topic Re: Schedule C question in Get your taxes done using TurboTax

Schedule C question

sandette40 — Tue, 10 Mar 2026 06:15:28 GMT

Hello: I have a travel business for additional income. Due to the pandemic, I received a lot of cancellations and gave refunds that included loss commission. Under Business Income/Income You Gave Back, can I enter the amount pertaining to loss commission? I ask this question because the amount may be larger than income on my 1099. Also, the expenses for my business is more than the income i received. Will this trigger an audit? Any advice will help. Thanks.

Re: Schedule C question

Opus 17 — Sat, 03 Sep 2022 16:21:59 GMT

No. For cash basis taxpayers (which is almost everyone) income that you did not receive is just that -- income you did not receive. You can't take a deduction because you can't subtract something that was never part of your income to begin with. Your taxes are lower because you had less income. A refund would be money you paid back from money you had already received and reported as income.

For certain taxpayers who use accrual accounting, they book the revenue when a contract is signed, so accrual taxpayers would take a deduction for a cancelled contract. But remember, they are subtracting a payment that was never made from income they already reported (even though they hadn't been actually paid yet).

Expenses more than income is fairly normal, lots of businesses operate at a loss. Your loss may be deductible against other income or it may carry forward to offset future profits. If you make a loss in more than 3 out of 5 years, the IRS will look to see if you should reclassify your activities as a hobby. But one or two years of losses are unfortunately normal.

Re: Schedule C question

Bsch4477 — Sat, 03 Sep 2022 16:49:54 GMT

Not sure what loss commission is. If it is money you would have gotten but did not, you can’t deduct that. Many businesses do not have a profit from time to time. If you have good records you need not be concerned. If you have a loss more than 2 times in 5 years you will be considered as having a hobby and can’t deduct any expenses.

EDIT. 3 times in 5 years is correct as pointed out by @Opus 17.

Re: Schedule C question

Opus 17 — Sat, 03 Sep 2022 16:30:57 GMT

Let me put it another way.

Suppose you booked a trip for someone that was $1000, of which $100 was your commission. They cancel and you refund the $1000. You can report the $1000 received as gross sales and the $1000 paid back as an expense. You don't record anything extra for the lost $100 of commission income. You never received it, so it won't be taxed, but it's not an additional deduction.

Re: Schedule C question

Opus 17 — Sat, 03 Sep 2022 17:05:58 GMT

@Bsch4477 wrote:

Not sure what loss commission is. If it is money you would have gotten but did not, you can’t deduct that. Many businesses do not have a profit from time to time. If you have good records you need not be concerned. If you have a loss more than 2 times in 5 years you will be considered as having a hobby and can’t deduct any expenses.

EDIT. 3 times in 5 years is correct as pointed out by @Opus 17.

Note that even if you have several years of losses and the IRS presumes you really have a hobby, that is a rebuttable presumption. You can still try to show (if you can) that it is a legitimate business, by a showing of facts and circumstances.

Re: Schedule C question

Anonymous_ — Sat, 03 Sep 2022 17:17:03 GMT

The IRS does not presume that an activity is a hobby (or not engaged in for profit). The IRS considers all of the facts and circumstances surrounding the activity.

There is a rebuttable presumption that an activity is engaged in for profit if the activity is profitable in at least three of the last five tax years.

See https://www.irs.gov/pub/irs-news/fs-08-23.pdf