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Member

Business Start Up Expenses accrued over past years - When to file?

I have been in the process of starting up a small business over the last few years. The business has not generated any income as of yet. 

 

My question is when do I include these start up fees? Do I add them up over the years and submit ALL once the business is operational? Or should these fees have been filed and included on the specific tax years?  (i.e. in 2015 I spent $4k, should that have been included on my 2015 taxes) (If the latter do I amend my taxes for 2015 and 2016 to cover these expenses - I have not filed 2017 yet)

 

I am also confused on what is considered start up costs. Can I include the costs to design the company logo, website, filing fees? As well as the content that has been created. For example I will be selling t-shirt designs. I have been working with artist to create concepts and ideas, many of them will not be used but have helped create the final product. Would that be considered start up expenses?

 

Thanks I really appreciate your guys knowledge and assistance.

3 Comments
TurboTax Specialist

Business Start Up Expenses accrued over past years - When to file?

According to IRS publication 535;

 

'Business start-up and organizational costs are generally capital expenditures. However, you can elect to deduct up to $5,000 of business start-up and $5,000 of organizational costs paid or incurred after October 22, 2004. The $5,000 deduction is reduced by the amount your total start-up or organizational costs exceed $50,000. Any remaining costs must be amortized."

 

Once you begin reporting income, then you can take $5,000 of the start up costs as business expense and the rest are amortized under Assets/Depreciation for your business.

 

IRS pub 535

Member

Business Start Up Expenses accrued over past years - When to file?

Thank you Paula!

 

Sorry one more quick follow up. Can I go back the three years to include all those fees as start-up?

 

I was reading an article and it said if you are investigating a business you can go back a year? Not sure if, how that applies to me? I have spent money over the last three years in connection to getting this going.

 

Thanks again!

 

https://www.thebalance.com/how-to-deduct-startup-costs-on-business-taxes-397608

When Does a Business Start? 

Determining the date when your business actually starts depends on several factors, but it's important to determine a startup date for the purpose of deducting startup costs. For example, if you are investigating the purchase of a business, you need to know how far back you can deduct these costs. Typically, you can go back one year from the startup date. 

TurboTax Specialist

Business Start Up Expenses accrued over past years - When to file?

You can go back one year before the start date of your business.

 

IRS pub 535