Limited Liability Company (LLC) No Work for Tax Year 2023

[badams_taxes]

Good Afternoon,

Since my husband did not work for the tax year to report income, Form 2106 cannot be used, correct? Please share with me where you got the information that Form 2106 has been restricted for the tax year 2023.

I will continue using Schedule C to report the business even if there is no income for 2023 because I intend to continue providing services soon.

I have a vehicle strictly used for business purposes only, and I will keep it on the books.

My tax and licenses total about $1298.00. When I claim this, it results in a loss, but I want to avoid a business loss if the IRS classifies the business as a hobby.

Please advise,

BAdams

[DawnC]

Form 2106 has not been available for employees since 2018; the TCJA suspended its use at least until 2025.   That form is for w-2 employees to claim job-related (related to the w-2 generating employment) expenses.    See this FAQ about Form 2106 expenses.

If you are self-employed, you should be using Schedule C for expenses and your business vehicle deductions.  

When the IRS classifies your business as a hobby

Taxes and licenses can be deducted by the self-employed on Schedule C - - but not by employees on Form 2106.

[badams_taxes]

Good Afternoon,

Thank you for including information about the Form 2106 Frequently Asked Questions and Expenses website, IRS Classifies Your Business as a Hobby, and Form Schedule C.

In other words, even if the business had no income in 2023, continue to report it on Schedule C and include my vehicle on Schedule C even if I do not have any expenses.

Please advise,

BAdams

[badams_taxes]

Good Afternoon,

Even if my business had no income in 2023, I should continue to use Schedule C and include my vehicle on Schedule C even if I do not have any expenses.

Please advise,

BAdams

[badams_taxes]

Good Morning,

Even if my business had no income in 2023, I should continue to use Schedule C and include my vehicle on Schedule C even if I do not have any expenses.

Please advise,

BAdams

[DianeW777]

No, do not continue to file Schedule C if you had not business activity in 2023.  It would seem you had no reason to use your vehicle for business if you had no income in 2023.  You can add you vehicle back to your return when and if you have business activity in a future year.  Keep in mind that any sale or trade of your vehicle will be a taxable event if you used the standard mileage rate (SMR) or depreciation on your vehicle.

[badams_taxes]

Thank you for confirming that the vehicle can be included in the return only when there is business activity in a future year. And any sale or trade of the vehicle will be subject to taxation at the standard mileage rate (SMR) or depreciation on the vehicle used.

Is there IRS guidance that suggests you should not file a Schedule C if you had no company activity during the Tax Year?

Please advise,

BAdams

[PatriciaV]

Per this IRS Schedule C FAQ: "If your sole proprietorship business has no profit or loss during the full year, it's not necessary to file a Schedule C (Form 1040), Profit or Loss from Business (Sole Proprietorship) for that year."

@badams_taxes 

[badams_taxes]

Thank you!