I have a question.... Last year, I decided to go bigtime and begin

[Ecumenist]

2 online businesses. I had the sites designed professionally, advertised, hosted- the whole 9 yards. I was under the impression that the start up costs, etc was 100% deductible up to 5K for website design and 5K for maintenance, hosting and advertising. I've read on informational sites that this was the case to. Does anyone know what the real skinny is on this subject?

[elfin]

1. I think you need a CPA/Tax friend for this query

I hope there are some of those in this forum.

Good luck!

Probably under small business write offs somewhere under the new recession guidelines, but I really have no idea

[Schema Thing]

2. I don't think there are any 5k limits

If design cost you 100k and maintenance cost you 100k, your profit or loss would reflect that 200k cost. Your cost are your cost, whatever they may be.

It is equipment that has limits on how much you can amortize in one year. For instance, under Bush, you could expense a 100K dollar custom hummer in the same year that you bought it. This provided many jobs, and the land prospered.

[csziggy]

3. You probably need to consult with a CPA and maybe a tax attorney

At least for your first year or two in business. Once you get a handle on how to do deal with your business expenses, then you may be able to go it alone.

I've had several small businesses for over thirty years. I still use a certified public accountant, even though it is a chunk of money out of my pocket every year. It is worth it - and the accountants I have used (it's only been two in thirty years, and only because the one I started out with retired and set me up with a new one) were terrific about letting me come in during the year and ask questions. They only charge me for the tax preparation and any audits, not for the questions. Over the years, I know it really helped me to have the expertise on call.

Although I was audited for several years, there were no significant changes and it was such a relief that the accountant dealt with the IRS agents. The audits were not his fault - our situation was the type that gets flagged by the IRS and gets them interested.

[cbdo2007]

4. Yes, please talk to a tax person who can look at your whole situation....

rather than trust any of us on DU.

No offense, I'm sure there are plenty of people here with good advice but tax preparation isn't something you should trust a message board for.

[Ecumenist]

5. I have a CPA but she doesn't seem to know much about online

businesses and the related tax deductions. She works with primarily agricultural clients and was great for us before but we've seemed to have crossed into an area she's knows little about.

[FrenchieCat]

6. Start up cost are normally amortized as are Organizational Cost.

There is a 5K option, in where you can elect to expense for each category not more than 5K of what would normally be considered an amortization type of expense, as long as the cost expended was less than 50K.

Equipment and so forth aren't amortized, they are depreciated, and there one can elect to depreciate via a sec 179 (which literally means to expense a capital expenditure that will still show up on a balance sheet, something normal expenses don't do) to the tune of $250,000.

More about Business Start Up Cost and Orgarnizational Cost 5K option:

A taxpayer can deduct up to $5,000 of start-up and $5,000 of organizational expenditures in the tax year in which the trade or business begins. Each $5,000, however, is reduced (but not below zero) by the amount by which the cumulative cost of start-up or organizational expenditures exceeds $50,000. Start-up and organizational expenditures not deductible in the year in which the trade or business begins are amortized over a 15-year period consistent with the amortization period for Sec. 197 intangibles.

A separate election statement is no longer required to elect to deduct up to $5,000 of business start-up and organizational costs paid or incurred after September 8, 2008.
http://www.another71.com/cpa-exam-forum/topic/organizational-expenditures-and-start-up-costs

Check regs for more info on amortization and what is allowed.
http://www.irs.gov/publications/p535/ch08.html#en_US_publink1000158840