TurboTax will ask you if you disposed of your business during the year. If you closed your business just by stopping operations, there is nothing else to do for your income tax return. However, if you sold the business to someone else, TurboTax will guide you through the disposition process and include the transaction on your income tax return. In the general profile of your business, you will indicate that you disposed of or stopped the business in 2020 - then you will be asked about the sale. All assets as well as the business need to be removed.
Business with assets
Things get a little more complicated if your business involves assets. In addition to filing that final Schedule C, you also have to give IRS details about your asset sales. For example, let’s say you run a small business by yourself making and selling desserts out of some retail space you rent, but after a few years you decide to move on.
Even if you dispose of the business in a single sale to one buyer, the IRS requires you to separately determine the value of each asset—the kitchen appliances, furniture, store lease, etc.—so that each is treated properly for tax purposes. Determining the assets’ market value allows you to calculate whether there is a taxable gain or loss in each case. You list the assets, plus the value and sale price of each, on Form 8594: Asset Acquisition Statement under Section 1060. Attach it to the 1040 you file for the year in which the asset sales occurred.
Business with employees
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