What can I claim?

[Kinsey6287]

Just wondering what I can claim this year for forming an online business.

LLC forming expense?

Web Development fees?

Advertising?

Phone bills?

Lunch expenses? (with potential clients)

Gas expenses? (driving to different clients)

Never done an online business until now, and tax time is coming up. I don't want to look like a rookie walking in expecting everything back. lol

Thanks in advance.

 

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[bflbob]

I'll preface this by saying that you really should find a CPA in your area to go through this with. Many times they will find expenses that you never thought of. This is especially important when the entire process is new to you.

That said...

LLC Formation Fees (including the required advertising) must usually be amortized over several years (don't remember how many). That means that you only get to expense a portion of the costs each year.

Web Development Costs may fall under the same rule, especially if they are fairly large. If you spent $100 developing your site, you'll likely be able to expense it this year. But if you spent $10,000 you'll probably need to amortize it.

Regular Advertising and Phone costs can be claimed against taxable income.

Lunch expenses are usually only 50% deductible. There are exceptions to this -- especially if you are out of town at a conference.

Gas can be written off, but it usually better to either purchase a vehicle through your LLC (or another company you own), or to track the mileage used for business.

If you track the mileage, you can either use the standard mileage rate allowed by the IRS, or you can accumulate all vehicle costs and calculate your own rate.

Or course there are many expenses that you've missed altogether, and this is where a CPA might be key for you. Off the top of my head, I can think of:

Hosting Fees
Computer Depreciation
Internet Access Costs
Office Supplies
Home Office Expenses
Interest Expenses
Travel Expenses to the B&P
Modeling Fees for your niece, whose picture is in your sites
Magazine Subscriptions for mags in your niche

The general rule is that you can claim anything that is reasonable and necessary for your business. So, while gold caps for your teeth might not qualify for you, they might if your site dealt with gold, and you were going to be a public spokesperson.

Not all the rules are black and white. In our company, black is not claimed, but grey and white are. Just be prepared to defend the grey.

 

[Rem]

There are all kinds of things but you need to look real close because some things have to be broken down over 3 years or 5 years.

If you work out of your house you can claim office space as long as it is not used for personal stuff and you have a section of your house strictly used for an office. You can figure out square feet and even figure out electricity, taxes, etc and find the percentage to claim.

I would maybe get an accountant just to look over it.

 

[cfittowin]

Make sure to separate your bank accounts, if you haven't already. Try to have all the expenses running through your business account. This will make life a lot easier at the end of the year.

Just and FYI, the home office deduction is often one of the areas which will raise red flags with the IRS. There are regs which identify how to split costs between personal and business.

Don't worry too much, after you file your initial year return, things tend to run more smoothly.

I'd recommend going to a friend(or a friend of a friend) who has entity tax preparing experience instead of a CPA. Any tax accountant with a year or two experience could prep your return for you. Your business doesn't sound too complicated(or is it?), and more than likely a CPA will charge a decent amount of money to prep a simple return.

 

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[Kinsey6287]

Thanks guys. Luckily being in the military does have a few advantages. We have a tax office on base that does all the active duty personnel's taxes. I will call them tomorrow and find out if they do business related filings.

And they are free.

I'm gonna walk in with every receipt I have, and let them do their thing. If they can't do business filings, then I may have to find a CPA as I don't have too many friends around here that are business owners.

That's a downfall of the military. You are never in one place long enough to get very well known in that area.