can I claim a tax deduction for a business I have not yet filed for a tax ID?
March 31st, 2010I run a lawn service out of my parents garage right now. I am making very good money and do like to claim it on my income takes as "other" or Schedule C. (its taxed @ 15%)
Recently I purchased several pieces of expensive equipment but I have not yet filed for a Tax ID # nor have I made the business an official corporation. Can I claim the purchases on my 2007 tax forms as deductions? I would like to claim full revenues and recieve a tax break from expenditures.
How would I go about this?
Replys
You are considered a sole proprietor and therefore your tax id# is you social security #. You can claim the purchases & depreciate them over a period of time or take the 179 expense deduction. Depending on what they are worth. When filling out your Schedule C there is a place for depreciation. If you use software, you will be prompted to answer certain questions regarding the items purchased and the software should note the right depreciation method, etc…
visit the irs website http://www.irs.gov for more information.
Its on the schedule C long form. (cant use the C-EZ)
Just put your deductions in and take it off gross. You dont need a TAX ID number to do it, SSN is fine.
I do some computer consulting on the side, and this is how I make deductions for expenses, including local travel.
You need to get with a CPA and they will do it all for you and the cost is very little not to mention the piece of mind you will have knowing everything is done right. be sure to pay in your social security so you will be able to draw a retirement.
D B sounds right to me.
However, file for an EIN (Employer Identification Number) when you can. If you do enough work for certain customer, or you want to pick up big-pay commercial accounts, they’ll have to 1099 you in order to write you off as one of their expenses. You’ll want them to use your EIN, because it’s just not good nor safe to have your SSI number floating around…
You would normally depreciate equipment purchases over several years. You can take a section 179 deduction for them, but if you sell them before the end of the normal depreciation period, you will have to recapture the excess.
I just started my own small business. Check with your states dept.of revenue. In mn your buisness would be a taxable service @ 7%. I’am trying to do it myself, but I did tatke the time to talk to a SCORE rep and an accountant. KEEP EVERY LITTLE RECEIPT!!!
For your business you would file a schedule C, not claim it under "other income". You’ll file a schedule SE to calculate your self-employment tax of 15.3% which is in addition to income tax. You are REQUIRED to claim full revenues, not just "would like to".
If you have employees, you need a separate tax id – otherwise you can just use your social security number. You can claim the equipment purchases as expenses, but depending on their cost you might have to depreciate them rather than expensing the whole cost in the year of purchase.
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