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BTRR
New Member

I need to report the closing of my sole-proprietorship. I didn't know that I had to report the closure. Here are 2 scenarios for reporting the closure. Which one is best?

Sole-proprietorship reported on Sch C.  2014 profit, 2015 loss, 2016 loss.  Closed Dec 2016.  Depreciation of home office was deducted as an expense each year (I know that I have to report on the disposition of assets).

However, I didn't report the closure on my 2016 Sch C (I didn't know that I was supposed to report the closure).

What's the best way to avoid an audit?  To report the closure and disposition of assets (disposition will not affect profit/loss), should I amend my 2016 Sch C , or should I report it on my 2017 Sch C with a profit/loss of $0?

1 Best answer

Accepted Solutions
IsabellaG
Employee Tax Expert

I need to report the closing of my sole-proprietorship. I didn't know that I had to report the closure. Here are 2 scenarios for reporting the closure. Which one is best?

You don't have to report to the IRS that you closed your business in 2016, unless you sold the business or disposed of assets.  Examine Schedule C and you'll see that there is no place to check that you closed your business.The IRS will automatically consider your business closed if you don't file another Schedule C for that business. If you decide to start a sole proprietorship up again, there is no paperwork required by the IRS. Simply file a new Schedule C for the year you started up again. For this reason, a sole proprietorship is the easiest business entity to form and to dissolve.


 TurboTax asks you if you closed your business only to prompt you to enter any taxable sales for the year that you closed the business.

Since the business was closed in 2016, don't report a zero Schedule C for 2017. 

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3 Replies
IsabellaG
Employee Tax Expert

I need to report the closing of my sole-proprietorship. I didn't know that I had to report the closure. Here are 2 scenarios for reporting the closure. Which one is best?

You don't have to report to the IRS that you closed your business in 2016, unless you sold the business or disposed of assets.  Examine Schedule C and you'll see that there is no place to check that you closed your business.The IRS will automatically consider your business closed if you don't file another Schedule C for that business. If you decide to start a sole proprietorship up again, there is no paperwork required by the IRS. Simply file a new Schedule C for the year you started up again. For this reason, a sole proprietorship is the easiest business entity to form and to dissolve.


 TurboTax asks you if you closed your business only to prompt you to enter any taxable sales for the year that you closed the business.

Since the business was closed in 2016, don't report a zero Schedule C for 2017. 

**Say "Thanks" by clicking the thumb icon in a post
**Mark the post that answers your question by clicking on "Mark as Best Answer"

View solution in original post

MP1313
New Member

I need to report the closing of my sole-proprietorship. I didn't know that I had to report the closure. Here are 2 scenarios for reporting the closure. Which one is best?

Question. 

I disposed of over $3000 of merchandise and closed my business last year. I foolishly only purchased the personal use TurboTax and now I can't figure out how to indicate that I closed my business at a loss. What should I do?

 

Thanks

Cynthiad66
Employee Tax Expert

I need to report the closing of my sole-proprietorship. I didn't know that I had to report the closure. Here are 2 scenarios for reporting the closure. Which one is best?

File Schedule C (Form 1040 or Form 1040-SR), Profit or Loss From Business, with your individual tax return for the year you close your business.  Claim the final expenses to shut down the business.

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