a business losing money year after year can expect either an audit or a letter/notice asking how the owner's plan to turn things around. This might include showing that while losses year after year have been reported the underlying assets are appreciating and if sold there would be a net profit for all the years combined. The most common example of this would be real estate. if the IRS does not accept your argument it's for profit, you can expect a bill maybe worse
this is something most taxpayers should not try to handle on their own. Wisest thing would be to engage the services of a professional to look things over and give you an opinion. Possibly even writing a letter providing info on how this will be profitable or helping you settle with the IRS if they too deem it a hobby. they would also discuss if you run other risks such as tax evasion.
if you can't prove it's for profit, you can expect the IRS to open all returns that can be opened either because the statute of limitations hasn't run or the losses produced a substantial understatement of tax liability. generally this is no more than 6 years. but if the IRS can show fraud then
