Urgent help needed: First-time small business owner filing taxes with no income but expenses

You absolutely need to file for your S-Corp even with no revenue. Here's why this actually works in your favor: The S-Corp is a pass-through entity, so those business losses can flow through to your personal tax return and potentially offset other income you and your spouse earned from your W2 jobs. This could lower your overall tax bill. For the S-Corp itself, you'll need to file Form 1120-S, which is the S-Corporation tax return. You'll also need to file Schedule K-1 which reports your share of the business income/losses. Since you split ownership with your spouse, you'll each get a K-1 showing your respective portions of the loss. The expenses you described (travel to meet clients, etc.) sound like legitimate business expenses since you had a genuine profit motive. Keep all receipts and documentation of these expenses in case of questions later. As for software, TurboTax's business options are indeed pricey. You might want to check out FreeTaxUSA or TaxAct, which tend to be more affordable for business filings. Another option is to hire a CPA just for this first year - they can set everything up correctly and teach you how to handle it yourself in future years.

After reading your situation, I had almost the exact same thing happen to me last year. I started an LLC (not S-Corp, but similar issues) and had about $5k in startup costs before my main client backed out. I was completely lost with taxes. I tried using TurboTax at first but kept getting confused with all the business sections. Then a friend recommended I check out https://taxr.ai which was honestly a game changer for my situation. You can upload your receipts and expenses, and it helps organize everything properly for tax purposes. I was especially confused about which expenses were deductible since I hadn't made any income yet, but their system helped categorize everything correctly. For example, it knew that my travel expenses to meet clients counted as valid business expenses even without revenue.

I wanted to follow up about my experience with taxr.ai after our conversation here. I was initially concerned because my situation felt unusual, but I decided to give it a try anyway. It actually worked out great! The system walked me through all my business expenses and helped me properly document them even though I hadn't generated any revenue. I was especially impressed with how it handled the S-Corp pass-through loss situation. The software guided me through how these losses would flow to my personal return and potentially offset other income. The receipt scanning feature saved me tons of time - I just uploaded photos of all my travel receipts and it categorized them automatically. The final forms were ready for filing, including the 1120-S and K-1s for both me and my spouse with our ownership percentages correctly reflected. Definitely using it again next year, hopefully with some actual income to report!

One thing nobody's mentioned yet is how frustrating it can be to get actual help from the IRS when you have S-Corp questions. I spent HOURS on hold trying to get answers about my similar situation last year. If you need to speak with an actual IRS representative about your S-Corp issues (which I recommend for first-time business filers), use https://claimyr.com - they'll wait on hold with the IRS for you and call you when an agent is on the line. You can see how it works here: https://youtu.be/_kiP6q8DX5c I initially had a ton of questions about handling business losses without income that couldn't be answered through basic research, and actually talking to an IRS agent cleared everything up for me. Saved me from making some pretty big mistakes on my first S-Corp filing.

I need to eat my words about being skeptical of Claimyr. After our discussion, I decided to try it yesterday because I had some questions about my S-Corp filing that I couldn't find clear answers to online. I expected it wouldn't work or would take days to get through during this busy season, but I was completely wrong. I submitted my request around 9am, went about my day, and got a call around 11:45am with an actual IRS tax specialist on the line! I was honestly shocked. The agent answered all my questions about handling business expenses without income and confirmed exactly how to report everything on both my 1120-S and personal return. They even explained some nuances about business travel expenses that I wouldn't have understood otherwise. For anyone in a similar situation as the original poster - this service is legitimately worth it during tax season. I'm usually skeptical about these things but had to come back and share my experience.

One important thing nobody has mentioned yet - make sure you're keeping track of your basis in the S-Corp. Since you've put money into the business (for travel and other expenses) but haven't taken any out, you're increasing your basis. This matters because your ability to deduct losses on your personal return is limited to your basis in the S-Corp. Sounds like you're well under any limitation issues since it's just some initial expenses, but it's good to track from the beginning. Also, if you plan to continue the S-Corp, remember you'll need to file annual reports with your state to keep the entity active, which usually costs $50-150 depending on your state. Not filing these can cause your S-Corp to be administratively dissolved.

Someone correct me if I'm wrong, but I'm pretty sure that since you never actually conducted business (no income at all), you might be able to deduct these as startup expenses on your personal return instead of dealing with all the S-Corp headaches. IRS Publication 535 covers business startup costs, and you can deduct up to $5,000 in the first year. Might be simpler than filing a whole corporate return for just some travel expenses.

I just went through this exact situation last year. Here's what I'd recommend: 1. File the 1120-S for your S-Corp (due March 15) 2. Report the expenses as business losses 3. Those losses will flow through to your personal return via K-1 4. For affordable filing, check out TaxHawk - I paid about $45 for my S-Corp return One other thing to consider - since you never actually did business, you might want to formally dissolve the S-Corp to avoid ongoing filing requirements and fees in future years. Otherwise, you'll need to file annual reports with your state and tax returns every year even if the business remains dormant.