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Old 12-13-2010, 01:11 PM
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Independent Contractor and Business Expenses

Hi Experts! I just had a quick question. I am just starting as an independent contractor for a work at home position (virtual call center agent). Because of the late start in the year I don't anticipate on receiving a 1099 form as I have yet to make income. However, I've purchased items related to this business and have expenses... should that be claimed this year on my taxes or next (when I actually have income coming in)? Thanks for your help and time.



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Old 12-13-2010, 11:56 PM
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" I am just starting as an independent contractor for a work at home position (virtual call center agent).I don't anticipate on receiving a 1099 form as I have yet to make income. I've purchased items related to this business and have expenses... should that be claimed this year on my taxes or next (when I actually have income coming in)?"----> When your business has incurred more expenses than revenues during the period ( negative income on line #31 of Sch C), your allowable tax deductions are greater than its taxable income, resulting in a negative taxable income. As there is a loss, you must determine if all of your investment in the business is at risk; Internal Revenue Code statute, Section 465, disallows any deductible loss from an activity if the you are not "at risk" for those losses. The investments of most business owners are at risk. Since your business loss exceeds your total income this year, you can’t offset your expenses against yourincome this year. 2010 is your NOL year. So, the NOL can be used to offset your income and reduce taxes in another year( 5 years carry back and 20 years carry forward). if there's any left over NOL after the carry back period, you carryforward the balance for up to 20 years after the NOL year. So, it is wise for you, as a sole proprietor, to file Schedule C and Schedule SE, Self-Employment Tax, even if your business makes less than that amount or even lose money. This is because if a loss is incurred, it could produce a tax benefit. The loss can be used to offset additional earnings in the same tax year, including earnings from a regular job.
You can go to the IRS Web site for further info. on NOL; Publication 536 (2009), Net Operating Losses (NOLs) for Individuals, Estates, and Trusts


Last edited by TaxGuru : 12-14-2010 at 08:48 AM.


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