Tuesday, January 18, 2011
There is no limit on the # of years you may have a loss in your self-employed business.
Since 1980 my husband and I have had two home-based businesses, plus he works from a home office for his job with the state.
We jointly own both businesses. The appraisal & consulting has never lost money and has very low expenses. I haven't done any appraisal or assessment work since 2000 because of health problems, but my husband has continued to do part-time property tax data collection (except for the past two years).
I have been on Social Security disability since 2007, and also worked part-time at a church until May 2009.
I resigned from that position because our middle daughter was diagnosed with terminal cancer. (She died March 8th, 2010.) My own home business, arts and photography, has never made a profit.
During 2009 and 2010, neither of our home businesses were in operation because of the need to care for our daughter and keep my husband's state job going. Now that we have had almost 10 months to process our daughter's passing, we are again trying to work in our home businesses.
My husband's work doesn't create any problems for our tax accountant, but my art & photography business does. I did not sell anything in 2010, and sold under $200 in 2009. However I did continue to purchase some supplies, books and office equipment in 2010. How long will IRS allow me to continue trying to make a viable business? Our CPA thinks she can defend the lack of sales for the past two years, as long as she can prove intent to continue the business. Do you agree?
Thanks for your help.
My sincere condolence for your loss. It is a testament to your strength and resilience that you and your husband are back at work.
There is no limit on how many years you may have a loss in your self-employed business. As long as your goal is to make a profit and you handle your art and photography endeavor in a business-like manner you may have a loss forever.
Here are some posts that give a short explanation as well as an argument for you to present to your tax pro. Your situation is more fully explained in my book Self-employed Tax Solutions.
Self-employment is about credibility.
You must have a profit in 3 out of 5 years: Hogwash!!
Hobby or Business: Are you a professional artist?
Profit Motive: You're OK as long as you want to make a buck.