Expert Q&A

Should a small business file a tax return even though it had no income for the year?


Related Topics: Tax Returns and Preparation, Taxes
Related Tags: Business Deductions
Thomas Bridgman
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By Thomas Bridgman - Brent Financial Group, LLC
Answered almost 3 years ago

In addition to Robert & Gary’s excellent answers, you should be aware that if your small business is a corporation or S corporation, you must file a return every year as long as the business exists. Failure to file can be very expensive.

In addition, some states require annual filings for some types of business forms (e.g., LLCs) even when no federal return is required.

Gary L. Hulett
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By Gary L. Hulett - Gary L Hulett LLC | Aurora Tax Accountant
Answered almost 3 years ago

The most important reason to file a return is to have the statute start running. If an individual or business never files a return then that period is still considered open by Code.

The IRS has 3 years to audit your tax return or to assess any additional tax liabilities.
This is measured from the day you actually filed your tax return. If you filed your taxes before the deadline, the time is measured from the April 15th deadline. We could utilize the same example as in the refund situation: the IRS has until April 15, 2014, to audit a 2010 tax return filed on or before April 15, 2011. After the three-year audit time period has expired, the IRS cannot initiate an audit of your tax return unless there is a suspicion of tax fraud. Most state tax agencies follow the federal three-year period for auditing tax returns; however some states have a longer statute of limitations.

The IRS has 10 years to collect outstanding tax liabilities.
This is measured from the day a tax liability has been finalized. A tax liability can be finalized in a number of ways. It could be a balance due on a tax return, an assessment from an audit, or a proposed assessment that has become final. From that day, the IRS has ten years to collect the full amount, plus any penalties and interest. If the IRS doesn’t collect the full amount in the 10-year period, then the remaining balance on the account disappears forever because the statute of limitations on collecting the tax has expired.

Robert Wellman
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By Robert Wellman - TaxWise
Answered about 3 years ago

Potentially. There are many factors that would determine whether or not you should file. Examples include:
a. Are there any carry forward losses/items that would benefit you this year?
b. Are there any depreciation expenses?
c. Has the business discontinued? And if so, are there any expenses that should be expensed in full (remaining depreciation)
d. Was the business sold and are there any capital gains/loss implications?

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