How far back can you deduct business expenses?

[JoCarole]

For all the VA tax experts - I am hoping someone will know the answer

Does anyone know how long you can hold onto business expenses before you will lose the deduction?

Do they have to be declared in the same tax year when the expense was incurred? Or can you hold onto them until your business starts actually making money? I am asking because my accountant told me to hold them so I did.

But I just was looking at the 2009 Stimulus Act at the "Longer Carry-Back Period for 2008 Losses" which deals with carrying back just 2008 taxes. Nothing was said about prior years which is what I am referring to. Now I am afraid I will just lose them because I waited.

Thank you in advance
Jo-Carole

 

[Tess]

Jo-Carole, I'd really recommend you talk to a CPA. We hired one this year and it was the BEST thing I've ever done for our business.
In fact, we are getting a refund - which is beyond the beyond in terms of incredible.

Not only can your CPA help you determine what is deductible but there are all kinds of things you probably don't even realize you can take on your business return.

For instance, and this may have been obvious to everyone else - I didn't ever think to take PayPal fees as a deduction. It's a banking expense, but it just didn't occur to me.

Logic tells me you probably have to take a business deduction the same year the expense is incurred but you never know - pay an expert to walk you through that part and you may just wind up saving more than the CPA costs you.

 

[RebeccaT]

Paypal fees are a deduction?? Holy spit! When I was asked if I had any other fees...I didn't think about Paypal stuff. Thanks Tess!

 

[JoCarole]

Jo-Carole, I'd really recommend you talk to a CPA. We hired one this year and it was the BEST thing I've ever done for our business.
In fact, we are getting a refund - which is beyond the beyond in terms of incredible.

Not only can your CPA help you determine what is deductible but there are all kinds of things you probably don't even realize you can take on your business return.

For instance, and this may have been obvious to everyone else - I didn't ever think to take PayPal fees as a deduction. It's a banking expense, but it just didn't occur to me.

Logic tells me you probably have to take a business deduction the same year the expense is incurred but you never know - pay an expert to walk you through that part and you may just wind up saving more than the CPA costs you.

Thanks Tess, you're right, i was just waiting till I was actually started making money before hiring one. This is something I have to work on now...

I didn't realize that about Paypal either:blush2: I take the business deduction for the purchase but I never thought about PayPal's commission.
Jo-Carole

 

[aztlandreams]

There are so many tax breaks out there for us. Definitely seek a CPA for advise they will get you on the right track and save you a lot of money and headache which would outway the their cost.

Good luck!


Elisabeth Hernandez-Madrigal
Aztlan Dreams Executive Solutions
"Helping your Business be as efficient as you Dream it should be.."

 

[CJ's Virtual Business Solution]

A CPA is the way to go. They know all of the great deductins you are eligible for. I'd used one for years until last year. My business had really slowed down so I thought I'd file myself. I had a heck of a time getting my refund as I had missed a step after efiling.

So, I went back to him. He said I did good BUT we are now filing an amendment to last year's because he found me "extra" deductions I hadn't even thought of.

It's definitely worth the expense. You receive more than you pay! :applause:

Carol
CJ's Virtual Business Solutions

 

[christinenc]

For all the VA tax experts - I am hoping someone will know the answer

Does anyone know how long you can hold onto business expenses before you will lose the deduction?

Do they have to be declared in the same tax year when the expense was incurred? Or can you hold onto them until your business starts actually making money? I am asking because my accountant told me to hold them so I did.

But I just was looking at the 2009 Stimulus Act at the "Longer Carry-Back Period for 2008 Losses" which deals with carrying back just 2008 taxes. Nothing was said about prior years which is what I am referring to. Now I am afraid I will just lose them because I waited.

Thank you in advance
Jo-Carole

Hi Jo-Carole,

If these are start-up costs, then there may be some leeway in when you can expense them. If they are not start-up costs, then I believe the deductions need to be taken for the year the expenses were incurred. I'm a bookkeeper, not a tax pro, but this is what my understanding is.

You should not hold onto expenses until your business starts making money. It's actually to your benefit to claim the deductions if you haven't made money yet, because your business will show a net loss and reduce your tax debt.

You should definitely check with a tax pro, but it does not have to be a CPA. I would advise looking into finding an Enrolled Agent. I use an EA to do my taxes and she is less expensive than a CPA. She has a degree in Accounting and is required to fulfill CE credits and keep up with new tax guidelines. An EA is licensed to represent their clients in front of the IRS, if necessary, so they are tax pros.

Here is a link to the NAEA where you can search for an EA in your area. http://www.naea.org/memberportal

Christine

 

[JoCarole]

Thanks everyone for your comments

Christine, I never heard of an EA before so thanks for telling me this and the link too!
I think my accountant gave me bad advice. He claims that people working from home tend to be scrutinized more by the Irs and told me I could always deduct it later when I had income to show that I was making money in my business.
I don't him anymore.

The expenses were start-up costs plus all other business expenses that I needed to start my own business. I hope I am not too late in submitting my expenses, going to put this on my priority list now. Thanks for your help
Jo-Carole

 

[christinenc]

You're welcome; I'm glad I could be of some help. Good luck and maybe share with us what you find out about the deductions and time requirements.

Thanks,
Christine