topic Re: Taxes for startups? in Business Credit

Taxes for startups?

DR527 — Sat, 20 Mar 2021 19:48:11 GMT

Hi, I had a odd question and like many of my odd questions. I bring them to you, the people. Does a small business that has been being funded. 100% by someone W2 income. Still have to file taxes for that business income? The total amount deposited into the business account is exactly $9000 over the last 12 months. And 100% of that has gone to business expenses. The business hasn't made $1. Are you required to submit a tax return for that income?

Re: Taxes for startups?

dragontears — Sat, 20 Mar 2021 20:11:43 GMT

@DR527 wrote:
Hi, I had a odd question and like many of my odd questions. I bring them to you, the people. Does a small business that has been being funded. 100% by someone W2 income. Still have to file taxes for that business income? The total amount deposited into the business account is exactly $9000 over the last 12 months. And 100% of that has gone to business expenses. The business hasn't made $1. Are you required to submit a tax return for that income?

Depends on the structure of the business

Re: Taxes for startups?

DR527 — Sat, 20 Mar 2021 20:14:42 GMT

The business entity is set up as a single member LLC.

Re: Taxes for startups?

tommyd17 — Sat, 20 Mar 2021 23:11:20 GMT

Should be credited to owner's equity and not considered income. You still want to file taxes though. It will be considered a $9000 loss.

I'm a business owner, not an accountant.

Re: Taxes for startups?

DR527 — Sat, 20 Mar 2021 23:48:17 GMT

Ok. Thank you for the advice.

Re: Taxes for startups?

silver_idle — Sun, 21 Mar 2021 10:10:23 GMT

@DR527 wrote:
Hi, I had a odd question and like many of my odd questions. I bring them to you, the people. Does a small business that has been being funded. 100% by someone W2 income. Still have to file taxes for that business income? The total amount deposited into the business account is exactly $9000 over the last 12 months. And 100% of that has gone to business expenses. The business hasn't made $1. Are you required to submit a tax return for that income?

Im not an accountant or any legal professional but from experience you should still file taxes even if you made nothing. You can write off startup cost (eg incorporation cost, attorney fees for business, etc), which can also offset your federal, and if applicable, state and local taxes especially for a disregarded entity/passthrough entities (eg LLC). So you should file the proper tax form for the busines even if it doesnt make any money to have an informational return. Just make sure you keep documentations and your books in order.

Re: Taxes for startups?

DR527 — Sun, 21 Mar 2021 11:41:15 GMT

Thank You

Re: Taxes for startups?

Shooting-For-800 — Sun, 21 Mar 2021 12:57:04 GMT

You should always file.

A single member LLC does not need a separate return though (verify that)

You should be able to mix in with your regular 1040 (verify that)

Your taxable income will be LESS than not filing (assuming you put in the money)

GL!

Re: Taxes for startups?

steelers1 — Tue, 23 Mar 2021 02:53:59 GMT

YES YOU NEED TO FILE!

It doesn't matter what type of entity your business is or how much you made or lost, you still have to file taxes on that business. Any business activity, gain or loss must be reported through a tax return.

If you did spend $9,000 in business expenses then you would definately want to file the business tax return and take the loss off of your income therefore lowering your tax liability.

Re: Taxes for startups?

DR527 — Thu, 25 Mar 2021 00:37:23 GMT

Thank you to everyone who shared some advice. I was able to call up Turbotax. And a CPA walked me through the "Schedule C" forms. I am actually getting $697 back so that awesome.

Re: Taxes for startups?

roniram — Thu, 25 Mar 2021 19:56:39 GMT

I'm glad you got the right information. Anytime you have business revenue, you want to file a tax return. If for some reason you have a business that doesn't make revenue for some reason, you want to file a return beause it can be a loss that can be applied to other income you made.

Ask you CPA or other tax professional about these types of questions because sometimes forums like this is not the best way to obtain the right information other than credit-related.

I am a tax professional - Enrolled Agent

Re: Taxes for startups?

IOBA — Wed, 21 Apr 2021 23:30:35 GMT

Just a note - if you have an FEIN (IRS issued business tax ID) you are required to file a federal tax return, even if there was no revenue or expenses.

When I handled someone's estate (after their death), I found the business documents, including the IRS letter stating the business was delinquent in filing taxes for the previous year. Also included was the person's response - hey, I opened a business, but ya know, I never did anything with it, so no tax filing needed. Also included was the IRS's very firm response - you HAVE to file a tax return regardless of the business activity.