Money Talk: Answering Common Tax Season Questions

It's been a couple of weeks since the start of tax filing opened for individuals and businesses and federal authorities say more than 30 million small businesses are filing taxes.

Our friend Paul Hood joined News On 6 to answer some common questions for business owners.

Q1 - What sort of expenses are tax deductible?

Paul: So the Internal Revenue Code has certain things in there that are very specific that you can claim. But there are other generic things as well. And what the Internal Revenue Service says, Is it ordinary and necessary to create a profit in your business, what I try to tell people is think of the IRS as your business partner that doesn't really do much, doesn't show up to work most of the time. But all we have to do is convince that business partner, hey, this is this is going to help us turn a profit.

So anything that remotely relates to the production of that income we can take, okay?

Q2 - What if your business lost money last year? Is there any sort of tax break?

Paul: It depends on how the entity the business is structured. If it's what's called a C Corp kind of stands alone, everything else pretty much flows down to the owners. And you can have a loss, you know, a large portion of very large portion Internal Revenue Code is for business owners.

And it's it's to encourage entrepreneurship and to encourage risk-taking. So it's expected to have a loss for a while. Now, what you have to have is you have to potentially if you have a loss for so many years, the IRS could come in and say, "Is this a hobby" or "Show us that there's a profit intent," right?

So there's nothing wrong with having a loss but yeah, that loss on your business can offset other income.

Q3 - Things that you use for your business can be written off as well. Is that accurate?

Paul: Yeah, yeah. If it helps you create profit revenue, you can tax deduct it.