this hyperlink Do I Have To File A Tax Return For My Sole Proprietorship?
If you are self-employed, how do you know either you are required to record your self-employment activities to the Irs? This record will answer that question.
Do I Have To File A Tax Return For My Sole Proprietorship?
By "self-employed", I'm referring to a someone who owns a sole proprietorship rather than a partnership or a corporation. I'm also referring to a someone who owns a single-member microscopic liability business (Llc) but has not chosen to have that Llc taxed as a corporation; instead, the Llc is taxed as a sole proprietorship.
There are three tax rules that may require you to file a program C or program C-Ez on your federal personal earnings tax return (Form 1040). If any of these rules applies to you, you should file program C or C-Ez.
Rule #1:
You must file program C (or program C-Ez) as part of your federal earnings tax return if the behalf from your self-employment activities is 0 or more. Your behalf is calculated on program C or C-Ez and is the discrepancy in the middle of your earnings (aka "sales" or "revenue") and your expenses (such as advertising, office supplies, vehicle expense, etc). So if you have a profit, and that behalf is at least 0, you must file a program C.
Rule #2:
If your gross earnings is above a unavoidable amount, then you must file a program C or C-Ez regardless of the number of self-employment profit. The Irs publishes a chart each year that lists the filing requirements for each filing status: single, married filing joint (Mfj), married filing cut off (Mfs), head of household (Hoh), and qualifying widow with dependent child. For each of these filing statuses, there is a unavoidable number of gross earnings that triggers the requirement to file a tax return. For example, in 2011 if you are filing Mfj and both spouses are under age 65, you must file a tax return if your gross earnings is at least ,000. And for purposes of this filing requirement rule, gross earnings includes your "sales" or "revenue" number from program C or C-Ez.
This second rule applies to many sole proprietors who may have less than 0 in program C profit, or who have a loss on program C. So it is needful that you take a close look at this Irs filing requirement chart to make sure you file a return and a program C even if you have a small behalf or a loss.
Rule #3:
You may not be required to file a program C but you should do so anyway. Let's say you have a loss from your small business but your sales were low adequate that you are not required to file a tax return. It could be useful for you to file a return and record that loss on program C because you can use that loss to offset earnings in a old or future year via the Net Operating Loss (Nol) carryback/carryforward rules. These Nol rules can be tricky, so be sure to consult with a tax professional if you need help to sort that out.
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