How do I close out a personal self employment business in TurboTax?

[wwgraessley]

My wife was a stay-at-home-mom part time real estate photographer for many years.  She put the photography on hold 3 years ago when she started a new job working full time.  The job has not allowed her time to pursue real estate photography and she now is ready to close out the self employment business.  We've been using TurboTax for years so it automatically carries the business information over from the previous year.

How do I do close out the business in 2019 in TurboTax?  It's just asking me for updates on income and expenses for the business.

Thank you,

Bill

[DianeC958 · Accepted solution]

As you go through the screens in TurboTax for the business there is a screen title Tell Us More About Your Business.  On this page you will see the option I sold or otherwise disposed of this business in 2019.

Then another question opens asking Did you dispose of the business in either of the following ways?  If you did not sell the business pick No.

[wwgraessley]

Hi Diane,

I changed my wife's personal photography business from inactive to discontinued.  My audit risk went from very low to very high.  TurboTax says the high audit risk is due to:

1. Having a Schedule C
2. Significant reduction in business income over the last year (not true-it's been inactive for 3 years)
3. Business expenses are significantly higher than business income ($0 income, $0 expenses, but ~$120 depreciation for camera gear).  

Is this audit risk an anomaly or am I better off just letting this business 'ride' as inactive?

Thank you,

Bill

[ColeenD3 · Accepted solution]

Yes, it is an anomoly, apart from continuing to depreciate an asset that has been retired to personal use. This is an appopriate action. You can't continue to depreciate a business asset if there is no business. 

In addition, for the past three years, if there was no profit motive (or income), this would have been considered a hobby. You would still not be able to depreciate the camera gear.

[SatansLittleTaxDemon]

Hi @ColeenD3,

This has been a very informative thread. I need one further clarification for my particular situation, however.

I have a self-employment business for which I bought a laptop in 2017. I have been depreciating it since. In 2019, my business was inactive as I pursued a different employment route. During 2019 I used the laptop for personal use, though I'm sure you could count 1% as still related to my self-employment business.

How do I go about depreciating my asset for 2019?

[AmyC]

You don't depreciate the laptop. If the business was non-functional, you did not use the laptop for business. In fact, your laptop must be used 50% or more for business any time that you claim it as business use. Please see IRS Deducting Expenses

@SatansLittleTaxDemo