Do you have to file taxes even if you didn't make money? What if you had no profit and no loss? What if you had revenue but your expenses exceeded your revenue? I'm asking about both federal and state tax law.
asked Dec 13, 2010 at 3:24
-
Since you mention profit and loss I assume you are concerned with business taxes, correct?– MuroCommented Dec 13, 2010 at 3:30
-
Yeah (self-employment)– Kirk OuimetCommented Dec 13, 2010 at 3:50
Add a comment
|
2 Answers
You're essentially asking the very common "Do I Need to File a Tax Return?" question. It's common enough that the IRS answers it right at the beginning of the Form 1040 Instructions, and it's answered fairly thoroughly here:
http://www.irs.gov/individuals/article/0,,id=96623,00.html
There's about 20 questions in that checklist which are mostly pretty specialized, but assuming you didn't have taxes withheld that you'd like to get back, and didn't have any retirement income/disbursements this year, the only interesting question is this:
"Were you self-employed with earnings of more than $400.00?"
Sounds like your losses outweighed your profits, and assuming you had no other income, I'd say you're fine not filing.
Can't really speak to state law since that can vary so much, but your state's laws are likely similar to federal, and you can probably find a very similar answer near the beginning of the instructions of your state's income tax form.
-
2I think you might be confusing earnings with profits. Losses wouldn't figure into earnings.– JohnFx ♦Commented Dec 13, 2010 at 15:42
-
3earnings != taxable income. If your gross income is 100K and your deductions are 99601 - you definitely have to file, even if the taxable income is 399 < 400. Commented Apr 14, 2013 at 20:01
-
2Also note that "file a return" != "owe tax". The filing is a part of tracking national/regional economic data even if tax liability is zero. Commented Jul 1, 2015 at 4:29
If you're "living off the land" and make no money, then you don't have to file. Though you might be able to actually make money through credits and the like if you do file.
If you've lost more than you've made, then you'll probably need to file since someone will have needed to report that they paid you (W-2 or 1099-MISC). If the IRS receives a form saying that you made X and you don't file, they aren't going to just take your word for it that you lost more than you made, right? That, and if you want a refund, you'll almost certainly need to file to get it.
-
2Good point here - if you made money "on the books" that someone else paid to you (vs. getting paid strictly cash off the books, or vs. purely investment activity - where your broker knows your losses more than offset your earnings) then it's possible that you'd get audited. That said, if you would be able to demonstrate (via paper trail, receipts, etc) that you had more expenses than earnings - you would not have violated any law by not filing.– Jon SCommented Dec 13, 2010 at 3:48
-
1@jdsweet, true, but then it would be to your advantage to file. Some unclaimed passive losses can be carried from year to year, so even if the tax bill is zero, if a profit is made the following year, the unrealized losses from the previous year can be applied then. But that requires filing both years, doesn't it?– mbhunterCommented Dec 13, 2010 at 3:58
-
2Yeah - speaking as someone who's been in roughly that situation myself, you can defer filing for now and then file this year's taxes a year later to document the loss before you claim the loss carryover in that following tax year. It's not illegal to have not filed in that case, and any/all late filing/payment fees are always computed as a % of what you owed, which appears to be zero in his case.– Jon SCommented Dec 13, 2010 at 6:09