A business is expected to report income 3 out of 5 years and should be in business to make money. The IRS stated at one of their tax forums that taxpayers are expected to take every deduction to which they are entitled.
By not reporting much income, you are also affecting your Social Security down the road and disability if you need it. The Social Security Administration gave a heartbreaking seminar on people underreporting and then need help and haven't paid in enough.