Did you start your own business this year? Don't forget that your tax returns are due on April 15th, which is less than a month away! The IRS shared with James Markham of Ernst & Young that the most common error in start-up company tax returns is in the reporting of start-up expenses. Many business start-ups don't know what counts as a start-up expense and what does not.
The first thing you need to figure out is what actually constitutes a start-up expense.
A non-recurring cost that pertains to getting your business started such as training, accountant and legal fees, registration charges, and pre-opening expenses all qualify. Anything you pay while investigating a prospective business before you get started also falls into the start-up expense category.
The U.S. Small Business Administration (SBA) describes a start-up cost as either the cost of "investigating the creation or acquisition of an active trade or business" or the cost of getting a business ready to operate.
Remember, the following are not considered start-up expenses:
2. Deductible Interest, Taxes, or Research
3. Experimental Costs
4. Incorporation Expenses
Keeping records is important for all of your tax returns, especially in the case of your small business. You'll need to back-up all of your deduction claims with accurate records.
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