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MTee777
Returning Member

Help -- Sole Proprietor company I created it this year. Only lost money no gain

Hi,

 

I've done contracting before. However, this year I tried to run an online store. It would be a Sole Proprietor company I created it this year. I need to know what I can deduct and how - did 't make any money only spent it.

 

How do I enter 

classes

money spent for domain

Other outside applications to run my company

 

to help me get money off of my taxes. I didn't make any money so I am guessing I will not owe any taxes. Which Turbo tax should I use and would I need to file tax returns in all 50 states if it was an online store with no income?

 

Can you tell I could use the help. 🙂 Thank you ahead of time. 

8 Replies
Critter-3
Level 15

Help -- Sole Proprietor company I created it this year. Only lost money no gain

 

If you are new to being self employed, are not incorporated or in a partnership  and  are acting as your own bookkeeper and tax preparer you need to get educated ....  

If you have net self employment income of $400 or more you have to file a schedule C in your personal 1040 return for self employment business income. You may get a 1099-Misc for some of your income but you need to report all your income.  So you need to keep your own good records. Here is some reading material……

IRS information on Self Employment….
http://www.irs.gov/Businesses/Small-Businesses-&-Self-Employed/Self-Employed-Individuals-Tax-Center 

Publication 334, Tax Guide for Small Business
http://www.irs.gov/pub/irs-pdf/p334.pdf 

Publication 535 Business Expenses
http://www.irs.gov/pub/irs-pdf/p535.pdf 

Home Office Expenses … Business Use of the Home

https://www.irs.gov/businesses/small-businesses-self-employed/home-office-deduction

https://www.irs.gov/pub/irs-pdf/p587.pdf

Publication 946 … Depreciation

https://www.irs.gov/pub/irs-pdf/p946.pdf

          

There is also QuickBooks Self Employment bundle you can check out which includes one Turbo Tax Self Employed return and will help you keep up in your bookkeeping all year along with calculating the estimated payments needed ....
http://quickbooks.intuit.com/self-employed


Self Employment tax (Scheduled SE) is generated if a person has $400 or more of net profit from self-employment on Schedule C.  You pay 15.3% for 2017 SE tax on 92.35% of your Net Profit greater than $400.  The 15.3% self employed SE Tax is to pay both the employer part and employee part of Social Security and Medicare.  So you get social security credit for it when you retire.  You do get to take off the 50% ER portion of the SE tax as an adjustment on line 27 of the 1040.  The SE tax is already included in your tax due or reduced your refund.  It is on the 1040 line 57.  The SE tax is in addition to your regular income tax on the net profit.
 


PAYING ESTIMATES
For SE self employment tax - if you have a net profit (after expenses) of $400 or more you will pay 15.3% for 2017  SE Tax on 92.35% of your net profit in addition to your regular income tax on it. So if you have other income like W2 income your extra business income might put you into a higher tax bracket.

You must make quarterly estimated tax payments for the current tax year (or next year) if both of the following apply:
- 1. You expect to owe at least $1,000 in tax for the current tax year, after subtracting your withholding and credits. 
 
- 2. You expect your withholding and credits to be less than the smaller of: 
    90% of the tax to be shown on your current year’s tax return, or 
  100% of the tax shown on your prior year’s tax return. (Your prior year tax return must cover all 12 months.)

To prepare estimates for next year, You can just type W4 in the search box at the top of your return , click on Find. Then Click on Jump To and it will take you to the estimated tax payments section. Say no to changing your W-4 and the next screen will start the estimated taxes section.

OR Go to….
Federal Taxes or Personal (H&B version)
Other Tax Situations
Other Tax Forms
Form W-4 and Estimated Taxes - Click the Start or Update button

Critter-3
Level 15

Help -- Sole Proprietor company I created it this year. Only lost money no gain

Which Turbo tax should I use and would I need to file tax returns in all 50 states if it was an online store with no income?

 

ANY of the downloaded versions will work however you would need to use the Self Employed version if you use the Online program.   And you do NOT file in all 50 states ... that is absurd.  You may have to deal with sales taxes in more than one state however that is not something TT can help you with. 

 

 

Online for 2020 will open in early December.  We cannot give you an exact date or time of day that it will open.  Just keep checking for it ---if you want to start you could use desktop for 2020--desktop (CD/download) is already available.

https://turbotax.intuit.com/personal-taxes/cd-download/

 

You can also purchase the CD/download from various retailers such as Costco, Amazon, Walmart, Best Buy, Staples, Sam’s Club, etc. etc. etc.

 

This link Where can I obtain authentic TurboTax software? has a list of authorized TurboTax resellers.

 

 

 

Please be careful about being in too much of a hurry to file your next tax return. Many tax forms are not available at the very beginning of the tax season, so you have to wait for your forms. The software still needs updates at the beginning of the tax season. 

 

Although the software will allow you to e-file in early January, the IRS does not begin to accept the e-files until almost the end of the month.  So your return just sits on the server.  If you realize that you made a mistake or left something out—as many people do—you cannot change it.

 

 

Every year we see people who are in such a rush to file that they file incorrectly and incompletely.  If you file too early and leave out a W-2 or a 1099, or forget to enter information, you will end up having to amend your tax return---and that takes months.  Employers have until the end of January to issue W-2's----and ALL of your 2020 W-2's have to be on the same tax return.  Many of the 1099's and 1098's you need do not arrive until late January or sometime in February.  If you are getting Earned Income Credit or Additional Child Tax Credit, the IRS is going to hold your refund until the end of February no matter how early you file.  There seems to be a greater chance of "early" returns being reviewed and those refunds are delayed, or early returns are more often subject to identity verification--which will also delay processing.  Filing too early may just be a recipe for a delayed refund.  It might go more smoothly for you if you wait until at least mid-February to file instead of e-filing during the first minute that you can do it.

 

 

MTee777
Returning Member

Help -- Sole Proprietor company I created it this year. Only lost money no gain

I haven't made any money this year which is why I am confused. I have been a contractor in the past and filed my quarterlies. However, this year, I have an online store. spent money to run it (without inventory) spent money on marketing, Google Ads, etc, but no money made at all. 

 

Would I still need to pay taxes with Zero income if I am looking to receive the benefit of what I have spent and the classes I have taken as a deduction and my lost of income since I made nothing in my online store? I would like to lower my personal taxes from the loss of this sole proprietorship venture. It is under a business name and not my own name yet sole proprietorship.

 

At this point I can even afford a CPA to help me with this matter. 

 

Suggestions in addition to the items you have posted for me to read?

 

Thank you ahead of time. 

MTee777
Returning Member

Help -- Sole Proprietor company I created it this year. Only lost money no gain

Help -- Sole Proprietor company I created it this year. Only lost money no gain - Looking for another reply to my questions - Thank you.

Hal_Al
Level 15

Help -- Sole Proprietor company I created it this year. Only lost money no gain

It’s not clear whether you were operating an active business or spending money (start up expenses)  to get ready to open a business.

Operating expenses are deductible, even if you have no sales income. Start up costs are not deductible. Start up costs are amortized and the deduction spread out over a 15 year period*.

 

Educational expenses to improve your current job skills are deductible. But learning a new job is not, not even as start up costs.  The other items, you mentioned, domain,  outside applications would be deductible.

If you have a business loss, there will be no tax  on the business activity, even if you had revenue (gross receipts). A business loss would be deductible against any other income you have.  So, it can reduce any tax liability you have. If you have a Net Operating Loss (NOL) on your tax return, the NOL will carry forward to the next year and can be deducted against next year’s income.  There is no direct refund or refundable credit on this year’s tax return, for a business loss (“I am looking to receive the benefit of what I have spent”). 

 

Where to enter your expenses?  Follow the TurboTax (TT) interview. There’s something like 18 expense categories on Schedule C (Sole Proprietorship). If your expense doesn’t fit in a category (education won’t), enter as “other expenses”. TT will allow you to type a description.

 

Re: Sales tax; see https://turbotax.intuit.com/tax-tips/self-employment-taxes/sales-tax-101-for-online-sellers/L4uTQCaI....

 

*See https://ttlc.intuit.com/community/investments-and-rental-properties/discussion/do-i-have-to-amortize...

For an exception to deducting start up costs.

MTee777
Returning Member

Help -- Sole Proprietor company I created it this year. Only lost money no gain

Thank you for your reply.

 

In response to you inquiry, I opened the online business in July of this year.

 

Since that point forward I have been at a loss. Google changed the merchant rules 3 times so my merchant acct has been closed since then for advertisement, even though they still charge me a monthly bill, but people can still see my store and buy from it. I have not sold anything, i but have been paying for operating cost since I opened the online store.

 

So my online store has been open since July. 

Hal_Al
Level 15

Help -- Sole Proprietor company I created it this year. Only lost money no gain

Your expenses are deductible, since your business was active. 

MTee777
Returning Member

Help -- Sole Proprietor company I created it this year. Only lost money no gain

Thank you. I appreciate the info. 

 

I will follow-up on all the great recommendations and see all that can be done on TT when I pull it up. I will also have fun reading the IRS publications on this too. 

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