Can I file expenses I've made for my corporation as loss on my business tax return? And will the loss carry over to my personal returns?

Can I file expenses I've made for my corporation as loss on my business tax return? And will the loss carry over to my personal returns?

by Nicole T. Buckman, CPA | Jan 25, 2018

I am in the process of buying a business, and I have spent money on attorney fees, fuel, broker costs, and some other items in 2017, totaling around $6,000. I registered the business and obtained a federal tax ID number in 2017. The business is a corporation. First, can I file those expenses as a loss in 2017? Second, this business is in the service industry and I am the sole owner/member of the business, so should I file as an S corporation? If I do, will this loss carry over to my personal tax returns? Because there is no income and it is straight forward, can I go ahead and file my own business taxes?

You can generally expense up to $5,000 as start-up costs when beginning a business. If you are using a Schedule C for the first year of business, you can deduct this amount as “Other Expense.” The remaining amount can be capitalized and amortized over a 180-month period. If you can claim some of these start-up costs as operating expenses, I would try and minimize the $6,000 in start-up costs to the maximum of $5,000 in order to fully expense the $6,000 on your 2017 taxes.

To answer your second question, for liability purposes, I would highly recommend considering an S election. To do this, you will need to file Form 2553. Once the business becomes an entity for years 2018 onward, the loss/profit will flow through on a Schedule K to your personal return. Benefits of S corporations include liability restrictions and no self-employment tax.

I would advise seeking the aid of a CPA, especially at the inception of your business, to ensure a financially healthy future.

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Answered by: Nicole T. Buckman, CPA, is with Jones Kohanski & Co. PC in Moosic, Pa.

The responses are based on the limited information provided by the questioner and apply the laws and regulations at the time of posting. Other options could arise as rules and regulations may change over time, including but not limited to the passage of the Tax Cuts and Jobs Act of 2017. They are intended to provide general information, not specific accounting or tax advice; they are not intended or written to be used and cannot be used for the purpose of avoiding or evading taxes or penalties under the IRS code or regulations. Views expressed do not imply an opinion of the PICPA, its officers, directors, employees, or members.
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