Convert business to hobby
by nmsheldon, Performer
- Created: December 29, 2009, 3:09 pm
(Yes, I know people usually ask this question the other way around.)
My computer consulting business hasn't made a profit in the last three years. If the IRS were to look closely at it, they would most likely consider it a hobby. I want to avoid any possible audit by filing as a hobby this year. I don't want to close the business, as I may do some off-and-on work for some clients in the future. What do I need to consider?
In the past I've simply been filing schedule C. I have no employees, and my only assets are a couple of computers, one of which I'm still depreciating, and some software which I deducted in the first year or two of business. I have been deducting business use of my home office every year. My locality does not require any special business licenses, but I have a sales tax license and LLC registration with my state (WI). I do have an EIN, which the bank wanted for my business checking account, which I may close soon.
Do I have to file any special forms to let the government know I'm not working as a business right now? Do I have to pay taxes on deductions I've made on this business in the past? Do I have to cancel my EIN or LLC if I'm not filing taxes as a business?
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