Small business taxes in diff state though no income?

[Taxes202112]

Hello , I have TurboTax Deluxe Mac Download version. I have no business income to report and no expenses apart from the licensing fee for the state of Delaware. I had two quick questions:

1. I live and work/earn income in California Do I have to file taxes in two different states since my business is in Delaware ?

2. can I use my version to report that I have no expenses and no income apart from the licensing fee, or do I need to get TurboTax self-employed?

[DianeW777]

The answer to your questions are as follows.  You must file all of your worldwide income to your resident state, and if you have income that is earned because you physically work in another state, the the income earned while you were present in the nonresident state must be filed on that state return.  In this scenario, your resident state will give your a credit for taxes paid to another state.

If you were not physically present in Delaware (DE) while the money was earned then on your personal/individual return there would be nothing to file in DE. If this is true then you would file only your resident state of California (CA).

If you have a business that is situated in DE, then the business return must be filed in DE.

For the second question, if you have expenses as a self employed individual, then you must use TurboTax Self-employed to utilize any expenses for the business. Otherwise the business can reimburse you and then the business return can take the deduction for these expenses.  If you are an employee and do not receive reimbursement from your employer, then these expenses are not deducible.

For more information about employee business expenses this link will be helpful: Can employees deduct job related expenses?

[Taxes202112]

Hello thanks for the reply. Regarding the turbotax self employed, this does not match what I have been hearing from other users. Several other experts say it is OK to use TurboTax deluxe desktop for this purpose. Also I’m not sure if the licensing fee counts as a business expense. Do you know why this contradiction is happening? Are you sure I cannot use TurboTax desktop deluxe for this? Thanks 

[Taxes202112]

Also, I did not earn any income for the business in either state. How does this impact what state I file in?

Also I am not an employee who can get reimbursed, I am the only employee and owner.

[GeorgeM777]

The licensing fee you paid to Delaware is a deductible business expense provided it is reasonable and necessary for your business.   It appears that you registered or incorporated a business in Delaware, but all business activities were performed in California.  While it is not clear from your questions whether your business is a Limited Liability Company or a Corporation, because you indicated that no business activity, nor any resulting income, was conducted/earned in Delaware, it would appear there is no need to file a Delaware state return. 

Even though your business generated no income, if you want to claim your Delaware licensing fees as a business expense, such a deduction is typically claimed on a Schedule C (appropriate for single member LLCs or sole proprietors).  Business expenses of this type can be entered into TurboTax Deluxe Desktop, thus it appears you have the correct version of TurboTax.  Although, if you registered a corporation in Delaware, TurboTax Deluxe Desktop will not generate a corporate return.   Additionally, given that your business generated no income, any reasonable and necessary business expenses you include on your return will likely generate a loss for the business.