Many people wonder if they’re still required to file taxes if they didn’t earn any income. Contrary to common belief, you are responsible to file your taxes annually regardless of whether or not you made any income. If you’re a startup business or one that potentially had a slow season, you’ll still want to get ready to file come tax season.
But why? Well, there are a few different reasons and we will break them down today.
The IRS Doesn’t Just Look for Income
While yes, the IRS wants to track the income made each year, they also are tracking active businesses that are partaking in business activities. The IRS looks for these things:
- Whether your business still exists
- Whether you incurred any deductible expenses, and
- Whether your entity is still in “good standing”
By not filing your taxes for the year, it can signal that:
- You’ve abandoned your business (even if you haven’t)
- You’re trying to avoid taxes, or
- You’re unaware of your obligations (which can still lead to penalties)
What You Should File
There are a few forms that are required when filing your business or personal taxes. Even if your business did not generate income or did not pay expenses, you should still file one of the following:
- A Schedule C – Form 1040 (for single-member entities)
- A Form 1065 (for multi-member entities)
- A Form 1120 or 1120S (for corporations)
Failure to file on time or at all can lead to steep consequences such as high penalties and a bad record.
Personal Tax Returns Still Matter
For those who are self-employed, your personal tax return is something you don’t want to miss. Not only is it required to show your personal income, but it shows whether your business is still actively running, made money, or made business expense deductions.
Health insurance premium tax credits and tax deductions are typically calculated at tax time, and if you are expecting a refund, filing your tax return is the first step to collecting that.
If activities like those relate to you, then filing is still in your best interest. Not filing can delay refunds, hold up credits, and complicate things down the line (such as buying a home or applying for loans).
Don’t Lose Your Benefits
If your business spent money, but didn’t necessarily earn money, filing your tax return allows you to report:
- a net operating loss
- carry deductions to future years
- and create a paper trail for audit protection.
The last thing any business owner wants to experience is an IRS audit and fail to file their taxes in the previous years. And if you don’t file? You lose access to all of those benefits later.
Even if your LLC or small business didn’t make a dime this year, filing your federal, state, and personal tax returns is essential to maintain tax compliance. Filing a $0 return now will save you in the future.
If you’re unsure where to start, you’re not alone! Many first-time business owners are surprised by what the IRS and states require. Whether you need help filing this years tax returns or the last few years, we can walk you through the p
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