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Tax Exempt

by chris8248, Window Shopper

  • Created: January 15, 2013, 8:21 pm
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2 comments
I'm thinking about starting a small business in Georgia. A friend told me recently that when you start a business you are tax exempt for 3 years due to start up costs. Is that true? Also where would I be able to find information on the topic?
Tags: Discuss Popular Topics, Filing and Paying Taxes
‹ How to avoid/minimize further tax on distribution of C-corp retained earnings? First time business owner, how does estimated tax work and legal repercussion if I withdraw once a year? ›

JGabriel | Community Moderator | 1/16/2013 - 1:13 pm

Visit this page for additional information on taxes.

BizResearcher | Window Shopper | 1/16/2013 - 11:32 am

No, that is not true. All businesses must file a tax return each year. What
your friend probably means is that for three out of the first five years you
can deduct expenses in excess of income and show a loss on your tax return
without raising concern with the IRS. However, if you continually show a loss
year after year, you will raise a red flag and could be subject to an IRS
audit. The IRS expects you to be in business to make a profit. When you
don't, they can either declare your business a hobby (then you can only
deduct expenses equal to income, not show a loss) or they could consider it a
tax shelter and force you to close. The IRS website has an extensive section
on small business tax issues. You may want to spend some time reading through
it.