Years ago I was told by an IRS agent that your business would be considered a "hobby" if you showed a loss for 3 years running. And that would mean entirely different rules. My question is whether this would apply to my expediting business, since I show a loss for the 3rd time in a row.
"Hobby" loss
- Thread starter jhamlin
- Start date
runrunner
Veteran Expediter
Last edited:
Just hold back some of your deductions to show a little profit. Simple as that.
purgoose10
Veteran Expediter
Wait a minute, I thought this was a Hobby.
Hi all, This has been a problem for quite a few years, the IRS legal explanation is you must make a profit within the first 5 years, not 3, they do not care if you make a $1.00 its still a profit, but it must be shown in the last 2 years of business startup. Basically as long as you have the written proof that you were in business it will not be considered a "hobby", But again you MUST PROVE IT TO THEM THAT IT IS A BUSINESS. Most of you who own cargo vans have been taking the Standard Mileage Deduction, which must be proved that you are "NOT FOR HIRE". Which depends on the company you are leased to. In the contract you signed it must state that your vehicle is for 'EXCLUSIVE USE OF THE LEASING COMPANY" If that is not stated, the mileage deduction really cannot be used. and Actual expenses will be complete on all return which will probably be AMENDED showing the change in Expense. If you prove otherwise the mileage deduction will stand and will not be disallowed, which means perfect mileage logs showing the the shipper, receiver on a daily basis, plus the actual miles from the truck stop to the pick-up to the delivery, to the truck stop where you plan to stay for your next load, and then you must start over again with that for each and every load. that is what the IRS is Checking. If you use some kind of ledger showing everything for each load, you are in compliance, if you enter only the business mileage and not the total miles for the year they will not honor the deduction in an audit, nor your Per Diem deduction. that proof showing that information will basically allow all the deductions. but you have to remember that if you use the mileage deduction you cannot also deduct Fuel, Repairs & maintenance, Parts, tires, Insurance (Liability/Collision/Bobtail/or Cargo)additional Engine Oil,. license plates renewals and fees. You can still deduct scales, additional fluids ( all addtives (diesel Power, Lucas Oil treatment, Injector cleaner etc) If you have any other questions please do not hesitate to ask. REMENBER IF YOU NEED AN EXTENSION TO FILE DO IT NOW, AND DON'T WAIT UNTIL THE LAST MINUTE, FILING AN EXTENSION IS PLAYING IT SAFE TO SAVE IF YOU OWE ANY TAX A 22-25% TAX PENALTY SURCHARGE, AND REMEMBER IF YOU STILL OWE TAXES WHEN YOUR READY TO FILE, INTEREST AND PENALTY IS STILL ADDED TO THE BALANCE OWED. [h=1]Franklin Katz, ATP, PA, PB[/h][h=1]Frank's Tax & Business Service[/h][h=1]315 E. King St.[/h][h=1]Kings Mountain, NC 28086[/h][h=1]704-739-4039 [/h][h=1]E-Mail: [email protected])[/h][h=1]Web: www.prep.1040.com/frankstax[/h][h=1]
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