Business Entity – No Income – Do You Need To File

Michael Lodge

by Michael Lodge

The question always comes up if my S-Corp, C-Corp, LLC or other business entity did not make any money, had no income, do I still need to file.  So let’s talk about the requirements of the IRS on this issue.

Question: Must a partnership or corporation file a tax return even though it had no income for the year?

Answer:

Partnerships and corporations have different standards for filing an income tax return.

  • A domestic partnership must file an information return, unless it neither receives gross income nor pays or incurs any amount treated as a deduction or credit for federal tax purposes.
  • A foreign partnership generally must file an information return if:
    • it has gross income effectively connected with the conduct of a trade or business within the United States,
    • it has gross income derived from sources in the United States, or
    • it or its U.S. partner is making an election, such as an election to amortize organization expenses.

Refer to the Instructions for Form 1065, U.S. Return of Partnership Income, for exceptions to filing requirements.

  • A domestic corporation (including a Subchapter S corporation) must file an income tax return whether it has taxable income or not, unless it is exempt from filing under section 501.
  • A foreign corporation generally must file an income tax return if it:
    • engages in a trade or business in the United States, even if it has no income effectively connected with the conduct of a trade or business in the United States during the taxable year,
    • has income, gains or losses treated as if effectively connected with the conduct of a U.S. trade or business and subject to taxation under subtitle A of the Internal Revenue Code (relating to income taxes), or
    • does not engage in a trade or business in the United States at any time during the taxable year but has U.S. source income, and the withholding at source under Chapter 3 of the Internal Revenue Code did not fully satisfy its taxation.

Refer to the Instructions for Form 1120-F, U.S. Income Tax Return of a Foreign Corporation, for other reasons a foreign corporation may file a return and exceptions to filing requirements.

If you have any questions on business returns, please send us an email at:  tax@icontaxgroup.com