Tax question

[Queasy]

My wife incurred plenty of expenses in her work as a real estate agent but it is looking like she won't make any money off of house sales until the beginning of 2007. Can we still write-off her business expenses for 2006 even if she had no income?

Will we end up with the IRS breathing down our necks if we do?

 

[EagleKeeper]

Without any income to show, they might get nosy.

You may be able to roll-over those expenses as part of the start-up costs for 2007 of the business.

Place a phone call to the IRS to determine if this can be done and how to do a CYA in either option depending on when the expenses are filed for.

 

[vi edit]

I'm *DEFINITELY* not an accountant, but if memory serves me correct, you can show losses for up to 3 years before you start getting flagged.

I remember reading this in a giant self-employment bible.

 

[jupiter57]

Originally posted by: vi_edit
I'm *DEFINITELY* not an accountant, but if memory serves me correct, you can show losses for up to 3 years before you start getting flagged.

I remember reading this in a giant self-employment bible.

That was the rule in the mid-nineties when I opened my Construction business and then when I bought my farm, but I would double check, I remember hearing that the laws had changed. (Had to do with everyone starting businesses to write off their SUVs, though they performed no actual work nor received any income)

 

[GuitarDaddy]

Yes you can claim the expenses with no income. If it's a normal sole proprietorship this will result in a schedule C loss which will reduce your personal income tax. If your wifes business is incorporated then it will not reduce your personal taxes, but instead will create a loss carryforward that will reduce her taxable revenue for next year.

 

[SSSnail]

Why don't you claim head of household, claim her as dependant and claim her expenses as well. Joint filing so that she doesn't have to, I'm not 100% certain, but I think this can be cone.

 

[Queasy]

Originally posted by: GuitarDaddy
Yes you can claim the expenses with no income. If it's a normal sole proprietorship this will result in a schedule C loss which will reduce your personal income tax. If your wifes business is incorporated then it will not reduce your personal taxes, but instead will create a loss carryforward that will reduce her taxable revenue for next year.

She doesn't own a business. She works for a real estate agency part-time. She's got three home sales lined up - two of them are still being built and won't be ready until Jan/Feb and the third will be sold just before one of those being built is done.

 

[GuitarDaddy]

Originally posted by: Queasy

Originally posted by: GuitarDaddy
Yes you can claim the expenses with no income. If it's a normal sole proprietorship this will result in a schedule C loss which will reduce your personal income tax. If your wifes business is incorporated then it will not reduce your personal taxes, but instead will create a loss carryforward that will reduce her taxable revenue for next year.

She doesn't own a business. She works for a real estate agency part-time. She's got three home sales lined up - two of them are still being built and won't be ready until Jan/Feb and the third will be sold just before one of those being built is done.

Ah! Then she should file her expenses on the "Employee business expenses" form, I believe it is 2106 or something like that.

 

[EagleKeeper]

Originally posted by: GuitarDaddy

Originally posted by: Queasy

Originally posted by: GuitarDaddy
Yes you can claim the expenses with no income. If it's a normal sole proprietorship this will result in a schedule C loss which will reduce your personal income tax. If your wifes business is incorporated then it will not reduce your personal taxes, but instead will create a loss carryforward that will reduce her taxable revenue for next year.

She doesn't own a business. She works for a real estate agency part-time. She's got three home sales lined up - two of them are still being built and won't be ready until Jan/Feb and the third will be sold just before one of those being built is done.

Ah! Then she should file her expenses on the "Employee business expenses" form, I believe it is 2106 or something like that.

She needs to find out how her commission income will be handled.

If as a W2, then use the Form 2106 with the Schedule A. You will loose 2% of the gross income from the expenses.

If as a 1099; then by all means use the Schedule C. That will aviod the 2% hit and also allow more flexability in expenses to write off.

 

[Fern]

Originally posted by: Queasy
My wife incurred plenty of expenses in her work as a real estate agent but it is looking like she won't make any money off of house sales until the beginning of 2007. Can we still write-off her business expenses for 2006 even if she had no income? YES

Will we end up with the IRS breathing down our necks if we do? NO

See bolded answers above

Fern