Here is something to consider when using the IRS pubs. They are NOT considered a valid source of support for any position unless it is supported by case law. Plenty of people have used the pubs as support only to get dinged because a case law decision was 180 degrees from the publication information. If the IRS phone support gives you bogus info regarding a tax question, they aren't liable for your application of said bad info. Isn't that great!!! I don't know too many businesses that are indemnified from giving bad info like the IRS. Sorry, here's your penalty and interest statement..... Have a great day.
The matching principle, you must have been an accounting major too. ?? Unfortunately........ YES!!!!!!
If you are exploring a new business and ultimately don't start the business, yes, you are SOL regarding any expenses. If you are looking for a potential new location for an existing business, those expenses are deductible. For example, a lease is expiring and the current lessee want to change location due to an exhorbinant increase in lease payment terms. Expenses incurred in the search for a new location would be deductible. Later, heading to the rack....... Cracked
Yeah, I busted my ass for 4 months to pass the CPA, was at work two days and felt like I made the biggest mistake of my life. I missed the part in the book about bringing lunch for the group and massive data entry. My first job was to enter about 1200 assets in to a depreciation schedule. Of course at this point I'd kill for a gig like that. Just ring if you need sandwiches. LOL That is a good point about case law. That was actually my favorite part of the job. From what I hear you get about 30-50% incorrect information when calling the IRS helpline. With the web it is a lot easier than using the old CCH disks, makes me feel old.
I wouldn't trade the experience that I recieved, however, i should have stayed in the line of work I left to go to business school. I actually enjoyed it but tired of getting dirty hands..... At least I enjoy trading futures and doing tax returns during the first part of the year. It is really interesting to hear what people are attempting to write off and then trying to come up with a 'creative' scenario to make it legitimate. I'm generally pretty aggressive, but, some I just roll my eyes at when I hear the justifications. The greatest ever was a client that wrote off a portion of his daughters wedding as a business expense because some of the invitees were current and potential customers. The amount was minute compared to the gross income so it didn't raise any flags from a % of income test. Nice to read another accounting major is working the market..... Later.
My favorite was a guy who made some major $$$$. After I complete the return my partner says so and so forgot that he sold a business last year we need to add 500K to his return. Hope my memory gets that bad some day. Have a good one.
A good idea is to get advice from a business/tax advisor who knows the business: they might advise that you set up an LLC, a Corp etc rather than use a sole proprietorship. Many of the comments/questions posted on this forum are either slightly incorrect or amount to very questionable advice. A few however are right on. The lesson is to do your research before you start so that you set up things in a way that maximizes your benefit. The IRS website has many resources that you can use: the problem is that you have to sort through it all. Paying an advisor will cut down the research time - but not eliminate it.
I agree Caltrader. It pays to investigate business structures before jumping into the fray. Someone with 20K in income would have a different circumstance and business structure than another with 200K. The basic issue of being deemed a trader by the IRS is crazy and never truly been defined. Another example of how the tax code is sometimes a difficult target to hit or nail down a definitive answer.
I agree with the both Cal and Cracked. The other issue I suppose is cost. And if you are examining a complex issue it may serve you to talk to more than one professional. With that said, cost for services should be a concern. A business owner I know called me to discuss setting up a small 401K plan for her business. The company wanted $2500 to administer the plan. Now for her business this would mean she would have to make at least 20% just to cover fees. Seems a little expensive at first blush.
trdrmac, You were up pretty late last night using west coast time. Was wondering were you a located? I'm in So. Orange County, CA. Another funny write off on a return that I couldn't fathom. A construction contractor bought an $35,000 engine for his race car. Pretty obvious that it wasn't involved in the business except for the advertising on the side of the car. The engine got capitalized as a replacement engine for a concrete pump. I could just imagine concrete shooting out the hose end at 200 MPH due to the 1000 HP engine running the pump!!!