Self employed- Closing business

Forum|Forum|1 year ago
October 24, 2024
2 replies
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I have been self employed since 2009. For 2022 and 2023, I had no self employment income due to illness. Only my wife had a W2. I did not report a schedule C for 2022 or 2023 as I had no expenses or income. We have used all depreciation and section 179 on equipment and property. Two items are almost to their full life, next year. I want to close this business down at the end of this year. So when I file my 2024 taxes, do i have to recapture anything at that time? I have not sold anything. I might not sell any of the equipment for a couple years. I need to do some repairs first. How do I go about this?

M-MTax

Not much needs to be done for reporting closing of a sole proprietorship BUT the Sec 179 assets are a problem in terms of recapture if the business use falls below 50%. Look at this article

Txmex24Author

I havent used them at all for personal or business use since i have been sick. They are still apart of the business. I just decided i am not going to get better. There are two that have 1 year of their life left. I still do not understand what I should do.

AmeliesUncle

Any recapture of Section 179 (or Listed Property) should have been on your 2022 tax return.

For the current year, no, there would not be any recapture. The recapture of Section 179 (and Listed Property) should have been taken care of in 2022, and the 'regular' kind of recapture does not happen until you sell the property. But if/when you do sell the property, you will need to report the sale and any 'gain' will be depreciation recapture.

Txmex24Author

I was still going to be in business and was told it was okay to skip a year and not put a schedule C since I had no income or expenses. It ended up being two years due to being sick. I feel like I am getting conflicting info here. So you are saying the only way to rectify this is file and amendment?

AmeliesUncle

For the business itself, yes, it is usually okay to just not report it. However, if Section 179 (or Listed Property, such as vehicles that were using accelerated depreciation) needed to be recaptured, that changes that answer and you should have reported it (the recaptured income will end up on your business Schedule C).

That is one of the problems with these forums rather than going to a tax professional. We typically only get a small bit of information, rather than knowing the entire picture, so the answers can be hit-and-miss because we don't know all of the information.

Yes, if the Section 179 was not recaptured in 2022, the only way to correct it is to amend.