New Business Deductions

[run_n_fool]

I started a new business this year as a sole proprietor and I also have a W-2 job. For the business, I bought a computer and some related equipment, but the business has not made any money yet.. Can I deduct all of that purchase from my total tax return, or do I need to amortize it? The computer/equip was around $4k, and I also have cell phone and communications (internet) expenses.

Does this somehow make me more prone to audit? My w-2 wages were pretty high this year and I'd like to take the full deduction immediately to offset this income. I have heard the IRS looks at income vs expenses for business and this business has no income (yet). However, as a proportion of my total income (W-2), the expense is less than 10%.

[tranquility]

You must depreciate the equipment. You can take as expenses your internet and phone bills. It is more likely you will be audited as small business returns is an area of IRS focus.