The IRS says your business activity needs to make a profit 3 out of 5 years otherwise they could audit and possibly treat the business as a hobby EVERY YEAR you have filed.
A) Is profit or loss the ONLY thing they look at? What about having good records for schedule C on Part I income and Part II expenses, a state business license, and the time spent on this business?
B) EVERY YEAR could be treated as a hobby; including years that had a profit?
C) If prior years are treated as a hobby, what is disallowed; ALL income, and ALL expenses or only some of these are disallowed?
D) Once they say the business is a hobby can it be changed back to a business later on?
E) How / where will my ‘hobby’ income and expenses be reported in future years?
F) What Turbo Tax Product would be best to use?
Thanks for your help.
