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Robin D.
Robin D., Senior Tax Advisor 4
Category: Tax
Satisfied Customers: 14848
Experience:  15years with H & R Block. Divisional leader, Instructor
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I have been filing a Schedule C for my sole proprietorship

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I have been filing a Schedule C for my sole proprietorship for many years. I have but my business activity on a back burner, and don't have any profit or loss to report this year, but I am not closing down the business. Do I still have to file a Schedule C because I have in the past? Can I file without one this year, without doing damage to my future business tax treatment?

Robin D :

Hello and thank you for using Just Answer,
Yes, if your business has not been active you can leave off the Schedule C for this non active year. It is not just profit or loss you would report but the Gross Income.

Robin D :

So

Robin D :

If you have no absolutely no Gross income then you do not have to file the Schedule C

Customer:

Hi. Thanks.

Customer:

I dn

Customer:

I do not have any gross income to report.

Robin D :

Remember that the IRS sees an activity as a business by looking at past years

Robin D :

If you have ceased to do business then the IRS may reclassify as hobby if you do sporadic work in the future years.

Customer:

I did file showing a loss in the prior year, so I was a little worried that it would seem as if I was "closing" the business and that I needed to jump through some additional hoops.

Customer:

Yes, that is what I was worried about. What, in general, is enough to keep the business active?

Customer:

Any gross revenue?

Customer:

Or just adequate business records?

Robin D :

If you have been in business for many years and now the activity has stopped, not lessened but stopped, you would have the last 5 years to look to for being a business

Robin D :

There is nothing you need to do

Robin D :

Just keep up with your records.

Robin D :

Any gross revenue? Not really sure about what you mean but I was talking about any amount your business was paid

Robin D :

If $0 then you do not have to file

Customer:

Ok. Thank you!

Robin D :

You are most welcome

Robin D :

Your positive rating is always thanks enough

Customer:

I know that this may not be answerable, but if I did have some modest business expenses, but no revenue = is it better to file with a small loss to show activity, or to eat the expenses because they are negligible and not worth the effort of filing?

Robin D :

Losses can only be shown for a few years before the IRS reclassifies the business to a hobby.

Robin D :

The IRS presumes that an activity is carried on for profit if it makes a profit during at least three of the last five tax years, including the current year — at least two of the last seven years for activities that consist primarily of breeding, showing, training or racing horses.

Robin D :

This means the entire years the business is filing

Robin D :

If you are reclassified a s a hobby your losses are limited to your income (gross)

Robin D :

You can not depreciate and you do not file a Schedule C

Robin D :

Your losses can not be used against other income. If the business brings in $1000 and you lay out $1000 you are only allowed $1000 as a loss on teh Schedule A and not even use the C

Customer:

Perfect - that rule is very helpful, and I think that is what I needed to know. Thank you!

Robin D :

Again, your positive rating is always thanks enough.

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