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My question is a bit different, actually.

I am a 18 years old who owns a single member llc since last july. The llc had been not making a penny but loosing money for the last months and I expect it to continue for some period of time.

Since I am under 24 and a full time student, I am considered as a dependent of my mother, which means I don't file for 1040. So my question is, single member llc (which I wanted irs to treat as a sole proprietor) files schedule c with owner's 1040. But yet, since my llc makes less than $400, owned by someone who doesn't need to file a 1040, do I still need to file my llc tax return?

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If you own a business you have to file a yearly return with the IRS regardless of whether there was a loss or profit.

To answer your question about your mom's tax return, the IRS lets you choose which way you want to handle it. You can file your own 1040 with your LLC's losses, or you can choose to let your mom claim you as a dependent on her tax return. However, you cannot do both. For example, when I was in college I worked in several paid internships and work study programs. My dad could have claimed me as a dependent, but instead I filed my own 1040 since he was no longer supporting me.

You and your mom (and possibly an accountant) need to decide which option makes more sense for you. If you had income from other sources it might make sense for you to file your own tax return. However, if you don't have any income to offset your LLC's losses, then it might be a better option if your mom claims you as a dependent.

I don't know how the LLC's losses will pass-through if your mom claims you as a dependent, since technically it's not her business. I'm not sure if she can claim your losses on her return, but she can at least claim the deduction for you as a dependent. You'll need to consult an accountant to figure out if you can get both.

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Well, this just doesn't make any sense at all. Since my llc is operating at loss which means I have no reasonable income, which means I have to be claimed as a dependent. As you mentioned, it doesn't make sense for my mom to file a schedule c since she isn't owning the business. However, I can't file for my own 1040 simply because I am not making a dime. It won't make any sense for me to remove myself from my mom's tax, since it will also hurt her tax deductibles. So either way it is a dead end. I have no clue at all where I should do, – henry Jan 29 '12 at 9:53
And lastly, I am just wondering isn't it true that since my business is a single member llc, which IRS treats it as a sole proprietor, making less than $400 a years doesn't it qualify me not required to file tax to IRS? – henry Jan 29 '12 at 9:56
@henry I don't think you understanding what I'm saying. What I'm telling you is that your mom does not have to claim you as a dependent. She is entitled to do so, and she can, but the IRS is not going to come after her if she doesn't. "I have no reasonable income, which means I have to be claimed as a dependent." << That's just not true. Your mom could have 10 children under the age of 18 and not claim any as dependents if she doesn't want to. She'll pay way more in taxes than she's required to, but trust me, the IRS is not going to come knocking on her door. – Zuly Gonzalez♦ Jan 29 '12 at 17:56
(cont.) Now, if she has 10 dependents and claims 11, then there's a problem. Second, you say "my llc is operating at loss which means I have no reasonable income". Keep in mind that I don't know your situation. It's possible that you have other sources of income that offset your LLC's losses. I also don't know how much your LLC has lost - it could be $10, $1000, or $10,000. Nor do I know what your mom's tax situation is like. These are all important variables that are going to determine which is the best option for you, and is way beyond what someone on the internet can help you with. – Zuly Gonzalez♦ Jan 29 '12 at 17:56
(cont.) That's why I tried to frame my answer by saying that you have the option to do it either way, it's just a matter of what makes more sense in your particular situation. If you are unhappy with the responses here, I suggest you spend the money to speak to an accountant. I hope that helps. – Zuly Gonzalez♦ Jan 29 '12 at 17:57
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up vote -1 down vote

Since the business ran a loss, you may want to file so that in the future you can avail yourself of the tax loss carryforward.

Please understand that I am not a tax attorney and the following should not be taken as anything other than a best guess.

If the LLC has a loss, I think the LLC should not be relevant to the question of if you need to file a 1040. Of course if it had made a profit and been your major source of income (which it wasn't) then it would affect the ability of your mother to claim you as a dependent.

Stated another way, if your mother is able to claim you as a dependent without the LLC, then the LLC would not affect her ability to do so since it had a loss and clearly did not contribute to your support.

I would recommend you call the free IRS help line and ask them this question, you have nothing to loose.

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My question is, even if I want to file, do I file my own 1040? Should my parent stop claiming me as a dependent? Will that mean I am no longer a dependent? – henry Jan 29 '12 at 2:17

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