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FORTUNE Small Business:

When to start filing your business taxes

Ask FSB fields a question about how much money you have to make to file as a business.

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Ask FSB
Get small-business intelligence from the experts. Here's a chance for YOU to ask your pressing small-business questions, and FSB editors will help you get answers from the appropriate experts.
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(FORTUNE Small Business) -- Dear FSB: How much do I have to make to claim a small, prepaid legal business? The company only brought in only $300-$500 last year. How should I file this under my taxes?

- Karen Alice Cobb, North Hollywood, Ca.

Dear Karen: Although the term "business" is not defined in tax code, it has been described as an activity carried on for a livelihood or profit, says CPA James Kellogg of Fullerton, Calif.

So, if you're attempting to make a profit or earn a livelihood from offering prepaid legal services, you would qualify as a business, Kellogg says.

Indeed, Internal Revenue Code Section 16 defines gross income to include income "derived from business" and "all income from whatever source derived," Kellogg says.

File any business income and expenses on the "Profit or Loss From Business" Schedule C along with your individual 1040 form, Kellogg says.

Should you incorporate or otherwise change your operation's tax status, your filing requirements may change. For example, an S-corporation would report income instead on Schedule E.

Remember that if you're reporting a net loss, you cannot claim a home office deduction, says Los Angeles-based CPA John Stoller.  To top of page

How do you claim your small business expenses? Share your advice for Karen in our forum.

More tax advice from the archives:

Cut your tax bill with write-offs

What can self-employed workers deduct?

5 smart tax moves
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