J.K. Lasser's Small Business Taxes 2017

CHAPTER 4 Income 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. Investment-Type Income
7. Miscellaneous Business Income
8. State Income Taxes on Business Income
9. Net Operating Losses
10. Limitations on Business Losses
11. 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 the book have been taken into account. Income and loss for accounting purposes, 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 to offset income on a tax return. For tax purposes, if there is a net loss, then limitations may come into play on when and the extent ...