Got charged State Income tax on a business that we only had a license for, but we did no business. help?

Question

I applied online a few years ago for a business license in WV.

It was for a sole proprietorship. We ended up not doing anything with the business. We didn't attempt to get any customers and we didn't collect any money. We kind of forgot about it. We have never sent any records to the State Tax department. Now we have an assessment that says we owe $300 in State taxes on estimated earnings, since we didn't file anything.

If we go talk to them, will they not make us pay that, since we didn't collect any money? What is the best way to clean up this mess and get it settled that the company disolved and did no business?

Answer 1

Get business license cancelled. If the city or state charges annual license fee, then you must pay it.

If it is income tax, then reply that you did not do any business.

Answer 2

Business taxes are a lot different than personal taxes.  With personal taxes, you do not need to file, if you earn below a certain amount.  However, with business income taxes, you are required to file an informational return.  You would show on that return that your income was zero, and your expenses were the cost of the business license.  That actually gives you a net operating loss.

You should go ahead and file this return. State that you are closing the business down, and turn in your license.  Do not pay the $300 estimated tax. It is possible, however, that the state may say there is a fee for late filing.