I started a design business in 2019 which is a single member LLC disregarded entity.
In 2019, I reported design income of $5500 on a Schedule C but claimed startup and ongoing expenses which put me in a loss position for the first year.
2020 is my second year, but I only had $250 in income due to personal health issues requiring surgery which was delayed because of the lockdown and because as a senior in "high risk" category I tried to stay home during the pandemic. My direct business-related expenses (mostly design software license subscription fees website fees and costs) put me in loss position again.
2021 is also looking uncertain as my health concerns continue and spouse is needing cancer treatment so I may be doing caregiving. Therefore I am concerned that 2021 might be a loss also. This raises the worry that filing 3 years of losses would subject my business to being determined a "hobby business" and I would have to abandon it.
Questions--Would any of the following scenarios either be acceptable or not advised and why?
Could I elect not to file Schedule C at all for 2020 since income only $250 (I would still be filing 1040 for personal income) so as not to have a second loss year? Or would the absence of a Schedule C filing be unwise or a "red flag."
Could I elect to file a Schedule C on the $250 income and not declare expenses this year (even though they were incurred)--essentially "eat them" so as to not file a loss? Could the expenses be deferred to a year when I have better business income? (However, I do have personal income against which the expenses could be claimed).
If health circumstances of myself or spouse limits my ability to work in 2021, would it still be counted as a "loss year" and thus trigger the hobby business label even if I have no income and claim no expenses and do not file a Schedule C?
Might the "hobby business" ax be delayed if one of the 3 years of losses is the COVID year since so many businesses incurred losses during the pandemic?
Should I just shut down the business altogether now until I can see that my personal life conditions are better supportive of business activity so as not to file 3 years of losses?
