J.K. Lasser's Small Business Taxes 2013: Your Complete Guide to a Better Bottom Line

CHAPTER 4

Income or Loss from Business Operations

Alert

At the time this book was printed, Congress had not extended numerous breaks for 2012 that had expired at the end of 2011. Check the online supplement in February 2013 at www.jklasser.com or www.barbaraweltman.com to see whether these breaks apply for 2012 returns.

The fees you earn for your services or the receipts you collect from the sale of goods are the bread-and-butter income of your business. Hopefully your pricing policies are realistic and you have a strong customer or client base so that you can make a profit.

Even if sales are healthy, expenses can outrun receipts, resulting in a loss for the business. You will not know whether you have a net income or loss until all of the expenses discussed throughout the book have been taken into account. If there is a net loss, then limitations may come into play on when and the extent to which business losses can be deducted.

It is now harder for businesses to hide income (not report it) because of new reporting requirements for transactions made on credit and debit cards. The processors must report to the IRS and to merchants the annual transactions, although there is an exception for small merchants (see Appendix A).

In this chapter you will learn about:

• Business income
• Income for service businesses
• Income from the sale of goods
• Income from farming
• Investment-type income
• Miscellaneous business income
• Net operating losses
• Limitations on business losses
• Where to report ...