Worth to do taxes and expect a refund?

Originally Posted by easyrecycle

Not true. When you claim part of the house as business use it acts like a month to month rent. Does not matter if you own the house the sq feet it uses has a value and since you are not using that part as a home but to make money..it can be added as a cost of the household. So when you sell..its your house you just "rented" part of it out to a company (your name) or if you took out a DBA then it would be under that name.

Also, you do not need a DBA or any license to start a company (in most counties/states) as long as your not using some name you came up with but your name as "jack joe" but need to look into zoning laws as that can be an issue in some cases.

I am not attorney and I am not CPA. Any advice I give is up to you to look into.

This has not been my experience. When you sell a house, the tax return form clearly asks if you used any of it as a home office deduction. You can claim it was only rented to your business but the IRS will not buy that. If you do indeed rent it to your business, then you have rental income to claim and cannot deduct utilities. If you take the home office deduction each year then you have to report it when you sell your house. However, in my personal case, and they are all different, I found that my yearly deduction was greater than what it cost me at sale time.

As far as licensing requirements for a business go, it is different in each locality.

I am also NOT an attorney or an accountant.

I'm not an attorney but I am an accountant. The best answer that I can give is that it depends. It depends on your facts and circumstances, it depends on your intent, it depends on your record keeping (or lack thereof), it depends on whether you treat it as a business or whether you treat it as a hobby. I don't jump in much on tax questions due to this fact, because, it depends. This time I will add a few thoughts.

The tax code is written for people that own their own business. It is not written for people that have a job. Keep that in mind.

I will say that the 3 out of 5 year rule is a scare tactic. A tax practitioner with an good understanding of the rules knows that a legitimate business can and frequently will not always have a profit 3 out of 5 years. If you treat this like a business, report your gross sales and all of your legitimate expenses, it will help you IF you are ever audited in the future by showing that you were serious. If you don't treat this like a business, the reverse is true.

Is it reasonable for someone to deduct the expenses when they have a race car? It depends. Did they work to study the various classes that their car might fit into? Did they research what various tracks paid for prize money? Did they actively solicit sponsors? Did they search out advice from people that have been successful in the same types of racing? Did they win more prize money each year over a period of years and because of that become able to charge more for sponsorship placement on their car? Were they able to receive bigger discounts and/or free parts from national auto parts store chains? Did they hire mechanics with more skill than themselves? Did they move up to a different class to receive more prize money? And did they treat it like a business? Or, did they throw the car on the trailer on Thursday night, grab a cooler, a case of beer and a bag of ice on the way home from work Friday, jump in the truck and drive to the local track to drive in a race with their friends and then drink beer after the race? One is a business and one is a hobby. Keep this example in mind and apply it to any business idea that you have.

The answer always is, it depends. Keep records, take pictures, give business cards to everyone, and there will be no doubt that you have a business. If you use Google maps to look at my house, there is no doubt whatsoever that I have a scrap business. No one in their right mind would have a pile of, well I call it an inventory of non-ferrous raw material. My wife calls it my pile of junk.

Decide what you want to do and proceed. Just remember, it depends.