How do i file for a closed business

[rcwkaw]

sole proprietor close

[Opus 17]

Just file as normal this year.  Include a schedule C as usual, listing all your business income and expenses.   I believe there is a question or check box to indicate the business ceased operations in 2021.  Depending on your assets and depreciation situation, you may have some items to deal with as part of the closure. 

[Critter-3]

Read this : 

https://www.irs.gov/businesses/small-businesses-self-employed/closing-a-business

[Carl]

Assuming you just closed your SCH C business and not a coporation type business, You'll indicate where asked, that you sold, closed or otherwise disposed of the business.

If the business had any inventory, your closing inventory balance must be zero. If not, then you must show the disposition of that inventory. If you did not sell that inventory, then simply select the option to indicate it was removed for personal use.  That will make the ending inventory balance zero.

If your business had any assets listed in the business assets section, then you must show the disposition of those assets. Assuming you did not sell those assets, work through each asset in the Business Assets section to indicate you stopped using that asset in 2021. Then if presented the "Special Handling Required?" screen, select YES on that screen. If you select NO, then you will be forced to enter sales information. Kinda hard to do if you did not actually sell the asset.

If your business claimed any vehicle use at any time while the business was open, you must show the disposition of that vehicle. Even if vehicle use was less than 100% business use. Simply work through the business vehicle section to show it's disposition. Most likely, you'll indicate it was removed from the business for personal use.

Once your end of year inventory balance is zero, all assets have been properly disposed of, and all vehicle use for the business has been terminated, that's generally it. There very well could be more. But for your typical SCH C business those three items are all you need to deal with. Other possibilities could include dealing with employee information if the business had W-2 employees, as well as any outstanding balances with 1099 contractors or sub-contractors of/to the business.

[Patrice033]

Hi.  The only box I see (for the 2021 tax year) for closing a schedule C business asks if I closed it in a "fully taxable transaction".  I was a small home baking business with no depreciable assets, no outstanding expenses, inventory went to zero (personal use) and no vehicle used.  I don't think I can check this box as there was no "taxable" transaction to close my business.  I notified the appropriate agencies, had no employees, etc.  I thought of writing next to my business name "closed business on 10-01-2021" to alert IRS of my status.  Short of that I know I can write the IRS and advise them my business closed.  Any other thoughts would be greatly appreciated.

[AliciaP1]

You do not need to check the box.  You just need to file your 2021 Schedule C with your business information from when your business was in operation in 2021.  As long as you do not have any 1099-MISC or 1099-NEC forms reported to you in 2022 for this business, the IRS will not penalize you or require additional filing information.

From the IRS:

Since you noted you did not have assets to sell you will not need to file the additional forms listed here.

[Edited 02/08/2022|12:04 PM PST]

[Patrice033]

Thanks, Alicia, for the added information!  I do try to be thorough and research a lot since I do our taxes.  I also found a "flyer" on the IRS.gov website for closing a Sole Proprietorship business that listed those and other items to take care of.  In addition, there was a section that said to send the IRS a letter re:  closing business and the reason why.  Address is IRS, Cincinnati, OH 45999.  Again, I appreciate your help!

Have a great day!