Tax Tips For Small Folks?

An anonymous "The tax deadline is fast approaching (here in the USofA). Like some of you, I have a small business on the side. Since I haven't figured out the 'step 2' yet (the one before 'step 3: profit!!!'), my revenues were zero for all of last year, and the expenses were just about zero too. What is the quickest and least painful way for a person in my situation to do his taxes? I don't want to spend 100s of dollars going to a paid professional, just to have him put all zeroes in the form. If you have done your taxes and are a small business (C-corp, don't ask why...), do you have any tips?" This is also your chance to offer all the heretofore unsolicited tax advice you've been bottling up all year.

Comments

Get an Accountant

[inbox]

My advice (and I, too, am the President of a very small C-Corp not quite yet generating a great deal of revenue) would have to be to get an accountant. There isn't just one form to put zeros on. There are a lot. And all kinds of other things. And penalties for messing it up.

Skip the lawyers if you have to, but don't skip the accountant.

Jeopardy

[Future Linux-Guru]

I have no revenue

The question, Alex Trebek, is:

"Who is RedHat?"

Tips

[namespan]

1. Call the IRS help line. The first two years that I did contracting work, calling them and asking questions probably added $500 to my return. They were friendly and helpful -- more so than in many interactions I've had with private corps who you'd think would have a greater incentive to keep the customer satisfied. This year I haven't had such great luck talking to them, though. Wonder if that congressional inquiry is wearing off. But you might try calling and asking them for advice.
   
2. Tax software. Two years ago I used Turbo Tax for the first time, and it was worthwhile. While I'm glad I slugged through the paper forms and publications for a while so I could understand some things, the software takes a fair bit of the tedium out of things. Some preparers I'm aware of out there seem to simply use tax software to do the lions share of the work.
   
3. If you find yourself tangled up even with these helps, it's time to talk to a pro. Use and consider retaining the services of an accountant and/or tax lawyer.
   
4. File for an Extension. You're already close to the wire... give yourself more time. If you're sure you own money, make a payment. You can get a refund on it later, and won't have to pay interest and fees on the outstanding balance.
   

And I thought...

[the-banker]

And I thought the people that sought legal advice on Slashdot were nuts...

Asking for tax advice on here is taking it to another level...

Re:RTFTM

[Lionel Hutts]

How does this post deceive us? Let me count the ways.

1. Schedule C, and the rest of Form 1040, are for individuals only. A C corporation will be filing Form 1120. The Service does provide publications "explaining" this form, but we are talking about a lot more complexity.

2. The individual cannot deduct the corporation's business expenses. The corporation just wouldn't owe any taxes, and could (potentially) carry the net operating loss forward to future years, but the losses of a C corporation cannot reduce its shareholders' taxes.

3. It's not 3 consecutive years, it's 3 years out of 5 (except that it's 2 out of 7 in the case of certain horse-related businesses).

4. It's not up to the IRS. The Code uses this as a presumption only. It is always a question of fact: if an individual has an honest subjective intent to make a profit at an activity, the expenses are deductible; if not, they are not (with many exceptions, as usual).

5. None of that matters, since it's the corporation's taxes. You can't possibly reduce your taxes by forming a corporation to pay the costs of your hobby. Deductions would be disallowed if, hypothetically, the corporation did not have a profit motive, but a bigger worry would be the almost certain constructive dividend treatment of payment of the shareholder's expenses. But the deduction is worthless to a corporation with no income anyway.