Does a sole propietorship need to file taxes if is under a particular amount?

Question

Or How about if the Sole Proprietorship spends all the income the business makes. Is there any point in noting it since there isnt any additional income?

In the united states and IF the businesses uses all the income does it need to be reported? I woudlnt think so since there is no additional income.

Answer 1

Sole proprietor still needs to report all income and all expenses for the business to prove to the irs that there was a net profit of $0. If sole proprietor gets any 1099's for the business, so does the IRS, and they will be expecting a 1040 tax return showing that 1099 income. If you don't send in a tax return showing the income and expenses, the IRS will prepare a tax return for you with just the income, and will send you a tax bill with tax, interest and penalties. Also, if the business makes a net profit of over $400 you have to pay self-employment tax. Also, you might find that even though the business makes a profit of $0, you still might have taxable income. Some expenses are not fully deductible or not deductible at all for taxes. Meals and entertainment for example are only 50% deductible, penalties are not deductible at all, etc.

Answer 2

A sole proprietorship reports its income on the owner's individual income tax return using Schedule C or C-EZ. All income and expenses must be reported. If there is no net income then there will be no tax. Keep in mind that the IRS expects you to pursue a business venture with the intent of making money. Eventually you need to turn a profit or the IRS will look much more closely at what you are doing.

Answer 3

First ignore what Kasamanli said.

A sole proprietorship isn't a separate entity..therefore it can't be a pass through entity. And as far as what he said about a net of $3500...is also crap.

Edandyvonnem is wrong too.

If you have $400 net income from self employment (sole proprietor) income you have to report it and file a return. It doesn't matter if you exceed the normal requirements to file a return. All that matters is if you go over the $400 net of self employment income.

I am an Enrolled Agent and been doing this for 20 years...this is the correct information.

Answer 4

Basically, a return has to be filed if the earnings are greater than $400 because in that case self-employment tax may be due. Regarding income tax, it is a generally a good idea to report all of the income and expenses, because the statute of limitations will generally start to run. Assuming the IRS eventually takes an interest, it is far easier to explain a mistake in a return that was filed, then a mistake in a return that wasn't.

Answer 5

A sole proprietor is required to file if business income, which is revenue minus allowed expenses, is over $400. If you have other income, like a job, you'd have to file if your total income is $8,750 for 2007.

However, even if you aren't required to file, keep the documentation in case the IRS asks questions why you didn't file. You may even want to do a Schedule C, just so you know you're under the limit.

Answer 6

You must file a return if your gross income is at least as much as the filing amount for your filing status and age (shown in IRS Publication 17, Table 1-1). Additionally, you must file form 1040 and Schedule SE if your net eanings from self employment were $400 or more (or you had church employee income of $108.28 or more).

I got the information from IRS Publication 17, Page 7
http://www.irs.gov/pub/irs-pdf/p17.pdf