J.K. Lasser's Small Business Taxes 2022

CHAPTER 4Income or Loss from Business Operations

1. Business Income
2. Income for Service Businesses
3. Income from the Sale of Goods
4. Income from Farming
5. Income from Commercial Fishing
6. Income from Rentals
7. Income from Government Programs
8. Investment-Type Income
9. Miscellaneous Business Income
10. State Income Taxes on Business Income
11. Noncorporate Excess Business Losses
12. Net Operating Losses
13. Other Limitations on Business Losses
14. Income Earned Abroad

The fees you earn for your services or the receipts you collect from the sale of goods are the bread-and-butter income of your business. Hopefully, your pricing policies are realistic and you have a strong customer or client base so that you can make a profit.

Even if sales are healthy, expenses can outrun receipts, resulting in a loss for the business. You will not know whether you have a net income or loss until all of the expenses discussed throughout this book have been taken into account. Income and loss for accounting purposes (referred to as “book income”), which reflects the actual money in and out of the business, may not be the same as income and loss for tax purposes. The reason: Some income may be treated as tax free or tax deferred, so it is not counted currently, while some expenses may not be fully or even partially deductible. For example, the business pays a $1,000 governmental fine, which reduces its profits for accounting purposes by $1,000; for tax purposes, the fine is not deductible (see Chapter 22), so it cannot be used ...