I need help understanding which version of Turbo Tax to use for Sole Proprietor LLC

[mische7]

Hi there. In the past I've used the Home and Business version. (My day-job with a tech company required I have a business entity but I also had/have a true business - a small jigsaw puzzle company - on the side.) However, I now have a regular W-2 day job and then my puzzle company. I could use help understanding what version of Turbo Tax is best at this point.

Here are some details:

1. With my W-2 job, I work part of the year in NC and part of the year in WA. (the company is in NC.. I live in WA)

2. My puzzle company does have an EIN.

3. With my puzzle company, I never take money out. I'm not employed by it in any way and have done no owner draws. (it's turned out to be a labor of love... yes, I know i need a different strategy.  It's a super tough market!)

4. I've never taken a tax write-off for the company in my personal taxes. I simply viewed it as it's own thing. However I track everything with the business in Quickbooks so the info is there. I've made a very large donation of puzzles this year to Toys for Tots so I want to account for that somewhere that's helpful to me. (I assume in a Schedule-C?)

Should I continue on with the Home & Business edition or is that more than I need at this point? I'd love some advice. Thanks in advance!

[IreneS · Accepted solution]

Since you have a sole proprietorship return, you should use TurboTax Home & Business (CD/Download) or TurboTax Self-Employed (online).

1. Since you work part of the year in both NC and WA, you will have to file a part-year resident return for NC.  [As you know, WA does not have a personal income tax.]
2. It's good to have an EIN, but not necessary for a sole proprietorship.  It will come in handy if you decide to become an S-Corp in the future.
3. "Labor of Love" is OK!  However, if you don't show a profit for 3 out of 5 years, the IRS may consider your business a "hobby" and you would be able to only deduct expenses up to the business income.
   
4. If you have business income you should be reporting the income on your tax return (as well as your expenses).  Charitable donations, even if made by your business, are deducted on the 1040 return (Schedule A), not Schedule C.

You should continue on with the Home & Business edition.  Best of luck with your jigsaw puzzles!!!

[mische7]

This is amazing. Thank you!! 🙂