Small Business Taxes

What are some factors the IRS considers when allowing for certain types of expenses and deductions associated with a business?

The IRS considers many factors when allowing certain expenses and deductions, including: whether or not the time and effort to create and run the business indicate that it is trying to make a profit; whether the taxpayer depends on the activity of the business; whether there are profits or losses; whether losses are related to start-up expenses or whether they are due to circumstances beyond the taxpayer’s control; whether the taxpayer improved some aspect of his business process in order to return the business to profitability; whether the taxpayer or his advisers and team have the knowledge and skills to be able to manage a business successfully; whether the taxpayer made a profit from similar activities in the past; whether the business is profitable in some years; and whether the business can make a profit in the future because of the appreciation of assets used in the business.


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