Discussion:Schedule C with no income
From TaxAlmanac
Discussion Forum Index --> Basic Tax Questions --> Schedule C with no income
Discussion Forum Index --> Tax Questions --> Schedule C with no income
Dsocpa@aol.com (talk|edits) said: | 6 March 2008 |
| Client just started selling life insurance as an independent agent. She has expenses for course work towards her license as well as some mileage. In 2007 she began to make sales calls and market her products. As of the end of 2007 she had no sales, but began making some sales in 2008. Is it possible to show no income and carryforward a loss to next year when she expects to show a profit? | |
| 6 March 2008 | |
| If it's carryforwardable, it's called an NOL (if she even has it) and you have to elect to carry it forward | |
| 6 March 2008 | |
| Kevinh5, how do you elect to carry NOL forward? Is there a form or a box on sche C to do that ?
My sister filed her tax couple years ago, got her refund. What she had was: a W2 and a sch A, she ALSO had a RE license with no income first year, only expenses incurred e.g..ads, mileage, phones, license ect..., which resulted a loss on sch C. Last year, she got a letter from IRS saying that those incurred expenses are not allowed... she had to pay back close $1600 + accrual interests. She contacted the auditor, who sent her letters but never returned her calls, she gave up! By law, a business could claim losses in 3 consecutive years, correct? | |
| March 6, 2008 | |
| Taxsmarts,
I'll anticipate kevinh5... Please complete your Tax Almanac profile. The New Tax Guy | |
| 6 March 2008 | |
| Not sure if course work for her license is dedctible since I think it would be considered necessary for min job qualifications. | |
| 6 March 2008 | |
| Newtaxguy, I will complete my profile when I have time...
I am still very new in tax practice, I need all taxtips I could get. Thanks! | |
| March 6, 2008 | |
| taxsmarts,
i'm not trying to be a wise ass... I understand perfectly. My point is that you'll find that those with the most wisdom and advice and tips to share will be more willing to share if they know who is asking. The New Tax Guy | |
| 6 March 2008 | |
| The best tip I can give is not to skimp on your education. Take lots of CPE classes. Lots. On different topics, including NOLs. In the meantime (since it's tax season and there aren't many classes being taught, go to the IRS website and read all of the pubs. I'm serious. | |
Notquitered (talk|edits) said: | 7 March 2008 |
| What about Sec. 195 Start Up Expenditures? $5,000 in start-up year and then balance amortized over 180-month period? | |
Scottycoyote (talk|edits) said: | 7 March 2008 |
| tax you have to elect to carry your nol forward by putting a statement with the return citing irc, i thnk its 172.
For the deductible expenses, read the irs pub on business expenses and what is considered start up costs. as for a business being able to take a loss the first 3 years, i think its the reverse, a business is supposed to show a profit in 3 of the first 5 or it could be looked at as a hobby (this is taking it for granted that the activity is an actual valid business with a profit motive of course). good luck | |
Dsocpa@aol.com (talk|edits) said: | 7 March 2008 |
| Expenses were minimal. Loss will not put a real dent in spouse's w-2 income and 1099 income she earned as a technical writer part of the year. Publicaion on business expenses does not really state anything about getting licensed for a new profession. I know that if an individual wishes to deduct educational expenses on a Sch A they can not if the purpose is to learn a new vocation. Reading the code regarding business expenses the only thing it really says is that expenses must be ordinary and necessary. In order for her to run an insurance sales business and write life insurance as a part of that she must be licensed so doesn't that make it ordinary and necessary? In any event I plan to file an election to amortize start-up expenses and go from there. There should be no nol because of the w2 and 1099 income. | |
| 7 March 2008 | |
| Thank you Scottycoyote and others for comment & advises...
LOVE this site where i learn alot from real proffessionals, wise & knowledgeable. Reading pubs and learning from classes get into one ear and out another... not as good as getting it from here -- learning and sharing on cyber...waaay more fun :-) cam'on- | |
TheTinCook (talk|edits) said: | 7 March 2008 |
| On education
Sec 1.162-5 It's not allowed | |
| 7 March 2008 | |
| The courses taken for the license are NOT deductible. It's the minimum requirement in order to have the job. | |
Dsocpa@aol.com (talk|edits) said: | 7 March 2008 |
| She was engaged in selling insurance as an independent prior to her training courses so technically she had already entered in the profession prior to taking the exams. | |
Gerbie1987 (talk|edits) said: | 8 March 2008 |
| If there has been no income for a new business yet, expenses should be capitalized and carried forward to the year income is first earned. No Schedule C is filed until there is income. Education costs for qualifying for a new occupation are not deductible, though. $5K of start-up expense and $5K of organizational costs (i.e. if she consulted an attorney or incurred professional fees to determine entity type) are deductible in the year of start-up; remaining start-up and organizational expense must now be amortized over 15 years. | |
TheTinCook (talk|edits) said: | 8 March 2008 |
| The education expenses would not be includible in either the deductable portion or amortizable portion of startup expenses as they are not otherwise deductable. Additionally there are no deductions allowed for organizational expenses for disregarded entities. | |
| 8 March 2008 | |
| A business can be open, but not have income. Rare, but possible. For example, I start a tax business in December: get the business license, software, computer, office, supplies, advertise. No one comes in until January. I was open for business, but had no income. Expenses are deductible.
Education for a new line of business is nondeductible however. | |
