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thtonethtaxtheth
New Member

SCH C...SELF EMPLOYED INCOME...I have $0 income but I have expenses. How many years can I show $0 income on Sch C and still declare related expenses?

 
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Hal_Al
Level 15

SCH C...SELF EMPLOYED INCOME...I have $0 income but I have expenses. How many years can I show $0 income on Sch C and still declare related expenses?

Simple answer: 2 years.

The general rule is that if you have not turned a profit in at least three of the prior five years, the IRS will categorize your business as a hobby. 

Reference: https://turbotax.intuit.com/tax-tips/small-business-taxes/when-the-irs-classifies-your-business-as-a...

But, it depends on the other details of your activity. That rule is not automatic and you can make a case if the IRS audits you.

The IRS expects that if you start a business, you intend to make money at it. If you don't, your business is likely to be a hobby. To determine if your business is a hobby, the IRS looks at numerous factors, including the following:

  • Do you put in the necessary time and effort to turn a profit?
  • Have you made a profit in this activity in the past, or can you expect to make one in the future?
  • Do you have the necessary knowledge to succeed in this field?
  • Do you depend on income from this activity?
  • Are your losses beyond your control?

View solution in original post

1 Reply
Hal_Al
Level 15

SCH C...SELF EMPLOYED INCOME...I have $0 income but I have expenses. How many years can I show $0 income on Sch C and still declare related expenses?

Simple answer: 2 years.

The general rule is that if you have not turned a profit in at least three of the prior five years, the IRS will categorize your business as a hobby. 

Reference: https://turbotax.intuit.com/tax-tips/small-business-taxes/when-the-irs-classifies-your-business-as-a...

But, it depends on the other details of your activity. That rule is not automatic and you can make a case if the IRS audits you.

The IRS expects that if you start a business, you intend to make money at it. If you don't, your business is likely to be a hobby. To determine if your business is a hobby, the IRS looks at numerous factors, including the following:

  • Do you put in the necessary time and effort to turn a profit?
  • Have you made a profit in this activity in the past, or can you expect to make one in the future?
  • Do you have the necessary knowledge to succeed in this field?
  • Do you depend on income from this activity?
  • Are your losses beyond your control?

View solution in original post

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