@sandyf wrote:
I like the first two ideas best. And no, even tho I live in So Cal I do not do the shops like So Cal Mama and Steve where I would rent an island or travel for pricey bar jobs. My expense was $24 for what I had to purchase for the shop.It was not something that I can return. I would not deduct the fee I did not get but at least if I can deduct the expense I did not get reimbursed for that would be helpful Two our of three so far...I will also ask my tax guy about it and see what he says but I think this may be a grey area...thanks all.
You're on the right track. Money spent is expense. Money earned is gross income. You enter income on the forms, and you enter expenses elsewhere on the forms. There's more to it but ultimately you pay tax on the difference between gross income and expenses.
Consider this: a produce company buys 1000 bananas each week. They always sell at least 850, but usually the other 150 get iffy and are donated to a food bank. The selling price of the 850 exceeds by a wide margin the price they paid to buy the 1000 so they are making a profit. They keep buying 1000 each week because once in a while a regular customer needs some of the 150 before they go bad. When this happens, they sell at a higher than normal price and the produce vendor has an excellent week. And more importantly he keeps a regular customer that relies on him to meet his needs happy in the process.
Is the cost of the 150 that they usually don't sell a legitimate business expense? Yes, it is. Because they take a risk on that and sometimes it pays off handsomely. Your situation is no different. You took a risk on that shop and it didn't pay off. Last week it did pay off, and next week it likely will too.
The fee that you never collected, however, is just gone. You never had it so it isn't income...so you won't pay anything in tax for it either. You can't expense what you didn't spend, so you can't write off the fee you expected but did not get. But the expenses you actually incur in legitimate pursuit of a profit are legitimate, even if they don't net you a profit this time.
Edited 1 time(s). Last edit at 03/05/2020 10:35AM by JustForFun.