Reporting a home office on your tax return would increase your audit risk, as that deduction has a lot of opportunity for inaccuracies associated with it. The main problem is that the office space must be used exclusively for business purposes, which can be hard to do since you are living in the house. For instance, the mere presence of a television in your home office would be grounds for the IRS to disallow the deduction, as watching television would be a personal thing and would thus violate the exclusive business use test.
A negative business income would also increase your audit risk, as you must have a profit motive to have a legitimate business and thus be able to deduct a loss from it on your tax return.
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