If you started a small business in 2015, first of all: congratulations! Small business is the backbone of the American free-enterprise system. Economics is just a class you take in high school until you’ve overcome doubt and fear and put your own time, talent and treasure on the line.
The life of a business is full of milestones. For 2015 start-ups, one of those milestones comes with turning the calendar page over to January 2016. If you’ve never owned a business before, you may not be aware that any expenses incurred before your first sale are “start-up costs.” If you haven’t recorded your first sale yet, feel free to go back to watching funny cat videos. Start-up costs can’t be deducted until you have revenue to deduct them from.
The IRS allows you to deduct up to $5,000 in start-up expenses in your first year. The balance must be spread over fifteen years. Some new business owners make the mistake of deducting all start-up expenses in their first year. Although that makes intuitive sense, it could get you in trouble. If you have more than $5,000 in start-up expenses, you should probably check with your tax adviser on how to properly account for them.
TBS Capital Funding does not offer tax or legal advice, but we can help get you through a cash crunch come tax time. We transform accounts receivable to cash, typically same-day, giving you the immediate cash you need to pay your tax bill, without loading you up with debt. Start right here.