Tax Law (Questions About Taxes)/S-corp question

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Question
We started an s-corp this year and have expenses, but won't receive any income until next year, how do we write off this years expenses?

Answer
Linda,

Thanks for your question.

If the expenses can be characterized as start up or organizational expenses, they can be capitalized and amortized over a 180-month period beginning in the month in which the business opened.  Any expenses incurred after the business opened are ordinary business expenses and are deducted in the year incurred.

The topic of organizational and start-up costs is rather lengthy. This link will help explain them.  http://www.irs.gov/publications/p535/ch08.html#en_US_2012_publink1000208937

If the business has not opened for business, there are no costs to deduct, so file a zero return or no return at all. If it has opened, then deduct the expenses and pass the loss on to the owners.  The owners cannot deduct losses in excess of their basis.

A S Corp is a very complex form of organization.  If you are not familiar with the nuts and bolts of S corps, I recommend you employ a CPA or enrolled agent who is familiar with S Corps.

Hope this helps.

John Stancil, CPA

Tax Law (Questions About Taxes)

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John Stancil, CPA

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I can answer questions on personal income taxes, partnerships, and some corporate income taxes. I can deal with some state tax questions. Limited gift and estate tax questions. I am also familiar with ministerial and church tax reporting issues. I am Professor Emeritus at Florida Southern College. Sales taxes and property taxes are state and local issues so I am not likely be be able to give you an in depth answer on those types of taxes. I have maintained a CPA practice, specializing in tax, for over 35 years. I am a member of the National Association of Tax Professionals, The Florida Insititute of CPA's, The NCPE Fellowship. In addition I am a Certified Mentor for SCORE. Visit my website at www.mybaldcpa.com. I also offer seminars and consultations to churches and clergy on their tax issues at www.churchtaxsolutions.com Also visit my blog, www.thetaxdocspot.com. I am listed on Tax Connections at https://www.taxconnections.com/profile/John-Stancil/12258973 Prepare and file your own taxes at www.1040stancilcpa.com

Experience

I hold a doctorate in Accounting, and am a CPA. My certifications of CIA, CFM, and CMA are inactive. I passed all certification examinations on the first attempt, and received honorable mention for my scores on the CIA exam. I have operated a CPA firm for over 37 years and have taught accounting and tax at the college level for over 35 years.

Organizations
FICPA, NATP, NCPE Fellowship, Lakeland Business Leaders

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The CPA Journal, Florida CPA Today, Green Consumer, Green Business, Global Sustainability as a Business Imperative, Palmetto Review, NATP TaxPro Quarterly, Mustang Journal of Finance and Accounting.

Education/Credentials
DBA University of Memphis MBA University of Georgia BS in Accounting Mars Hill University

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