Reporting expenses for inactive business

[Samesmaeili]

Hi there. I'm a general and roofing contractor. Due to COVID and past couple years construction cost skyrocketing, I decided to work for others. Now I'm employed and have had no activities under my own company. However, I didn't want to inactivate my licenses in case something happens with the employment and I loose my position! 

My question is to know if I can still report my company's fixed expenses such as license fees and county/local municipal business tax receipt, continue education, and subscriptions for Quicken, PDFfiller,...? Back in 2022 I had some income but nothing during 2023.

Thanks-Sam

[DianeW777]

It depends.  If your company was active and operating in 2022, then you can deduct any expenses you paid in 2022 for business on your 2022 tax return.  You can amend or change it if you did not include those expenses at that time. 

If your business doors are closed, in other words you are not conducting business at the time those expenses are paid, then they will not be deductible. 

Even without income, you may be able to deduct your expenses, as long as you meet certain IRS guidelines. Your business loss can offset other income on your tax return and lower your overall tax bill. The test for being able to deduct your expenses is whether you are operating a true business and not practicing a hobby.  In your situation you did have a successful business operation until you were forced to close it due to lack of business.  

• Other helpful information:  Closing a Business