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Early this year, I started a small business, sinking in my own money.

Four months later, I gave it up when I had earned an embarrasingly small amount of revenue. I won't give the numbers--it's too humiliating.

Anyway, I faithfully kept receipts for all the money I spent on this fool's errand. So with the end of the year coming soon, I'm wondering about my tax filing.

So then, if my expenses were overwhelmingly larger than my revenues, is there any point in filing a Schedule C? More importantly, would losses from my business offset personal taxes I paid through my two jobs?

I found this article: http://taxes.about.com/od/taxplanning/a/freelance_5.htm

But the article is written from the perspective of a going-concern, not a business that began, ate up a bunch of expenses, then ended all within the course of a single tax year.

Thanks in advance.
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I really thought you'd get an answer by now. Maybe they are all busy.

As far as I know you can deduct the business loss against other income. There isn't, as far as I know, a time limit for the business to be in operation. The lady I bought my nursery from was only I business for about 3 months. I really just bought the inventory, not the business.

Jean
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Yes, the business loss can offset personal income. No, I do not know the details.

My wife launched a small business in 2012 and like you we sunk a good chunk of money into it - around $40k. The business lost money that year, and she abandoned it when she was offered a very lucrative position with a previous employer. We had an accountant handle our personal and business taxes for 2013, and the business losses offset some of our personal income.

But now it swings the other way. The business had essentially no expenses in 2013, but some payments were received for work done prior in 2012. So it will post a small profit for 2013.
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But the article is written from the perspective of a going-concern, not a business that began, ate up a bunch of expenses, then ended all within the course of a single tax year.

AFAIK your Sch C losses will in fact offset your regular income. Its my understanding that if this was started as a true business, as opposed to a "hobby", your documented/substantiated losses for the business should be accepted by the IRS.

Unless the pro's say differently I would report the loss on Sch C and chalk it up to experience.

Rich
Arizona
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But the article is written from the perspective of a going-concern, not a business that began, ate up a bunch of expenses, then ended all within the course of a single tax year.

AFAIK your Sch C losses will in fact offset your regular income. Its my understanding that if this was started as a true business, as opposed to a "hobby", your documented/substantiated losses for the business should be accepted by the IRS.


Rich has it right. For more information on business vs. hobby see the section titled "Not-for-profit Activities" in IRS Pub. 535. If the IRS determines that your "business" was a hobby, then your deductions are limited. Full details are provided in the same section of Pub 535.

Ira
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Unless the pro's say differently I would report the loss on Sch C and chalk it up to experience.

That makes sense. Thanks, everyone.

On another note, I already file a Schedule C for my wife's small business. I presume I would file a second Schedule C for my own?
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I already file a Schedule C for my wife's small business. I presume I would file a second Schedule C for my own?

Yes. One Schedule C for each business.

Phil
Rule Your Retirement Home Fool
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