Submitted By: someone
Answered: August 27, 2020 10:41 pm

How many years can a business lose money and still file a Schedule C?

A business that loses money year after year may draw the attention of the IRS; it may question whether this is a business with a profit motive or a mere hobby activity for which losses (expenses in excess of income) are not deductible. There’s no fixed limit on the number of years of losses. However, a business that’s just starting up can elect to rely on a presumption that the activity is for profit (not a hobby). If such business is profitable in three out of five years, it’s presumed to be for profit (a different presumption applies to horse-related activities). But even if the presumption isn’t met, facts and circumstances can be used to demonstrate a profit motive.

Tax Glossary


An amount taken from income as a prepayment of an individual’s tax liability for the year. In the case of wages, the employer withholds part of every wage payment. Backup withholding from dividend or interest income is required if you do not provide the payer with a correct taxpayer identification number. Withholding on pensions and IRAs is automatic unless you elect to waive withholding.

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