Question

Sole Prop Taxes

Forum|Forum|2 years ago
August 30, 2023
2 replies
0 views

I have a sole proprietorship and am confused about tax filing. From my understanding, with an SP you do not need to file separate federal taxes. Instead, you would include your income in your personal taxes. However, I live in California. Do I still need to file City and State business taxes? My income from my SP has been around $3,000/year.

Laura_CPA

Hi AniTar1,

Happy to help! You are correct with an SP you file it under Schedule C along with your 1040 (personal tax return), it doesn't require a separate business filing.

If you created a Limited Liability Company (LLC), you would be required to file Form 568 Limited Liability Company annual return. Otherwise, you just need to file your federal and state tax returns.

Hope this helps,

Laura

**Say "Thanks" by clicking the thumb icon in a post**Mark the post that answers your question by clicking on "Mark as Best Answer"

A

AniTar1Author

Thank you! Is this true even if I have an EIN? I get notices from the city saying that I may lose my Seller's Permit if I don't file my business taxes. However, what I'm hearing is that if I have a Sole Proprietorship, I don't need to file City/County business taxes. I would only need to include the income from my SP on my Federal Taxes. Is this correct?

Laura_CPA

Thank you for the additional information. If you have a Seller's permit, you do have a Sales and Use Tax filing requirement. This is an additional filing with the California Department of Tax and Fee Administration (please check out their website: https://www.cdtfa.ca.gov/services/#File-a-Return). In which County are you located?

**Say "Thanks" by clicking the thumb icon in a post**Mark the post that answers your question by clicking on "Mark as Best Answer"

bkaytaxes

Hello @AniTar1 !

Great question! You are on the right path. You would still file your federal return as usual. The only differences is that you would included a Schedule C as part of the filing. A schedule C is to report the income and expenses from your Self Employment. You would do the same for the state of California. Make sure to take time to report all your expenses so you are only paying taxes on the profit from your business. Turbo Tax (most tax software) will walk you through the federal and state reports to make sure you are not paying more than you should. If its a hobby vs a business you would still need to report the income but there will be some differences. Here is an article to support you along the journey:

Reporting Self Employment Income and Expenses

Hobby vs Business

**Say "Thanks" by clicking the thumb icon in a post**Mark the post that answers your question by clicking on "Mark as Best Answer"