I did not have business income but still have business expenses. Can I still legally claim these expenses?
Deductible expenses for 2011 cannot exceed the businesses income for 2011. But you will list the expenses anyway. The expenses will not be deductible for 2011, BUT they will "carry over" for your 2012 taxes.
They will then be deductible on your 2012 taxes, provided the business income for 2012 exceeds the expenses for 2012 and the carry over expenses from 2011. So, even though you will not be able to deduct the business expenses in 2011, if you do not list them on your 2011 taxes, then you will not be able to "carry over" those expenses to your 2012 taxes.
What is an accrual method?
In general there are two types of accounting methods; cash and accrual. Some businesses are required to use the accrual method of accounting; ie those that maintain inventory. The cash method is generally straight forward - record income when cash is received (or constructively received) and expenses when paid. For those on the accrual method you record income basically when an order is received (debit accounts receivable and credit sales) and record expenses when incurred (debit expense and credit accounts payable). Accrual method gives management a clearer picture of what is really happening.
Do I have to create a 1099 for myself if I own a business? Or, is it considered to be what is left-over from my business?
You would not prepare a Form 1099. The Schedule C would report your income minus deductions (or, as you put it, "what is left over.")
You don't pay yourself or enter a salary or withdrawal for yourself. All the business income and expenses are your personal income and expenses in the first place. If you have a net profit of $400 or more you will pay SE self-employment tax on it in addition to your regular income tax. It's all included on your personal 1040 form. Hope this helps.
When entering the rent and utilities amount, do I put the annual amount or the monthly amount?
Enter the annual amount.
I have a small business and I am the only employee, can I deduct my wages?
If you are a small, unincorporated business, you are a sole proprietor---your profit after expenses are your "wages." If you are a sole proprietor, you cannot deduct wages for yourself. You would have to incorporate and then give yourself a W-2 and file quarterly payroll returns to be an employee. Sole proprietors use Schedule C to report their income and expenses and cannot take a deduction for wages unless they have employees. {even if you took a deduction for wages on Schedule C, you would have to add them back to page 1, line 1 of the Form 1040, so it would have no effect}.
How many years can you operate a business at a loss?
There are nine factors in determining if a 'business loss' is not a 'hobby loss' and therefore nondeductible:
A simple, general rule is that if the business makes a profit in 3 of 5 years there will be a presumption of profit motive.
- You carry on the activity in a business-like manner
- The time and effort you put into the activity indicate you intend to make it profitable
- You depend on income from the activity for your livelihood
- Your losses are due to circumstances beyond your control (or are normal in the start-up phase of your type of business)
- You change your methods of operation in an attempt to improve profitability
- You, or your advisors, have the knowledge needed to carry on the activity as a successful business
- You were successful in making a profit in similar activities in the past
- The activity makes a profit in some years and the amount of profit it makes
- You can expect to make a future profit from the appreciation of the assets used in the activity
I have a Mary Kay business, when dealing with my general income do I cut the total in half since I paid wholesale for the product and sold it at a retail price?
The basic answer is that you enter the total receipts for all money collected on the receipt. Then, when you enter your expenses into the expense section, you would enter "supplies" or "product" and the actual cost of the product you paid to the company so that it is deducted from your sales totals. You would also enter any shipping & handling charges paid, sales tax paid, etc. into this part of the program.
If you do not see a specific entry listed on the expenses page that is presented (the one that has a list available of possible expenses), then you can enter specifics into the next page presented that has blank line entries to give detail.
All of the information then flows into the schedule C form for your business to show a profit or loss.
I pay rent for a room I use for my business. Do I need to file a 1099 form for money paid to the owner of the office?
Yes.
What is 'cost of goods sold'?
The labor, materials and subcontracts used in building whatever you build would be your cost of goods sold. You can enter those into the Cost of Sales section in the program; spaced are provided for the common ones and you can enter others there as well. If you have inventory (you may not) you need to enter your beginning and ending inventory as well. This then calculates your cost of goods sold.
Expense such as advertising, telephone, auto, etc. would all go under other expenses. Salary for an office worker or the like would be under wages paid.
I am self-employed and don't have any employees, can I deduct 100% of health insurance premiums?
You can deduct your health insurance premiums if you buy your own policy. In other words, it's not provided though yours or your spouse’s employer sponsored health insurance. You do not need employees to qualify.
How do I claim my odd jobs as income?
You are considered self-employed and would include your SE income on Schedule C.