Hi rachelrenee1,
I understand how tough it may be with running a business and trying to turn a profit. You are correct, if your business claims a net loss for too many years, or fails to meet other requirements, the IRS may classify it as a hobby. If the IRS classifies your business as a hobby, it won't allow you to deduct any expenses or take any loss for it on your tax return. If the IRS classifies your business as a hobby, you'll have to prove that you had a valid profit motive if you want to claim those deductions.
If you are generating income, the IRS requires you to report all your income; hobby income is no exception. You just wouldn't take deductions on that hobby.
Here are some helpful articles to help guide you further:
When the IRS Classifies Your Business as a Hobby
Here’s how to tell the difference between a hobby and a business for tax purposes
Earning side income: Is it a hobby or a business?
