Long-standing sole proprietorshop inactive in 2019 but not abandoned---will rise again. What to do about tax filing?

[Arvidd]

Circumstances required that I not pursue my sole proprietorship business in 2019, but I will be engaging in business activities again through it in 2020. Until this year, this business had been in active operation for many years. In 2019, there was and will be no income and no expenses, nothing to report. I want to be sure to file correctly so that the IRS does not think that I have simply skipped reporting business income. Also, I don't want to compromise anything so that restarting business activity makes it awkward when it is time to file for 2020, when there will be income and expenses to report. How is suspending but not abandoning a sole proprietorship properly handled at tax time for both the year it is suspended and, subsequently, when business activity once again is being pursued?

[Critter]

If you have no assets being depreciated you could just enter $1 of income and $1 of expenses just to keep the Sch C active in the program. 

[Carl]

A business does not have to produce income to be considered "active" for the tax year. So you'll need to report the business income/expenses for 2019 to show the IRS that the business is active, and that you haven't sold, closed or otherwise disposed of the business.

Now the TurboTax program will not let you completed a zero dollar SCH C. So on the SCH C just show $1 of income and $1 of expenses to cancel out that income.

If your business has assets that are being depreciated, then you *WILL* continue to depreciate those assets if you want the IRS to consider your business as still being active. That doesn't change.

Now if your business has multiple depreciable assets, one thing you can do with all "EXCEPT" the major asset(s) is to show those assets as "removed for personal use" for 2019. That will stop depreciation on those assets. So long as you keep a minimum of one income producing asset "active" in the business, then the business will be considered to have been active for the entire year.

Then on the 2020 taxes you can take those assets removed for personal use, and change their status back to 100% business use for 2020.

Any expenses incurred by the business in 2019 will still be claimed on the 2019 return. However, if the business does not have the income to claim those expenses against, they just won't be "allowed" as a deduction on the 2019 return. Instead, the program will carry those unallowed expenses forward to 2020 where they can be deducted, provided you have the income in 2020 to deduct those expenses from.

But do note that if you don't "claim" your 2019 expenses on the 2019 return, then you can not carry them forward to the 2020 return.