Stop reporting Schedule C after 2 years

Forum|Forum|3 years ago
March 27, 2023
1 reply
40 views

If someone with high W2 income filed taxes as married filing jointly and included Schedule C (as sole proprietorship) on their taxes last 2 years—reported no income, but deducted some small losses as part of setting up the business. It was part of launching a startup of creating a social media business, but failed to monetize and have no intentions to continue on with this business as the potential reward is not worth their time. They are thinking of starting a new business in real-estate with their spouse this year. So, last year (2022), they were fully engrossed in their W2 job and there virtually was no activity on the earlier business for which they filed the Schedule C.

Can they just stop including Schedule C going forward, or would doing so trigger an IRS audit, which is not fun? What other options do they have - such as continue reporting Schedule C with no income and no losses?

Tax Advice

JulieS

Level 15

Yes, you can and should stop filing your Schedule C if you have no self-employment income or expenses.

There is no other option, you aren't supposed to file unless you are actively trying to earn self-employment income and have income and/ or expenses.

Stopping your Schedule C filing will slightly reduce your audit risk, and definitely will not "trigger" an audit.

This is how to remove your Schedule C and related forms from your return in TurboTax:

Open your return and scroll down to Tax Tools on the bottom of the left side menu.
Select Tools.
Click on Delete a form (third on the list at the bottom of the screen).
Find Form Schedule C on the list of forms.
Click Delete to the right.
Confirm your Delete.
Click Continue in the lower right.
Click Continue with my return.

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abs124Author

Level 2

Thanks for taking the time to reply to this thread. Means a lot to me. 🙏

I spoke with a local CPA this morning for a brief consultation, and he said that I cannot remove Schedule C until I formally dispose the Sole Proprietorship/LCC. If I remove Schedule C, that is riskier and it could flag an IRS audit. Instead, he said I continue including Schedule C with $0 income and $0 loss. He then suggested that I instead try to repurpose my other business to the new business I am trying to create this year. Please advise whether I should remove Schedule C all together, OR include it with $0 income and $0 loss.

Thank you!!

AbrahamT

Level 8

Either way is fine. If they don't have more activity from the business, then it is what it is. Just top clarify, when do do expect to dispose this sole proprietorship/LLC anyway? Maybe, the CPA thinks that they may reconsider and not dispose of the single member LLC after all. In that case, you might be better off to keep the Sch C intact for future potential activity.

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