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Employee
June 1, 2019
Question

Whenever I enter a business expense my refund goes down- am i to put a negative amount in for expenses?

  • June 1, 2019
  • 2 replies
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2 replies

VolvoGirl
Employee
June 1, 2019
No do not type a negative.  By increasing your deductions and expenses it will decease your income and you may not be getting as many credits as before like the EIC credit. You can't go by the refund monitor until you have entered everything in. Also after you reduce your income to zero there is no more refund to get back.

And business expenses will reduce your net profit on schedule C which will lower your taxable income.  But even though you are reducing the regular income tax on your total AGI, you will still owe Self Employment tax on a net profit of $400 or more on schedule C.

Be aware, if you have self employment income you can get in trouble for not reporting all your expenses to qualify for EIC.  See this IRS page, scroll to the bottom and see the Caution notes,
http://www.irs.gov/publications/p596/ch04.html
Employee
June 1, 2019

No, you should enter them as positive numbers.

The most common reason for this is the Earned Income Credit.

This credit is on a curve that increases from zero earned income to a peak income level and then goes back down and zeroes out at a certain threshold.

Therefore, a reduction in income can cause either an increase or a decrease in your credit amount and your refund.

Legally, you must deduct all eligible business expenses on your return.

You can see the Earned Income Credit table at the link below.  Check out your income before the expenses and your income after to determine the change in your credit.

 2015 Earned Income Credit table