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Deductions & credits
most likely you will show losses year after year if revenue is only $2k while the taxes are $5K. after several years of showing losses, the IRS may audit your return and attack the losses as an activity not entered into for profit. then you will owe the additional income taxes for each open year, penalties and interest. the IRS would say the revenue is taxable while the taxes can only be deducted along with other taxes on schedule A - so you would have to be able to itemize. even if you do itemize, currently the schedule A tax deduction is limited to $10,000 so if you are already there these additional taxes will not benefit you.
‎December 29, 2021
6:29 PM