Question

If the business is changed to a hobby are you required to pay back the taxes from past deductions as a business?

Forum|Forum|4 years ago
December 15, 2021
1 reply
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My business has not made a profit in the past three years. I have a single member LLC.

1) If I report my business income (less than $200 gross), as a hobby, will I be required to pay back the past deductions as a business?

2) Before I report as a hobby, do I need to close out my LLC? Or is it okay to report the LLC income as a hobby for this year since it is under $200 anyway?

LLC

Critter-3

1) If I report my business income (less than $200 gross), as a hobby, will I be required to pay back the past deductions as a business? No

2) Before I report as a hobby, do I need to close out my LLC? Or is it okay to report the LLC income as a hobby for this year since it is under $200 anyway? Since a single member LLC is a disregarded entity you will simply stop filing the Sch C. If you have any assets still being depreciated then you will "sell" them by converting them to personal use. For the federal return that is all you need to do.

If your state requires it (since an LLC designation is a state issue) you may need to "close" the business with them in the manner they dictate ... check local laws for the rules.

A

anonymous5Author

I am hoping that in 2022, things will turn around, so I do not wish to close it. Are you saying that my state might require it just in order to file as a hobby this year?

Critter-3

No ... only if you are permanently closing the business ... if it is just taking a break then just enter no income or expenses on the Sch C and let it ride unless you have assets being depreciated then just use the Sch C as normal ... the IRS is going to be very understanding during these covid times that even though you are trying to make money it may not be possible for a time.