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
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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.

For more resources, check out PICPA’s Money & Life TipsAsk a CPA, or CPA Locator.

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

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