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Tax help

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My husband is a teacher and I have started a small business this year. I have not made very much money at all and when I fill out the business expenses portion of our tax form, it makes us have a huge refund. This is very scary, we have never received a refund before (this is my first year not working due to having a child).


It looks like the miles I have put on my vehicle are the culprit. (Alot of driving with the business).


I have not made much this year but I am hoping that all of the driving I did will benefit next year and my business will grow.


I guess I am saying I feel shady looking at my tax return and seeing that my business is a $25,000 loss. When in reality it just does not feel like I was so negative.......... Although I did not even break even.


Will it be flagged by the IRS? Should I limit my losses this year? So I the numbers on my forms do not look so strange?


Please any help would be appreciated.



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As long as you have receipts for the things you bought and kept track of mileage on a log yoiu will be fine, its very common for a business to have a lose in the first year or two, $25,000 may seem like alot but compared to most businesses that isn't that much in the eyes of the IRS

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In most cases, businesses will generate substantial tax losses the first few years. My first two years, my taxable loss was $50k+ each year, it looks like my 09-10 year will show a small taxable profit. As long as you have solid documentation on your deductions, take them.


Also, keep in mind that taxable profit/loss, is only for taxation. Many businesses are making money hand over fist, and generating a net loss on their tax returns. The opposite is also true, businesses losing money can generate a taxable net profit. Your taxable profit/loss is not the same as your operating profit/loss.

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