You are more likely to be audited by the Internal Revenue Service if you repeatedly claim small business losses on your tax return. This is especially true if you operate either a sole proprietorship or a single member LLC for which you file a schedule C with your personal tax return each year. These schedule C businesses are more likely to be audited if they do not show a profit for at least three of the last five years. If these schedule C businesses do not show a profit the Internal Revenue Service may feel that these are hobbies rather than businesses!
Mike Sylvester, CPA/ABV
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