I run a used car business in Pennsylvania that I officially opened in November, 2012. We had huge losses for that year because everything was an expense from licensing all the way up to inventory.
This past year, 2013, was more losses as the business is new and very little money was actually made yet plenty was spent to try and keep it floating.
Now the accountant did our taxes for the year and claims we made more money than I know we did. I know they are overlooking something and I don't want to get screwed for it. First, I know that they are looking at the cars I had sitting on my lot at the end of the tax year and counting that as all profit. I don't believe that is correct though. Just because I have a car priced at $5k doesn't mean it will sell for $5k and they are not taking into account how much I actually owe to the floor company to release that vehicle to me when I do sell it. So this is one problem I am trying to correct.
Here are my other questions:
1) I could swear I read somewhere that a business can claim first year start up losses against the second year....something like that but perhaps I am mistaken. True or not?
2) My wife is telling me that the accountant isn't counting building rent, phone, internet, etc....I am 99% sure that all of this is a business expense and is to be counted against profit. Am I wrong? Perhaps my wife is not understanding what they said.
3) We had to add a large sum of money from our own savings account back in may to keep us floating...is this profit or not? Shouldn't this be some sort of loss?