by cdaaccounting | Feb 7, 2020 | EDU
A loss on your Idaho business tax return in Hayden is by no means a sure cause for audit. It is not uncommon for new businesses to show a loss in the first year or two, with high start-up costs and early, slow Idaho business.
A warning, however,
to the people of Post Falls who manage to show a business loss year after year: if you do not show a profit for at least three out of five consecutive years, the IRS, if it audits you, might rule that your Idaho business is not really a business, but a hobby. The IRS treats any income from a hobby as taxable income, but losses are not deductible. By contrast, a business loss is deductible. (I you breed, train, race, or show horses, the IRS hobby loss test is two out of seven years instead of three out of five.)
The hobby loss rule is not a firm rule.
An Idaho business in Sandpoint can deduct losses for several years in a row without ever being challenged by the IRS. In the event of an audit, the IRS will allow the ongoing losses if they are convinced that you are operating a real business and trying, though unsuccessfully, to make a profit. The key issue is intent. What are you really doing? Trying to earn some money, or just having fun? It will help if your Idaho business looks like business-business licensees, income and expense records, bank account, business cards, and if you’re devoting to it in a businesslike manner.
by cdaaccounting | Feb 7, 2020 | EDU
Your Coeur d’ Alene Idaho business will be required to identify itself on tax forms and licenses by either of two numbers: your social security number or a federal employer identification number (called FEIN or more often EIN).
So, Hayden proprietors can use either number, your choice, except in situations where you must get an Idaho EIN. You must get an EIN if:
- You hire employees
- Your Idaho business is a partnership corporation. Or LLC.
- You are required to file a federal excise tax return (covered in the taxes chapter).
- You set up a qualified retirement plan (covered in the taxes chapter).
- You purchase or inherit an existing business.
- Your state or other government agency, a vendor or customer, your bank, or your insurance company requires you to have an EIN.
As you can see, although the federal identification number is called an “employer” identification number, the EIN is used by any Idaho business that needs a federal ID number, whether the Idaho business has employees or not.
Many Post Falls sole proprietors get EINs even when not required because the sole proprietors do not want to give out their social security numbers to customers and vendors.
- You get one EIN per business, even if the Idaho business has more than one location.
- You keep the same EIN for as long as you own the Idaho business, even if you move.
- If you have more than one unrelated Idaho business, you should have separate EINS for each Idaho business.
