Tax Preparation Archives - Bridge Group Tax

April 12, 2022

Filing-Taxes-for-Small-Business-With-No-Income-To-File-or-Not-to-File-1280x487.png

So, you started a business, then let it sit for a little bit, hmm? If you didn’t earn income for an entire year, you might be wondering if you have to file your tax return. So, how does filing taxes for small business with no income work?

To file, or not to file? That is the question we all must ask.

Reasons why you might not have income in a fiscal year

Not all businesses without income during a year are on their way to closing up shop. There are a number of reasons why a business might not incur income during a fiscal year.

Here are four common situations that could result in no income:

Situation #1: The go-getter that forms a business but waits to start operating.

Some business owners put in the work to form and structure a business a year or more before operations begin.

Does this sound like you? If you formed your business and filed the paperwork with the state (e.g., limited liability company) but wait to officially start, you may not have income during the year.

Situation #2: The entrepreneur who starts multiple companies … then pauses one.

Your brick-and-mortar business is going great, so you decide to open a new, separate online business. Unfortunately, your marketing efforts fall flat, so it doesn’t do very well.

You lose interest and put a “brief” hiatus on it. You hope to get back to it eventually. Weeks turn into months, and before you know it, you’ve gone a fiscal year without incurring income.

Situation #3: The seasonal business owner dealing with pandemics or natural disasters.

You run a seasonal business. You’re gearing up, ready to open shop for the season, and then Bam!

A natural disaster or pandemic (cough, COVID-19) hits, and you’re forced to stay closed for the season. Which means you won’t be able to open shop until the following fiscal year.

Situation #4: The business that’s at the end of its journey but isn’t officially closed yet.

Some businesses begin the process of closing, but the business owner doesn’t get around to cutting the final cord. So, operations wind down and the business closes … but not officially.

If this sounds like you, you might have a fiscal year (or two or three), where your business has no income.

What about expenses?

Regardless of your situation for not incurring revenue, you fall into one of the following categories:

No business expenses and no income
Business expenses but no income

The category you fall into might influence whether you need to file a tax return with the IRS or not, depending on your business structure. So, keep that in mind as we move on…

Filing taxes for small business with no income

Do I have to file business taxes if my business made no money? This is the question you came here to answer.

And we have answers.

But, your responsibilities for filing taxes for small business with no income depends on your company structure.

The different types of company structure include:

Sole proprietorship
Partnership
Corporation (C Corp and S Corp)
Limited liability company (LLC)

Read on to learn what form each type of structure files and whether you must file it with the IRS in years without income.

Sole proprietorship

Sole proprietorships are businesses owned by one person. Rather than filing a specific tax return, you simply fill out Schedule C, Profit or Loss From Business, and attach it to your personal income tax return, Form 1040.

So, is it necessary to file Schedule C in a year with no income? Maybe.

During a year with no income and no expenses, you generally don’t need to file Schedule C. But, doing so might be a good idea. When it comes to taxes, it’s better to be safe than sorry. So if you plan on not filing a return, be absolutely sure that the IRS won’t think you should have. And, verify that you did not receive any non-income payments related to your business.

If you had no income but had expenses, filing might also be a good idea. You might be wondering, Can I deduct startup costs with no income? If you have no income but did have expenses, you may be eligible to receive a tax refund or credit by filing.

The bottom line is:

No income, no expenses = Filing Schedule C generally is not necessary
No income, but expenses = Filing Schedule C can help you receive a refund or credit

Partnership

What is a partnership? Partnerships are businesses that are owned by two or more people. If you own a partnership, you must file Form 1065, U.S. Return of Partnership Income. And, you need to distribute Schedule K-1, Partner’s Share of Income, Deductions, Credits, etc., to partners.

OK, you might be thinking. But do I have to file business taxes if no income is earned?

If you had no income and no expenses, you do not need to file the partnership tax return. Like sole proprietors, verify that you don’t have any hidden income or expenses that you forgot about before skipping your filing responsibility.

If you had no income but had expenses, you must file your information return. That way, the IRS knows about payments that could be treated as deductions or credits.

The bottom line is:

No income, no expenses = Filing Form 1065 generally is not necessary
No income, but expenses = Filing Form 1065 is necessary

Corporation

A corporation (“C Corp”) is a business structure that is a separate legal entity from its owners. Corporation owners must file Form 1120, U.S. Corporation Income Tax Return.

Corporations can also decide to form an S corporation. S Corp owners must file Form 1120-S, U.S. Income Tax Return for an S Corporation. Both C and S Corps follow the same guidelines for filing taxes with no income.

If you had no income, you must file the corporation income tax return, regardless of whether you had expenses or not.

The bottom line is:

No income, no expenses = Filing Form 1120 / 1120-S is necessary
No income, but expenses = Filing Form 1120 / 1120-S is necessary

Limited liability company

The form an LLC is responsible for filing depends on how the company is taxed. An LLC might be treated as a:

Sole proprietorship
Partnership
Corporation

Follow the filing guidelines for the appropriate business structure your LLC is taxed as.

Filing tax return with no income: Chart

Skimmed to the end, eh? No worries. Use the following chart to help you determine your responsibilities:

Business Structure	Do You Have to File a Tax Return With No Expenses and No Income?	Do You Have to File a Tax Return With Expenses and No Income?
Sole Proprietorship/LLC taxed as a sole proprietorship	Generally, no	Generally, no, but it can help you receive a refund or credit
Partnership/LLC taxed as a partnership	Generally, no	Yes
Corporation/LLC taxed as a corporation	Yes	Yes

This is not intended as legal advice; for more information, please click here.

by admin

January 11, 2022

Right after the holiday season, comes tax season, filing your personal or business taxes requires a good amount of attention to the details. It doesn’t matter if you hire a professional or do it yourself for the filing. It is a must to know a few things BEFORE you proceed.

Here are the five things we advise you to bear in mind before filing your taxes:

1. Year End Is The Most Important Time

last minute tax filing rush

December end – to be precise, 31st December, is the date on which the IRS “closes and resets.” So, try to avoid paying in excess or receiving significant transactions which may carry over in year end. Plan the big transactions for your personal/business in advance and wrap up by November end. Be proactive in filing sales and employee tax withholdings by year end. In January it would be too late. After all, you don’t like that last minute rush, do you?

2. Make A Document Checklist

If you’re a full time employee, your employer is most likely to give you either a W2 or a 1099. You will need your ID, your SSN too, a prior-year tax return, and any applicable information on your dependents. Always remember to keep the IDs of dependents along with birth certificates and SSNs handy (whether digital copies or hard copies).

3. Keep A Clear Track Of Income And Expenses

tax-return-filing

As we discussed earlier, filing requires you to pay special attention to all the details. This mainly involves keeping a clear track of your income and expenses classified in applicable sections of your books. If you’re self-employed or a business owner, this becomes even more essential. You can also plan to hire a tax professional ahead of time.

4. Personal v/s Business Tax Filing

personal-and-business-tax-filing-difference

Have a clear understanding that personal taxes are only applicable to your income and your expenses as an individual. While your business is a totally separate entity in the eye of the IRS. Even when you’re a Sole Proprietor or owning a company individually such as a single member LLC, any expenses or income to the business should be utilized through the business bank account and documented separately to be produced as a Business Tax Filing.

5. No Question Is Silly When It Comes To Tax

Taxation rules and regulations in the USA are ever changing. At the same time, each filing is different based on individual or business type, circumstances and applicable rules to the business category (in case of business filing).

general-tax-filing-questions
So, it’s always a smart thing to ask your questions & share concerns with a Tax Professional. Even when you feel that it’s a silly thing not to know. Search online.

There are plenty of resources on Google and YouTube to help you with Tax Preparation readiness and Documentation preparation.

You can also Contact Us and schedule a Free Consultation for your Tax Filing and Financial Planning.
Explore Frequently Asked Questions on Tax Filing for a better understanding.

by admin

January 31, 2020

Filing tax returns can be a daunting task every year and involves hassle, particularly if you are not familiar with how to do it as well as forget some steps. Here arises the need to get in touch with a professional tax preparer that can do the job with precision. It is the utmost priority of the individuals and organizations to file tax returns every year. In recent times, it has been found that the majority of people choose a tax preparer to do the work for them rather than doing it themselves online.

When you hire a tax preparer, there are certain mistakes while filing the tax returns that can be avoided. They take account of the nitty-gritty, though there are several reasons why one must choose a professional tax preparer for handling the taxes over electronic methods. Some benefits are as follows:

Accuracy- tax returns filing involves numerous calculations, receipts gathering, invoices, and other essential documents. Thus, it is indeed very easy to make mistakes; a simple mistake might lead to severe problems. This is the reason why most people now prefer hiring a professional tax preparer. Precision is guaranteed when a professional tax preparer works on the taxes.
Speed- tax returns filing takes a lot of time when you think of doing it yourself. But when you hire a tax preparer, the work will be done in the quickest possible manner.
Professionalism- tax returns filing must be done professionally. Hiring a professional will not give you anymore headache and they will follow the tax laws while filing the tax returns on your behalf.

Now, it is clear the importance of hiring a tax preparer. You must not think twice and hire the professional at the earliest to do the job on your behalf while you sit back and relax.