct what you paid for the unsold widgets, until the tax year you actually sell them.

Please ensure you understand how inventory and COGS works.

6) I assume the business does not have employees, so I won't go into that part. Just understand that the business owner CAN NOT be an employee of the business they own. Your sole-proprietor or single member LLC business is considered a disregarded entity by the IRS. That means money earned by the business is treated no differently than money earned at a W-2 job by the business owner - with one exception of course.
If the business has more than $400 of taxable income, then in addition to regular income tax, the business will pay an additional self-employment tax (around 15.6%) on the business income only. The SE tax is basically the employer side of Medicare and Social Security.

7) Make sure you list only ONE PERSON as the business owner. It makes taxes a whole lot easier and simple. If you report the business as owned by more than one person, then you don't have a sole proprietorship or single member LLC. That would be a partnership, even if both owners are married to each other and filing a joint tax return. It can complicate tax filing quite a bit, depending on what state you are in.

😎 Since 2016 will be your first year dealing with the business, I highly recommend that you DO NOT use the online version of TurboTax for your 2016 tax return. I recommend you purchase the CD/download version of TurboTax Home & Business, physically install the program on your computer, and use that this year. The version you physically install on your computer is MUCH easier to deal with when you make mistakes and need to jump around to correct data. Remember, this will be a learning process for you since it's your first time dealing with SCH C. You know the first rule right? When you find yourself fin a hole and are ready to get out of it, the first thing you do is STOP DIGGING!

Hopefully, you find the above helpful. Of course, if you have questions as you are working things through, please feel free to post back and I'll be happy to help.