The sale of a business is comprised of the sale of individual physical assets (if any) and the sale of intangible assets such as goodwill. You will need to tell TurboTax you've sold the business and then record the sale of any assets or goodwill.
To tell TurboTax you've sold the business in TurboTax Home & Business:
To tell TurboTax you've sold the business in TurboTax Business:
The sale of goodwill is a capital asset and should be reported on Schedule D. You should also have Form 8594 completed (both buyer and seller do this and they should agree). If you do not file a correct Form 8594 by the due date of your return and you cannot show reasonable cause, you may be subject to penalties.
Per the IRS, The purpose of filing the form is "Both the seller and purchaser of a group of assets that makes up a trade or business must use Form 8594 to report such a sale if goodwill or going concern value attaches, or could attach, to such assets and if the purchaser's basis in the assets is determined only by the amount paid for the assets."
This form is not available for electronic filing, so you will have to mail in your return.
For further information about the form 8594, please refer to the instructions for IRS form 8594 at the following link:
The sale of a business is comprised of the sale of individual physical assets (if any) and the sale of intangible assets such as goodwill. You will need to tell TurboTax you've sold the business and then record the sale of any assets or goodwill.
To tell TurboTax you've sold the business in TurboTax Home & Business:
To tell TurboTax you've sold the business in TurboTax Business:
The sale of goodwill is a capital asset and should be reported on Schedule D. You should also have Form 8594 completed (both buyer and seller do this and they should agree). If you do not file a correct Form 8594 by the due date of your return and you cannot show reasonable cause, you may be subject to penalties.
Per the IRS, The purpose of filing the form is "Both the seller and purchaser of a group of assets that makes up a trade or business must use Form 8594 to report such a sale if goodwill or going concern value attaches, or could attach, to such assets and if the purchaser's basis in the assets is determined only by the amount paid for the assets."
This form is not available for electronic filing, so you will have to mail in your return.
For further information about the form 8594, please refer to the instructions for IRS form 8594 at the following link:
This answer is outdated. Also, the method described is only applicable if you actually sold your business entity, like selling the corporation or LLC. This solution doesn't work if you sold only your business assets (goodwill, customer base, tangible assets) but you still own the business entity.
is this response still work for the 2019 edition of TurboTax?
Hi,
I'm using TurboTax Home and Business 2019 and from what I read, I need to dispose of my sole prop business. I turned the Sole Prop (2012-2018) into a SCorp in 2019. (I'm using TurboTax Business to deal with the corps 2019 taxes).
In TurboTax Home and Business 2019 >Business Tab > Business and Income Expenses > Let's Conform your business info> Disposed of Business Current Year> I checked marked "I sold (or disposed of ) my business in 2019. > Selected "No" because the three items don't apply.
I think this is all I do. I don't see any other "date" entries or questions. What I'm concerned about is, TurboTax still leaves the company in the "Business Income and Expenses" area prompting me to fill in all the information. Is this suppose to be like this? Just ignore?
Where can I double check in the "Forms" to see that I'm reporting to the IRS I'm disposing of this sole prop entity?
Many thanks!
All you need to do now is retire any assets you have listed ... no where on the Sch C will it say FINAL form.
You can peek at only the Federal form 1040 and the summary of the state info by going here:
1) lower- Left side of the screen...click to the left side of the "Tax Tools" text selection.
2) then select "Tools"
3) then select "View Tax Summary" from the pop-up
4) then back to the left-side and "Preview 1040"
Then hit the "Back" on the left side to get back to your tax entries.
To view your entire return using the online editions (including the state) before you file, you will need to pay for your online account.
To pay the TurboTax online account fees by credit card, without completing the 2018 return at this time, click on Tax Tools >>> Tools and then Print Center. Then click on Print, save or preview this year's return. On the next page, to pay by credit card, click Continue. On the next screen it will ask if you want Audit Defense, if you do not want this option just click on the Continue button. The next screen will ask for all your credit card information so you can pay for the account.
Hello - I am using Turbo Tax for Business. My S Corp business sold during 2019 for which I received a payment for inventory and goodwill. All other assets are fully depreciated. Turbo Tax for business doesn't seem to be prompting me for form 8594 or for Schedule D (isn't that where I should be reporting the gain)? Or, do I only report the gain on my personal tax return 1040 and file the 8594 separately?
The form 8594 is informational to the seller and buyer ... using the info on that form will help you retire your assets by selling them off, the inventory is sold by adding that amount as income and the goodwill must be added as an asset so you can sell it. If you are unsure on how to do any of this you can call support for specific instructions or seek local professional help for this final return.
Thank you kindly for your response. I added the goodwill as an asset value of $47k (agreed to in the contract sale document) and indicated the "asset" was acquired at the business inceptions (so that it can be considered long-term) with a acquisition cost of $0. However, this then reports the gain as a 1231 asset on my 199A. I don't think this is correct. What am I missing?
If your goodwill was part of an asset purchase of the business and $47k was allocated to that asset, then you should have been amortizing it (if the business was a stock purchased, then not amortized for tax). The goodwill of $47k is your starting point for amortization and the remaining net asset at sale is your starting point for gain calculation.
I'm using Turbo Tax Home and Business 2021, and when I indicate I've sold the business Turbo Tax doesn't walk me through anything and doesn't reflect a Form 8594.
What gives?
Turbotax doesn't do Form 8594. you would need to prepare it manually and then mail in your return unless you use a professional to do your taxes. Their software will have that form. as to the sale of your business, the reporting depends on the type of business sold.
Thanks for clearing up my confusion on the absence of the 8594… That helped!
My wife and I sold her health care clinic in 2021 to another physician in town. For simplicity sake, we categorized the sale price as 100% goodwill, as the limited amount of tangible property assumed by the purchaser was negligible. The business was a husband/wife LLC treated as a disregarded entity by the IRS (community property state (AZ)), so I reckon the sale follows the pattern used for sale of a sole proprietorship?
My question is how to report this goodwill? From various threads, I get that self-created goodwill is a Section 197 intangible asset, which is treated as a short-term capital gain. Where I get confused is how that goodwill should be reported—on Schedule D or on Form 4797 (or both)?
Tod in AZ
actually report on form 8949 code C (short-term) or code F (long)-term. form 8949 transfers to schedule D.
short-term vs long-term is based on how long you operated the business.
so I would enter on the 8949 sale of business - goodwill sales price $XXX, cost $0, date acquired (date business began) and date sold. codes c or f just indicate to the IRS no sales form was filed (1099B)
4797 doesn't seem appropriate
per the IRS
Use Form 4797 to report:
The sale or exchange of property.
The involuntary conversion of property and capital assets.
The disposition of noncapital assets.
The disposition of capital assets not reported on Schedule D.
The gain or loss for partners and S corporation shareholders from certain section 179 property dispositions by
partnerships and S corporations.
The computation of recapture amounts under sections 179 and 280F(b)(2) when the business use of section 179 or listed property decreases to 50% or less.
Gains or losses treated as ordinary gains or losses, if you are a trader in securities or commodities and made a mark-to-market election under Internal Revenue Code section 475(f).
Thank you Mike! I think I've got it now... When entering the cap gain on form 8949, it does transfer to Schedule D as you indicated... So the capital gain/sale is recorded in form 8949, then reflected in Schedule D (capital gain), and finally the sale is also reported on form 8594 by both seller and buyer (and must match amounts by category), and is generated outside of TurboTax. The latter meaning the return has to be physically filed with the IRS...
That form is not included by Turbptax so it has to be prepared manually requiring the return to be e-filed.
don't ask why it isn't included. numbers from that form to do flow to any other form so it would not be complicated for TT to add it.
No, you cannot attach a PDF of Form 8594 with TurboTax. If you need to file Form 8594-Asset Acquisition Statement. Both the seller and purchaser of a group of assets that makes up a trade or business must use Form 8594 to report such a sale if goodwill or going concern value attaches, or could attach, to such assets and if the purchaser's basis in the assets is determined only by the amount paid for the assets.
Hello,
I have the exact scenario you describe in your answer. I have a single member LLC (sole proprietorship for tax purposes) that I sold off a web-based software product to another company, but I still kept my LLC and use it for other business. How would I account for this? It seems Form 8594 is only used for selling all the business's assets and shutting it down. Do I still use Form 8594 to report selling the software product/brand?