Required to File?

[RayT]

Client started a new busines in 2012. Due to first year Section 179 deductions, no profit was realized. Net equals zero. In effect, client does not have to file a return; however, I'm a little concerned about being able to use the Sec 179 Carry Over in 2013, if a 2012 return is not filed. Any comments/suggestions appreciated.

[powerage]

It would be in his best interest to file.

[Gary]

Schedule C?

Is this a Schedule C business? If he took in $400, then he must file a return because he has to pay Social Security and Medicare.

[taxea]

What date did he start the business? Is it possible that some of the expenses should or could be put into start-up expenses? And I agree, file a return. Does he have any other income or just the sch c? The gross income is added to the other income to determine whether he has to file. The 400. rule comes after the total income is determined. If he has any depreciated items is another reason why you should file it.

[New York Enrolled Agent]

Net equals zero. In effect, client does not have to file a return;

Your conclusion is not valid.

The general requirement to file a tax return in §6012 is based on gross income. The definition of gross income is found in §61.

You did not state the type of business or the amount of sales. It is more likely than not that the gross receipts from the taxpayer's business exceeded the filing threshold. For a business, gross income = total sales less the cost of good sold. See Reg. §1.61-3. Think line 7 on a Schedule C - how much is on that line? (I presume this is a sole prop. - if a corporation, you must always file). For purposes of gross income, you cannot subtract ordinary business expenses under §162 or §179 in order to determine if a return is required. Line 7 not line 31 of Schedule C is the important line.