Just proposed my tiny home commercial operation Sep 07. I am still not informed with commercial operation income taxation issue. Since I did not benefit any profit, I motionless not to record my commercial operation income taxation for 07. Am I starting to be in difficulty if I begin filing it for 2008?.
Do I have to record it right away even it is as well late? or record prolongation ? or what should I do now?
How to Invest Money to Make Maximum Profits
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Profit or no profit you still have to file tax.
If you did not make profit you don`t pay tax.
How would the taxman know you did not make profit if you did not file one.
There is a requirement for businesses to file whether or not they earned any taxable income. There are penalties for failure to file or for late filing.
But here is the important fact that applies to your situation: The amount of the penalty is a percentage of unreported income received in the year in which the business failed to file. In other words, if the business earned zero income (or had losses), then there is effectively no penalty for filing late or not filing because the business earned no income on which the penalty is based.
You should, however, file a late return for 2007 even though it’s really late. The reason you should do this is that if you had no taxable income for the year, chances are you had losses–that is, your deductible business expenses exceeded your revenue. If you had losses in 2007, then if you file, you can deduct these losses against income in 2008–that is, you can “carry forward” your losses.
The only way you can be entitled to carry forward your losses is by filing for the year in which the losses occurred.
If your business had no activity whatever in 2007, and you had neither gain nor loss, there is no harm in just not filing for that year.
To file late, you don’t file for an extension–it’s too late for that. You also don’t file an amended return. You only amend when you had an earlier return. All you do is file the same form you would normally file, and send it to the appropriate address–late. If the return shows nothing but a bunch of zero’s and no tax liability, the IRS won’t care.
If your business had revenue, even if it didn’t have any profit, you should be filing showing the revenue and the expenses. If you have other income also, a loss or part of it might even be deductible from your other income. You can still file an amended return for 2007.
No, you won’t be in trouble if you start filing for 2008, but not filing for 2007 could end up costing you a lot of paperwork so save all of those 2007 records.
If your business is incorporated, then you could definitely have problems with not filing 2007.
If you did not have any income, then you don’t need to file. However, for a self employed person, you must file if income is $400 or more.
Read more about self employed tax filing: http://taxipay.blogspot.com/2008/04/tax-filing-by-self-employed-sole.html
The question is not one of profit. You need to say if you have taken in any income. If so, you need to report that income, even if you had enough expenses that your business showed a loss. If you did have a loss, it would be in your best interest to report that loss since it will help offset your other income – from your other jobs, etc – and lessen your taxes.
If you did have income, you have to report it. If your business is not incorporated and you have not registered it as a partnership in your state, then it is called a “sole proprietorship”. Reporting your profit or loss from that business is as easy as filing one more form with your personal return and carrying one number over to your 1040 or 1040A. If you incorporate or form a partnership, things get a lot more complex, but otherwise this will be easy.
This form is called Schedule C and you can just download it from http://www.irs.gov. Since you have filed already, you will need to amend last year’s return so download Form 1040-X also. Fill them out and send them in together and you are done – than simple. If you had a loss on the business, you will be due a refund probably!
A couple rules about business FYI:
1. No big deal about the first year loss, but the IRS doesn’t allow you to take losses constantly – if you take three losses in a five year period, they will declare your “business” to be a “hobby” since you must not have a profit motive. You are not allowed to take as many expenses against a hobby, so try to stay profitable once in a while!
2. If you start making significant money, you should start paying estimated taxes quarterly. This is because you don’t have an employer withholding income and FICA taxes for you. The govt doesn’t want to wait until you file to get their share so you have to send them in quarterly while you earn the profit. To get more info on this, download form 1040-ES while you are downloading. Those are quarterly payment vouchers with some instructions. But if this is just a little side income to go with your regular job, you are probably having enough withheld there to cover the side income, or you could bump that up a little if necessary.
The profit or loss from a sole proprietorship goes on your personal taxes. If you have a regular job also then claim your business loss as it will be a benefit towards your personal taxes.
If your business had any revenue, then you will need to file the Schedule C to claim the losses. These losses will offset other taxable income that you had.