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Shawnslawns
02-03-2005, 06:31 PM
I am going to have to take a loss on my part time lawn mowing business. I bought a commercial mower last year and it alone was 3200.00 I only made 2700.00 and some dollars. My wife says that this is good for me tax wise. She also said that small businesses can claim a loss for the first 7 years. Is any of this true? Thanks.

MMLawn
02-03-2005, 09:04 PM
You'd NEVER make it 7 years filing losses, the IRS would be knocking on your door LONG before that. Now, that's not to say you can't have those losses but you better really have them and be prepared to show the supporting docs.

On a new business (most any type also) you can get by with a loss in the old income tax department for the first 2,maybe even 3 years with no problem. However, show no profit after that period and I guarantee that it is only a matter of time before you will get that dreaded letter from the IRS informing you of the time,date and place of your new audit as they will question why any business is not either turning a profit or closed due to that after about 3 years.

Also, and this came to me STRAIGHT FROM THE IRS AGENT that did my last audit after asking why they were just now saying I owed even more than I paid on my 2000 business taxes. On businesses ONLY they always run 3 years behind the actual filing dates on the "inspection" of the filing. In other words this year they will be looking at 2002 filed taxes in reviews and they look at all businesses that have employees at some level even if it is nothing more than comparing their yearly 941's to the yearly W2's, W3 and W4 filed to make sure they match. So as I said if you show several years of losses expect to either get that letter or one day they will just walk into your office and show you that nice shiney ID.

drsogr
02-03-2005, 11:24 PM
I agree with MM Lawn. You have to show a profit 3 out of your first 5 years. A profit really only has to be $50 dollars though, just as long as you are making a profit. Your wife is right that showing a loss is good. Just think of it this way, the less money you make, the less taxes you pay, and what could be better than not paying taxes!

Littleriver1
02-04-2005, 10:53 AM
LOL, How can showing a loss be a good thing? All it means is, you paid out more than you took in. I understand your being happy that you will not be sending the Feds any money form you Company this year. After you are done buying and paying off equipment and you have money for your wife to spend, believe me she will be much happier.

LLCO
02-04-2005, 11:32 PM
How are you structured from a tax perspective (Sole Prop, S-corp, etc?)