Where to enter business expense

[davenj]

When I encounter this screen and TT asks whether I want to write off a purchase as an expense rather than list it as an asset, I want to say YES.  But then it's not clear where to enter it as an expense.  The list of possible business expenses provided by TT does not include obvious categories like software.  

[Critter-3]

Use OFFICE expenses for the software costs or make your own category ... either will work. 

There are 17 unique categories for entering business expenses in the TurboTax Home and Business program for a Schedule C.  If you have a particular expense that does not fit in the other 16 categories listed use Other Miscellaneous Expenses at the bottom of the list.

• Click on Business
• Click on Business Income and Expenses
• Click on I'll choose what I work on
• On Profit or Loss from Business, click on the start or update button

On the next screen, click on Edit for your business listed.

On the next screen scroll down to Business Expenses

On Other Common Business Expenses, click on the start or update button

[davenj]

Thanks.  I saw that list but don't see anyplace to enter software, computers, wifi routers, and other electronics that every business uses.   These kinds of expenses are not listed as examples under Misc. Expenses either.  Any idea why? 

[Critter-3]

There are thousands of expenses so the program cannot possibly list them all ... so if you don't find a suitable category then simply make your own.   The actual Sch C you are filling in has very limited categories so the "make your own" option is valid to use ...  https://www.irs.gov/forms-pubs/about-schedule-c-form-1040

Most folks will simply lump it in with office expenses as it really doesn't matter.  If the IRS ever audits your return they will want to see all of your bookkeeping records & receipts. 

[davenj]

Thanks.  I entered an amount in Other Misc Expenses and it had no effect on the amount of tax owed.   Entries of equal amount in some other expense categories affect tax owed.    ?? 

[SweetieJean]

This can happen when certain credits are involved - most commonly the Earned Income Credit (EIC). 

At certain income levels, the amount of EIC will fall as your income decreases. So, with each business expense, you are reducing your taxable income, which will then reduce the amount of your EIC.

If the expenses are generating a business loss, you may be losing child tax credits and child care credits.  So don't look at the refund meter until you are completely finished. 

[VolvoGirl · Accepted solution]

If you are not showing a loss on Schedule C.

Some expenses, such as home office or section 179 depreciation can only be used to reduce your schedule C taxable income to zero, and not to create a loss. Excess deductions for these carry over to the next year.  And you have to answer yes to both questions about exclusive and regular use, not just one.  The area of your home office must be used regularly and exclusively for business to deduct it.

Or you checked the box on 32b saying Some Investment is Not at Risk.

If you have money not at risk you can not take a loss on schedule C. If you don't know what it means then probably All your Investment is at Risk (check Box 32a). It means you are using your own money for the business.  People usually check the wrong box.

And  by entering more expenses it will decease your net profit or give you a loss, so you may not be getting as many credits as before.   Also after you reduce your income to zero there is no more refund to get back but you still may owe for other things like self employment tax or the 10% early withdrawal penalty from 401k or IRA accounts.

[davenj]

Thanks.  I am in the process of amending my return to include some consulting income for which I received no 1099. 

I have input the revenue and itemized sufficient business expenses to bring business income to zero, yet TT says I still owe additional tax.   As you mentioned, adding additional expense makes no difference. 

Any idea why I would owe incremental tax when the net effect of the changes I've made is zero additional income?   This is driving me crazy.