When is a business no longer a business? [IRS Schedule C]

[catnamedspot]

I stopped running a business about 10 years ago but I still get small royalty checks from different sources. But these amount to perhaps $4,000 a year total. I don't know how long these royalties will continue to come, but for all I know I'll get $100 on my deathbed.

Is there a point when I can stop filing a schedule C? I am not someone who is interested in keeping track of receipts and deduction for a "business." I'd rather just stop filing C and stop "being" a business. Isn't there another legal way of reporting this income? I get 1099's from different companies that range from $200-$600.

The only thing I can think of - how a schedule C might benefit me - is that I pay my own monthly HMO health plan, which (at one point) I could apply as a business expense, and it can bring my business profit to zero - but maybe that no longer exists. Your thoughts?

[David Jay]

As long as you have 1099 income, you will need to file a Schedule C.

Get them to stop sending you checks and the problem goes away.

[sport]

Depending on other sources of earned income, you may need to file Schedule SE and make Social Security payments.

[catnamedspot]

As long as you have 1099 income, you will need to file a Schedule C.

Get them to stop sending you checks and the problem goes away.

I always like to let people know when they say something that made me laugh out loud. Thanks

[Fpdesignco]

You also can of course deny it - or if possible, redirect the payments / structure to a trust that will continue past your death (or some charity)

Most dont turn down free money

[crg11]

Or maybe explore selling the "business" to someone else so you get an upfront payment and move on?

[dukeblue219]

If you're just getting a few royalty checks what receipts and deductions do you really have? You can drop all of that and just report the income. With something like TurboTax you're looking at 20 minutes tops.

[aristotelian]

I'd be happy to cash those checks for you.

[catnamedspot]

If you're just getting a few royalty checks what receipts and deductions do you really have? You can drop all of that and just report the income. With something like TurboTax you're looking at 20 minutes tops.

That's what I was wondering. But someone said here since they send me 1099's I have to file as a business. I don't do any deductions for it at all (haven't for years).

[catnamedspot]

Or maybe explore selling the "business" to someone else so you get an upfront payment and move on?

At this point it's lingering royalties for books and design work - it's not really a business to sell. Actually I'm not really complaining - I just feel like at some point it's just feels like leftovers from a business that does not exist anymore.

[LadyGeek]

This thread is now in the Personal Finance (Not Investing) forum (tax form). I also retitled the thread.

[an_asker]

I'm surprised no one has told you to use tax software. Apparently once you start using it, all your tax filing issues will be solved. Or so I have been repeatedly told.

[dukeblue219]

I'm surprised no one has told you to use tax software. Apparently once you start using it, all your tax filing issues will be solved. Or so I have been repeatedly told.

Scroll up.

It's true though. I don't understand all the angst over filing a schedule C. It's just a few more screens on whatever software you use.

[an_asker]

I'm surprised no one has told you to use tax software. Apparently once you start using it, all your tax filing issues will be solved. Or so I have been repeatedly told.

Scroll up.

It's true though. I don't understand all the angst over filing a schedule C. It's just a few more screens on whatever software you use.

LOL. I blinked and missed it!!

[RickBoglehead]

As long as you get those 1099s, you have to file Schedule C.

I am in a similar "bind". I have about 1/2 that income. 1/2 of that is on a 1099. I also had income that didn't qualify to be on a 1099. I read carefully the definition of a hobby, and whether I intended to make a profit in that "hobby". The answer was yes, on one, no on the other, so some of the income didn't get reported as a business, it got reported as Misc.

I ran the numbers in TurboTax both ways.

[IowaFarmBoy]

I'm not a tax professional so please verify this. My wife inherited some book royalty payments from her mother. It's about $200 most years and my wife has no expenses to claim against it. The publisher sends a 1099-Misc. H&R Block software reports it on Schedule E which is for rents, royalties, partnerships, S Corps, trusts, etc.

So if it is all royalty income, you might explore whether this could work for your situation.

[fyre4ce]

Check into Schedule E instead of Schedule C. I'm not sure exactly where the line is between business income and royalties, but Schedule E explicitly says it's for royalties. One advantage of Schedule E (probably, unless you're in the 90% Social Security bracket) is that you don't have to pay self-employment tax on Schedule E income, whereas you do on Schedule C.

[cowdogman]

Royalties
Royalties from copyrights, patents, and oil, gas and mineral properties are taxable as ordinary income.

You generally report royalties in Part I of Schedule E (Form 1040 or Form 1040-SR), Supplemental Income and Loss. However, if you hold an operating oil, gas, or mineral interest or are in business as a self-employed writer, inventor, artist, etc., report your income and expenses on Schedule C.

For additional information, refer to Publication 525, Taxable and Nontaxable Income.

https://www.irs.gov/businesses/small-bu ... ble-income

Just because you are colleting royalties doesn't mean you are a business or self-employed. Don't file Schedule C or pay payroll taxes unless you have an on-going business.

[123]

You're still in business but just not producing new product. The royalty payments you receive are continuing payments for sales of your intellectual inventory/works/rights and according schedule "C" is the way to report them. That's fundamental cash basis accounting.

You could close the business by selling the rights to receive the royalties to someone else. Simple disposal of business assets.

[blackburnian]

I get a small amount of money every year from book royalties. When I tried Turbo Tax, it wanted me to file a Schedule C; but for a few years I've used a professional tax preparer, who used to report it on Schedule 1 ("additional income and adjustments to income") under "other income" (typing in "royalties"), but this year used Schedule E (royalties).

[cowdogman]

You're still in business but just not producing new product. The royalty payments you receive are continuing payments for sales of your intellectual inventory/works/rights and according schedule "C" is the way to report them. That's fundamental cash basis accounting.

You could close the business by selling the rights to receive the royalties to someone else. Simple disposal of business assets.

So, would the person who bought the right to receive the royalties be, solely because of such purchase, running a business, required to file a business tax return (Schedule C, etc.) and pay payroll taxes?

If not, why does the OP need to file a Schedule C and pay payroll taxes if he does not have an on-going business?

[123]

So, would the person who bought the right to receive the royalties be, solely because of such purchase, running a business, required to file a business tax return (Schedule C, etc.) and pay payroll taxes?

If not, why does the OP need to file a Schedule C and pay payroll taxes if he does not have an on-going business?

A purchaser of the royalty stream would not be running a business because the royalty stream is not represent compensation for services that they personally performed. The OP needs to file a Schedule C and pay payroll taxes because he still has a business as long as he receives royalties for his past business work. Society may decide that he is no longer in business when it no longer finds value in the works/products he created and the royalties stop. Alternatively copyright and patent/trademark law determine how long original work is under the control of its creator and that creator must be compensated for it via royalties.

[cowdogman]

So, would the person who bought the right to receive the royalties be, solely because of such purchase, running a business, required to file a business tax return (Schedule C, etc.) and pay payroll taxes?

If not, why does the OP need to file a Schedule C and pay payroll taxes if he does not have an on-going business?

A purchaser of the royalty stream would not be running a business because the royalty stream is not represent compensation for services that they personally performed. The OP needs to file a Schedule C and pay payroll taxes because he still has a business as long as he receives royalties for his past business work. Society may decide that he is no longer in business when it no longer finds value in the works/products he created and the royalties stop. Alternatively copyright and patent/trademark law determine how long original work is under the control of its creator and that creator must be compensated for it via royalties.

So you can check in, but you can never check out?

If "being self-employed" includes receiving payments for past self-employment, then you are correct. All the IRS.gov discussions I found relate to "being" self-employed--not "being or having been".

If self employed, I'd encourage the OP to look at the SEHID deduction and keep track of expenses related to the royalties (mileage to the bank to deposit the checks). OP may also want to look at a SEP IRA or solo 401(k).

[GenawithanE]

One thing to think about. so long as you are filing a schedule C, you can take the self employed healthcare deduction for your medical insurance. That includes medicare premiums, medigap, vision, dental, etc. insurance.

[catnamedspot]

Humorous post follow up to my original post.

Just did my taxes and was so happy I accomplished something for the first time in my life: Getting my Fed taxes to 0%. I even was able to eliminate my $1,000 Schedule C royalties with a health insurance deduction.

But then WHACK on the head. I had to pay $143 social security (self employment) taxes for those lingering royalties for the business that closed 10 years ago. Darn!

They are going to bury me with a schedule C.