Can I claim business expense after date business closed?

Forum|Forum|6 years ago
June 4, 2019
3 replies
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I understand you can enter a business expense if it is prepaid during the time you are still in operation, and do not have to prorate it when filing your final tax return.

But,..

Can you enter business expenses after the closing date, if they pertain to your business such as: (1) continuing monthly payments using quick books to figure closure of business, taxes. (2) contract not completed, but still obligated to pay monthly payments, such as Cox. (3) Fee from closing merchant account.

Thanks!

TurboTax Business Windows

Best answer by JulieR

Yes. Even though you have ceased to do business, you can still deduct these business-related expenses. If you have or expect to have continuing business expenses, related to this closed business, in 2019, you should wait to file your final business return until next year.

JulieRAnswer

scook7878

I didn't see this until after I filed. What if you submitted the 2019 tax indicating closed. Can you revise or still deduct in 2020?

HelenC12

@scook7878 If the business expenses are for tax year,

2019 - amend your 2019 income tax return(s).
2020 - close the business on your 2020 income tax return(s). Report the business and make sure you select I stopped [your business] in 2020 on the Tell us how long you've worked in [your business] screen. Click here to read more.

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TBorch

Currently, my business is closed because of my health issues. I don't plan to be closed for good. If insurance approves my surgery (they have been denying it for over a year) recovery is up to 2 years. There is no way to tell how much permanent nerve damage there will be and how much functionality I'll regain. This could put my business on hold for several years. Because I'm not planning on closing for good, can I still continue to itemize the business expenses I'm still paying for even if I can't show any income? Example: mortgage interest, insurance, property tax, licenses, etc.

MAK70

No, if you are not currently active in the business (no business income) you should not deduct expenses- the IRS is very strict about self- employment with zero income and expenses only because it creates a loss that can offset other income.

@TBorch

JSWIZCPA

Employee

YES maybe!! I know its late, but i see some inaccurate answers being repeated.

As a former S Corp owner and if obligated to pay expenses, then yes you might be able to claim them as capital loss. The Arrowsmith vs Commissioner ruling can be googled and easily explains this.

DaveF1006

This Court ruling does not address the fact on whether or not a business can deduct expenses after a business has been closed. From what I read, it covers the sales of capital assets and whether these could be considered capital or ordinary losses.

Now to address orchid9 concern, you may be able to claim business expenses after the business has closed but you will need to file an amended return reflecting the business expenses that occurred after closure.. If you filed a final return for the business, then you cannot file a original return for the business that has been reported closed. I would however not doing this every year to reflect the reoccurring payments to Cox.

@orchid9 @JSWIZCPA

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JSWIZCPA

Employee

Yes, you are correct, to be sure, I qualified my remarks with you MAY be able to. I'm not here giving advice just correcting all the Nay's. They may be deductible. The key according to some sources is that you must have been legally obligated as the former owner to pay those expenses. I have a client with some recurring legal expenses he couldn't foresee prior to closing the S Corp a few years ago. The only reason he has the expense is that he's the former owner and they resulted directly from his owning the business. They don't exist for any reason but for his ownership and therefore is obligated to pay.