Never filed business taxes - recommendations? Virginia

[ShouldaKnownBetter]

I started a small house cleaning biz in late 2007. I was licensed in our city and filed for an EIN via the IRS. I had an existing corporation that just needed renewed so I was a DBA under that corporation. I had an attorney helping me update my corporation information and she dropped the ball to the point that a few months later the corporation expired. The state never got the papers she was supposed to file. I really have no idea what type of biz is on file with the state or the IRS now...S Corp, sole-proprietor, etc. I operated under the assumption that I was an S-Corp but I supposed when that expired I was put into another bucket.

So fast forward over the course of six months....at which point in 4/08 I shut my doors entirely.

For a couple of those six months I "hired" some help and paid them cash and classified them as IC's. I kept detailed records of their earnings which were percentage based. However, I paid a driving allowance (flat fee) to those who drove to the work sites. I didn't pay hourly. I didn't "require" anyone to work. If they showed, they showed. Every single worker was let go because of circumstances involving theft, despite running background checks on everyone. It was very discouraging. Since they were considered independent contractors, I simply told them their services were no longer needed. Most never made more than a couple hundred dollars, but some exceeded $600.00.

I had a sudden departure from the business and transferred my existing client base to a friend who just "took over" the accounts. No money was transferred between us. I didn't sell anything. I just wanted OUT of the headache and mess. I had health issues to deal with and it was clear I wasn't set up to continue operating a business with so much to "fix" paperwork wise.

So the end result is that I did not get an accountant due to lack of funds and resources. My attorney, whom I paid good money to, didn't do her job. I LOST a considerable amount of money on this startup. I had to use family income to pay our payroll and said "forget this mess!" I wasn't making any profit and gave up. The fact that the staff on hand couldn't do their specified jobs without stealing in some way just put the nail in the coffin for my biz.

I have not filed any taxes. I am not sure how! Is it too late to file, and honestly...is it worth it for me to stress over it?

I have only one former IC who asked for a 1099. But here's the thing...she made less than $600 but insists she made more. This is a girl who had other "side" work that included stealing my existing clients and doing cleanings behind my back. I think she's confused about her earnings because she had it coming from so many sources. LOL

Anyway, I am not trying to defraud anyone...I just got over my head and am not sure what to do to fix it. Should I hire a CPA or just let it go? I really just want this behind me once and for all.

Thanks all. I appreciate it.

[LdiJ]

I started a small house cleaning biz in late 2007. I was licensed in our city and filed for an EIN via the IRS. I had an existing corporation that just needed renewed so I was a DBA under that corporation. I had an attorney helping me update my corporation information and she dropped the ball to the point that a few months later the corporation expired. The state never got the papers she was supposed to file. I really have no idea what type of biz is on file with the state or the IRS now...S Corp, sole-proprietor, etc. I operated under the assumption that I was an S-Corp but I supposed when that expired I was put into another bucket.

So fast forward over the course of six months....at which point in 4/08 I shut my doors entirely.

For a couple of those six months I "hired" some help and paid them cash and classified them as IC's. I kept detailed records of their earnings which were percentage based. However, I paid a driving allowance (flat fee) to those who drove to the work sites. I didn't pay hourly. I didn't "require" anyone to work. If they showed, they showed. Every single worker was let go because of circumstances involving theft, despite running background checks on everyone. It was very discouraging. Since they were considered independent contractors, I simply told them their services were no longer needed. Most never made more than a couple hundred dollars, but some exceeded $600.00.

I had a sudden departure from the business and transferred my existing client base to a friend who just "took over" the accounts. No money was transferred between us. I didn't sell anything. I just wanted OUT of the headache and mess. I had health issues to deal with and it was clear I wasn't set up to continue operating a business with so much to "fix" paperwork wise.

So the end result is that I did not get an accountant due to lack of funds and resources. My attorney, whom I paid good money to, didn't do her job. I LOST a considerable amount of money on this startup. I had to use family income to pay our payroll and said "forget this mess!" I wasn't making any profit and gave up. The fact that the staff on hand couldn't do their specified jobs without stealing in some way just put the nail in the coffin for my biz.

I have not filed any taxes. I am not sure how! Is it too late to file, and honestly...is it worth it for me to stress over it?

I have only one former IC who asked for a 1099. But here's the thing...she made less than $600 but insists she made more. This is a girl who had other "side" work that included stealing my existing clients and doing cleanings behind my back. I think she's confused about her earnings because she had it coming from so many sources. LOL

Anyway, I am not trying to defraud anyone...I just got over my head and am not sure what to do to fix it. Should I hire a CPA or just let it go? I really just want this behind me once and for all.

Thanks all. I appreciate it.

Step one: Contact the IRS and find out what kind of entity you claimed when you set up the EIN. If it was an S-corp, and you previously had a valid S-corp election on file with the IRS, then send a "zero" 1120S to the IRS, and check the "final return" box. If it was some other kind of entity, or you didn't have a proper S-corp election, then you may need to file a C-corp final return, or you may not need to file a final return for a "business".

Then, as a sole proprietor filing a schedule C, issue 1099's to your contractors. You can eliminate those who made less than 600.00 from the list if you like.

File a schedule C with your return for 2007, listing your true income and your true expenses. If you have a loss, and no other income, then you would have a loss carryforward.

Do the same thing for 2008, bringing forward the loss carryforward. If you have a further loss, then your loss carryforward increases.

Eventually you can take that loss against other income.

You really should consider having a tax professional help you with the above.

[ShouldaKnownBetter]

Thank you SO much for your help! I will hopefully "catch up" on this over the next week with the help of someone who does taxes. You helped me a great deal!

ETA: Since it's past the 31st of January, is there a penalty for not getting the 1099's out in time? I have two from IC's who probably never wanted them in the first place...but that's not for me to decide.

[LdiJ]

Thank you SO much for your help! I will hopefully "catch up" on this over the next week with the help of someone who does taxes. You helped me a great deal!

ETA: Since it's past the 31st of January, is there a penalty for not getting the 1099's out in time? I have two from IC's who probably never wanted them in the first place...but that's not for me to decide.

So far the IRS has not been assessing any penalties for filing them late.