Question
How does writing off business expenses work?
I am in the United States. I do not understand this and am confused. Suppose an online company that resells products needs a computer to manage the business. This is an ordinary and necessary expense for the business. Do you just get it for free and the IRS pays for it? How does it work? Please explain in detail. Thanks.
11 months ago - 4 answers
Best Answer
Chosen by Asker
The IRS does not pay for it and you do not get it for free. You buy the item you need. With a computer, you need to depreciate it, but you can take full depreciation in the first year because it is a relatively small amount. Say you made $5000.00 for the year. A computer costs you $1000.00 and you had other expense of $2500.00. You subtract $3500.00 (total expenses) from the $5000 you made and pay taxes on the remaining $1500.00. You will need to get an accountant or bookkeeper to help you. Do a search for S.C.O.R.E., they offer help with understanding business and to help people run their businesses. They are retired business people
by Tim
11 months ago
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Other Answers
"The IRS pays for it" Of course, it's not true, the IRS is in the business of taking your money away from you, they will not send you money for your computer purchase. When you heard that the IRS would pay for it, it meant that when accounting for the purchase of this computer, the cost of the computer would be partly deducted off your business income tax. So in a way, if you make a profit, you pay less income tax because the purchase is deducted from the tax. If you overall business income is a loss, then you are not saving on income tax because you don't pay any.
by lilianlemaire- 11 months ago
The IRS pays for nothing. You will pay for the computer out of your own pocket and write off the expense on your taxes on Schedule C 1040.
by Frank M- 10 months ago
IRS will certainly work for you.
by Jim S- 10 months ago