Questions about my EIN Number?

Question

I am STARTING a small business... Keyword Starting. And I applied for an EIN number in my state, and with the IRS. I set the end of the year to be 12/31 or every year. I am still in school while starting my business, and I was wondering if I haven't made a profit by the end of the year, and the IRS sends me the papers, and I don't file because I didn't spend any money, or make any money will they take me to jail?

Keep in mind my business hasn't been active at all... Can they do that?

Is there a way I can disable my EIN or something until I start making money so there won't be any problems when tax season comes? Thanks guys!

Answer 1

Disabling the EIN might be a good idea to keep someone else from using it fraudulently.

The IRS will not take you to jail without warning simply because no return was filed.  At worst, they would send you a letter demanding that you either file or provide proof that you were not required to file.  At that point, you send them documentation that you did not spend or receive any money and file a return showing $0 on all lines.

Answer 2

If you have any Gross Receipts, you report it.  Profit is not the operative word.  You list the Income, then the Expenses and then if it's $0 profit, you go oh, darn, no profit for this year.

Unless you did something fancy, you would classified as a sole proprietor.  A sole proprietor includes any business income on their schedule C attaching it the 1040.

The IRS isn't dumb.  If they expect a schedule C and you don't have one, they'll know you had no income or expenses to report.    

Answer 3

Even though you have no sales, you should still file Schedule C because I will bet that you have start up costs and some other expenses. Unfortunately, start up costs must be amortized over five years. However, you should still take advantage of the deductions even if you show a loss.  

Answer 4

If you made no money, it will take you all of ten minutes to file a return... Just do it!