ForumsTaxes and Payroll

As a sole proprietor, you'll complete Schedule C for income taxes, and it will more or less guide you through the process you need to follow -- enter your Gross Sales, calculate and subtract your Cost of Good Sold, deduct your Expenses, and you'll get your Net Profit or Loss (which is transferred to the appropriate line on your 1040 Form. As long as your documentation (sales invoices, purchase receipts, credit cards bills, etc.) show that you sold an item for $20 that it cost you $30 to buy/make, you'll be fine. Well, maybe . . . if you only had that one sale all year long, yet incurred much greater expenses that resulted in substantial losses, there's a possibility the IRS could say that you weren't really engaged in a business at all, and they'd disallow the loss. If you think that might be the case, you'll probably want to seek a tax professional's advice before filing. Hope this helps. Best wishes.

Here's one more thing -- a pretty good article on what the IRS looks at if your business has a loss:
http://www.ipowerweb.com/iboost/manage/business/your_business/40004.htm