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Business Tax Filing Requirements
- You must file regardless of income or expenses. The IRS allows claiming losses for only three of five years. After, if not making money, the IRS prohibits claiming losses.
- For 2020 taxes, file if over $12,400 adjusted income as a single under 65. Over $400 of net business income requires filing.
- No income but expenses requires filing Form 1120 or 1120-S. Your company structure influences filing requirements. Sole proprietorships, partnerships, S and C corporations, and limited liability companies have different rules.
Why Small Businesses Fail
- About 20% of small businesses fail in the first year; 50% within five years.
- Business owners rarely pay income tax directly with pass-through entities.
- Important to file taxes for LLC with expenses and no income.
Deductions and Credits
- If you have carryover deductions/credits can’t claim without income but file to claim in future profitable year.
- If reported accurately, can only go back three years.
Filing for Inactive Businesses
- If your partnership has no income or expenses that may qualify for deductions or credits, you do not need to file a Form 1065.
- If your partnership has any transactions that qualify for deductions or credits, an informational Form 1065 should be filed.
- If you have no income or qualifying expenses for the entire tax year, there is no need to file a Schedule C for your inactive business.
