Crazy Tax Questions! (Sole Proprietorship) How to file?

[Keezee]

What is the name of your state? Virginia

started doing business halfway through 2005 and didn’t make any money so I didn’t file taxes in 2006 on it. From January 2007 to December 2008 I have actively been doing business the same way with my fiancé being a pivotal ‘partner’ for lack of a better word. During this year the business has operated at a significant loss when compared to sales, revenue and profit. Because our overhead is so low it’s not a problem for business per se. My fiancé at the beginning of this fiscal period is now my wife and we are both employed full-time outside of our business and will be getting W-2’s. My question is ‘how on earth do we file this properly, and how can we do so to our benefit?” We spent thousands of dollars via business investments; traveling expenses, supplies, etc and they are all deductible so how will this work out? My dilemma is that my fiancé at the time/now wife is a tremendous asset to the business and travels with me when we go out of town.

If it helps, the business is not incorporated.

Please avoid the 'seek professional help' reply if possible. I'm going to do that, but I wanted to educate myself as much as possible going in.

Thanks a million.

[abezon]

You'll file a Schedule C to report gross income & expenses, generating a net loss which will reduce your overall taxable income.

The IRS website has lots of info for self employed people. It's at [url]www.irs.gov[/url]. You might find these pages particularly helpful: [url]http://www.irs.gov/businesses/small/article/0,,id=110417,00.html[/url]
[url]http://www.irs.gov/businesses/small/article/0,,id=109807,00.html[/url]

When you go see your tax pro, set up for an initial meeting where you present what you have & how it's organized, then find out how the pro wants it tweaked to make tax prep easier. Make sure your pro has lots of experience with Schedule C filers. A crucial question will be whether 2006 expenses were startup expenses or operating expenses. Chances are you should file a 2006 return even though you didn't make any money.

[Keezee]

That's very helpful, thank you!

I guess the big picture is that to the IRS income is income no matter where it comes from, it's just handled differently sometimes and certain deductions are applicable here and there.

I guess a big question is this: Let's say I make $30,000 and my wife makes $30,000 and our business didn't make any money.Hypothetically, let's say our sales we're only $1,000 and expenses totaled $9,000.

Would that make our taxable income $61,000 right? And tax on that amount would be roughly $8,367.50 based on filing together. Our deductions are $9,000 and we did pay taxed throughout the year on our employement income so I'm at a loss as to what I should expect as a return, if anything.

[abezon]

Originally Posted by Keezee

That's very helpful, thank you!

Let's say I make $30,000 and my wife makes $30,000 and our business didn't make any money.Hypothetically, let's say our sales we're only $1,000 and expenses totaled $9,000.

Would that make our taxable income $61,000 right?

No, that would make your AGI $52,000. After standard deduction & exemptions, your taxable income would be around $34,500. Tax would be approx. $4,400.

[ljgoody]

I own a small business (sole proprietorship) and i also work for a company out of state(I live in Texas and i work in Alaska). By the end of the year i will have paid about $20,000 in income taxes. If i purchase a piece of land for my company and have it cleared... i will show about an $18,000 loss on my company can i claim that on my income taxes since i have a sole proprietorship? What % of those expenses can i get back? Anyone know?