When I enter my business expenses, my Federal Tax Refund goes down. Why is it going down, especially if I didn't make any money.

[Coleen3]

The only way a business can generate a refund is by qualifying you for an Earned Income Credit. A business, in and of itself, only generates income to the extent of the profit. If you had had a $50,000 gain, you would have quite a tax liability.

The EIC is based on income. It starts off as a small credit, maximizes at income between $10,150 and $18,200 for 2016. The smaller your income below that $10,150 the smaller your credit and as a result, the possible reduction of refund. The larger your income above the $18,200 and the smaller your credit.

[rmwest69]

Thank you for your response.  What if the business had a loss?

[Coleen3]

If your business had a loss, it would lower your other income. There would be no taxes owed on that income since there would not be any. The only thing that would come into play is the EIC. My second paragraph above explains how the EIC works with income. Here is a link for the tables: <a rel="nofollow" target="_blank" href="https://apps.irs.gov/app/vita/content/globalmedia/earned_income_credit_table_1040i.pdf">https://apps...>