My wife has a day job + a self-employed biz on the side w/ $540 in '16 expenses — but no income until '17. To claim them, do we HAVE to upgrade to Turbo Self-Employed?

[Phillip1 · Accepted solution]

If you are need to report self employment expenses, you will need to upgrade to the self-employed program.

I assume this is a new business. If that is not the case, the next two paragraphs are not applicable.

However, since the business did not have any income in 2016, you may want to treat 2016 as a start-up year and file the first schedule C in 2017. The IRS give business 5 years to prove they have a profit motive (the profit motive is proved by having at least 3 years of net income on your schedule C). This would allow your wife's business to have an additional year to meet the 3 years of profit out of the first 5 years of business. Claiming a loss when there was no income may prove to be a waste.

The 2016 expenses would be considered start-up and/or organizational costs. Both of these items have an allowable 5,000 dollar deduction in the first year, and the remainder of the expense is amortizable over 15 years.

[andardoen]

Thank you so much!