Live Q&A: Ask us anything about TurboTax!

[Tom]

Preparing for tax season can be tedious—though we have some good news for you! Earlier this month, we partnered with TurboTax, and @TurboTax_Lisa answered a handful of your concerns.  Whether you're a small business doing taxes for the first time or an owner with multiple locations, TurboTax and Square can help you tackle tax season so you can get back to business.

🔎 Have a look at the questions (and answers!) that came through below, and don't forget to check out TurboTax's website to learn more!

Lisa Greene-Lewis is a CPA and tax expert for TurboTax. Lisa has over 20 years of experience in tax preparation. Her success is attributed to being able to interpret tax laws and help clients better understand them. Lisa also has a well-rounded professional background. She has held positions as a public auditor, controller, and operations manager. Lisa is passionate about breaking down tax laws and sharing tips to help taxpayers save on their taxes no matter what stage of life they’re in. For Lisa, getting timely and accurate information out to customers to help them is paramount. Lisa has contributed tax articles to local, national, and online publications, including US News & World Report and Huffington Post. Lisa has also appeared on news broadcast, the Steve Harvey Show, and the Ellen Show.

[MizDiabla]

What happens if you go negative in your business 3 years in a row with the IRS? How do you prevent your business from being deemed a hobby and essentially closed?

[TurboTax_Lisa]

Hello @MizDiabla,

Just because your business has three years of losses doesn’t mean that it’s automatically considered a hobby. There are other factors that the IRS considers. For example, did you spend significant time trying to earn a profit (even if you didn’t actually earn one)? Did you depend on the income from your business to support you? Are the losses due to circumstances outside of your control)? If you can answer “yes” to these questions, then there’s a good chance that your business won’t be deemed a “hobby”.

[flowerfairies]

What are the tax implications, if any, of becoming or being a hobby when formally a "business"?

[sayra]

Hey @flowerfairies - On here you can read more about our Square Tax Reporting. However, I would check with @TurboTax_Lisa or a tax professional near you for more clarity regarding tax implications in your state. 

Thank you.

[Tom]

Hello folks! I went to check on the status of this event and we're going to have to push back the time to later this month. Sorry to keep you waiting—rest assured that we'll follow through and get you in touch with the answers you need!

Keep the questions coming! Post a question now and we'll circle back to this thread with the updated date & time as soon as possible. 🙏

[thesunnyside]

Hi, I have my business where I do Chinese Medicine (acupuncture, cupping, herbal medicine, etc.) I am a professional tap dancer as well. In my opinion these are all under my business. I have heard that I only need to claim my freelance work if it is over $600. Is this true? If so, may I add this income to my business income? What is a good percentage of my business income should I save for taxes?

[TurboTax_Lisa]

Hi @thesunnyside,

Some businesses are so different that they should each be reported on their own Schedule C Profit or Loss from Business. Consider if someone would expect the two to normally occur in the same business. If they would, you can keep them together. If not, it would be better to report them on separate Schedule Cs. You should maintain records of these businesses separately to make preparing your return easier.

Income from freelance work should be reported on your tax return, even if it’s under $600. Any business expenses from your freelance work can also be deducted to reduce your taxable income.

The percentage of your business income to set aside for taxes will depend on how your business did during the year. It will also depend on your personal tax bracket. Unfortunately, there is no one-size-fits-all! The good news is that you pay tax on your business income, reduced by any business expenses. If you have a lot of expenses, this may mean your tax bill isn’t too bad. TurboTax offers some helpful tools to estimate your taxes.

[nandoajv]

[This reply was created from merging an existing thread: Reporting earnings to irs]

Do I have to report my earnings. To turbo tax even though I didnt qualify for a 10 99 form??

Please help

[MichiganFarmsta]

By the law you need to report your income.  Otherwise if you sign you tax forms saying that it is complete you are committing tax fraud.

[TurboTax_Lisa]

Hi there @nandoajv,

You still need to report your earnings even if you didn’t get a 1099 form. It’s still income that the IRS wants to know about, whether or not you were required to receive a form.

[TurboTax_Lisa · Accepted solution]

Thank you to everyone who stopped by and contributed questions! You can visit the TurboTax website to learn more about pricing and getting started.

We received some additional questions via social media and identified some themes that we'd like to address in this thread as well. Read on for more details! ⬇️⬇️⬇️

If I’m a sole proprietor or an LLC, which tax forms do I need to file?

A sole proprietor reports business income on Schedule C Profit or Loss from Business, which is included as part of your personal income tax return (Form 1040). Keep in mind that some cities may also require you to file a local tax return for your business that is separate from your personal income tax return. The exact form can vary by locality.

If you own an LLC outright, then the business income is reported on Schedule C Profit or Loss from Business and is included as part of your personal income tax return (Form 1040). Depending on the state where you do business, the LLC may be required to file a state LLC tax return. For example, in California an LLC generally must file Form 568 Limited Liability Company Return of Income.

Can I deduct my personal expenses?

Personal expenses should not be deducted as part of your business. To make it easy, keep personal bank accounts and credit cards separate from your business accounts and credit cards. This helps avoid any confusion and makes it easier to track your business cash flow.

If you do keep one account for personal and business expenses, just make sure you categorize which ones are personal and which ones are business.

TurboTax will help you put the business and personal expenses in the right places.

What are classified as deductible expenses for my business?

Luckily, there are lots of deductible business expenses! Things like rent that you pay for a co-working space or interest paid on business loans are both deductible. The following are some other expenses that could also be deducted:

‣ Supplies
‣ Business licenses/permits
‣ Insurance
‣ Expenses for business use of your home
‣ Inventory sold
‣ Wages for employees

Generally, so long as the expenses are ordinary and necessary expenses of running your business, they can be deducted. TurboTax will walk you through the common expenses for your specific industry.

Do I need to keep all of my receipts from business transactions?

Yes, it’s a good idea to save all receipts from business transactions. Things like paid bills, invoices, receipts, deposit slips, and canceled checks should be kept as support for your business transactions--electronic copies are okay! If you miss a few, that’s okay! You just need to be able to prove that you actually are paying these expenses in the course of your business. Saving them will just make your life easier in the future.

How can I make filing taxes for my business easy?

Filing business taxes is much easier if you maintain good records throughout the year and keep your business and personal expenses separate. Categorize your expenses ahead of time to make sure.

Also, getting an early start on your taxes helps avoid last-minute stress and gives you time to find tax help if you need it.

What are the top things small business owners need to be aware of when filing taxes?

Here are some good things to keep in mind as a small business owner:

‣ Know your tax deadlines. This may seem obvious, but it’s an easy one to miss if you’re focused on the day-to-day running of your business. This includes deadlines for sending employees their W-2s, issuing 1099s to contractors, and filing and paying sales and payroll taxes throughout the year.

‣ If your business is profitable, consider making estimated tax payments throughout the year to pay your tax as you earn your income.

‣ Don’t be afraid to extend your taxes if you need more time to organize your business information. Just remember that when you extend, you should pay your taxes as well.

‣ Leverage apps to make recordkeeping and tax reporting easier! There are lots of helpful options out there. Quickbooks will also allow you to categorize expenses and import them directly into TurboTax.

👉 Visit the TurboTax website to learn more about pricing and getting started. 👈

[roblesrodrigo]

Can I deduct business expenses from Walmart if I don't have receipts but I have a spreadsheet and I can show the transactions on my business account?

[GGVisions]

@TurboTax_Lisa If I’m a startup LLC and I haven’t had any income or expenses, do I still need to file taxes? 

& do I need to file if I just set aside money in my account for when I’m ready to start my business?