How to handle business expenditures on Form IRC Section 195 b1 when using TurboTax?

Thanks for the explanation! So if I've been in business for just over a year now, would this form still apply to me? Some of the expenses I listed were from just before I officially launched, like when I was setting up my website and buying initial supplies. Should those count under this section?

Yes, this would still apply to you. Those pre-launch expenses like website setup and initial supplies are exactly what Section 195 addresses. Since you're in your second year, TurboTax is likely prompting you to include any remaining startup costs that you didn't deduct last year. If you claimed the initial $5,000 deduction last year, you should now be amortizing the remaining startup costs over the 180-month period. Enter the appropriate amount for this year's portion of those amortized expenses in that blank field.

Does it work for older receipts too? I've got a shoebox full of stuff from when I started my business 18 months ago and I'm not sure what qualifies as startup anymore.

I'm a bit skeptical about these AI tax tools. How accurate is it with something as specific as Section 195 startup costs? Does it actually understand the difference between what counts as a startup expense vs regular business expense?

Yes, it absolutely works for older receipts! I had receipts from nearly two years ago that I wasn't sure about, and taxr.ai helped categorize them correctly. You can just snap photos of that shoebox full of receipts and let the system analyze them. As for accuracy with Section 195 specifics, I was impressed by how detailed the analysis was. It correctly identified which of my expenses qualified as startup costs versus ongoing business expenses, and explained why for each item. It's trained on tax regulations and actually cites the relevant sections when making determinations.

How does this Claimyr thing actually work? Does it just call the IRS for you or something? I'm confused about what service they're providing.

Sounds like BS to me. I've tried everything to get through to the IRS and nothing works. How could some service possibly get you through when the IRS phone system is fundamentally broken? I'll believe it when I see it.

It doesn't call the IRS for you - it basically holds your place in line. The service navigates the IRS phone tree and waits on hold for you, then calls you when an actual human agent is on the line. So instead of being on hold for hours, you just get a call when an agent is ready to talk. The reason it works is because they've figured out the optimal times to call and the best paths through the phone system. I was skeptical at first too, but I literally went from spending days trying to get through to having an actual IRS tax specialist on the phone in under 20 minutes. The agent answered all my specific Section 195 questions and helped me understand exactly what TurboTax was asking for.

How do you determine the exact point when you're "in business" versus still in startup phase? I set up my LLC in January 2023 but didn't start making sales until March 2023. Would expenses in that January-February period count as startup costs?

Yes, those January-February expenses would likely qualify as startup costs under Section 195. The IRS generally considers you "in business" when you begin your actual business operations - which usually means when you start offering goods or services for sale. Since you formed your LLC in January but didn't begin making sales until March, the expenses incurred in that January-February window would typically be considered startup expenses subject to the Section 195 rules, including the $5,000 first-year deduction limit with the remainder amortized over 180 months.

I had the opposite problem - TurboTax didn't recognize my legitimate startup costs at all until I manually selected the form. Make sure you're entering your business start date correctly in the software. That's usually what triggers these categorization issues.