Some Might Be Wondering:
- “How is it a business if I'm not making any money?”
This is a fair question and the answer is relatively simple. In the beginning, you're in "start-up mode.” This is true up to the point when you make your first dollar (sale/commission). It does not have to be a profit. It just needs to be business income.
- How can it be a business if I don't have an S, Corp, C-Corp, or LLC,?
All three are traditional corporate entities that people form when setting up a business; however, there is one other business form that you get without doing anything –it’s called a sole proprietorship.
The Bottom Line
When you make money, the government will tax it, if possible.
Evading taxes or hiding income is illegal, and you will see the inside of a jail cell if you do it (Al Capone found this out). It doesn't matter where the income came from or how you got it, the government wants its share of your money.
However, taking advantage of the tax laws to REDUCE your tax burden is perfectly legal, and every business owner should do so. In fact, every citizen should do so.
Next Up: Three Types of Taxes You Need to Be Aware Of:
Reply
"The general rule is that if you have not turned a profit in at least three of the prior five years, the IRS will categorize your business as a hobby. This may be extended to a profit in two of the prior seven years in the specific case of horse training, breeding or racing."
Also, how long ago was that? You are able to file an amended return for up to three years after the due date of the original return (File IRS Form 1040X).
Finally, your WA business has nothing to do with those other businesses. You are legitimately operating an internet business to make a profit. Thus, you can, and should, treat it as such. If your CPAs are telling you that you cannot claim expenses for your WA business, I'd look for another CPA.
Anyway, wish you continued success,
Joshua
