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How to Avoid IRS Audit Flags
Common IRS Tax Form Mistakes
How to Report Tax Shelters on IRS Forms
How to Report Business Losses on Schedule C Tax Form
How to Report Tips to the IRS
How to Report Itemized Deductions to the IRS
Reporting Rental Properties on IRS Tax Forms
How a Company Audit Affects Shareholders
File Accurate Return to Avoid Tax Audit
How Prepaying Affects Likelihood of IRS Audit
How to Organize Receipts for Tax Deductions
Electronic Vs. Paper Tax Filing
IRS Form 1040 is the easiest way to file federal taxes, and it is designed for those who do not have itemi… More
The 1040EZ Tax Form was designed by the IRS to simplify income tax filing for taxpayers that don't require… More
Medical expenses and property taxes are examples of itemized tax deductions. Learn how to document your co… More
When tax time arrives, consumers look for tax forms, Internal Revenue Service (IRS) publications, or just … More
You must establish profit motive to use the schedule C tax form. Learn how to report business losses on yo… More
A 1099 form needs to be filed with the IRS by anyone who has been compensated for a job where they were no… More
Check the math on your tax form. Learn mistakes which will automatically cause the IRS to target your retu… More
A W-2 form is the actual form used for tax purposes showing the IRS and the employee how much money was ea… More
A W-4 form is filled out for a new employer to calculate how many exemptions the employee is claiming, whi… More
Tax forms may seem difficult to complete, but the best way to finish them is with a methodical approach an… More
Taxpayers who receive new and different sources of income or who incur new types of deductions may be at a… More
IRS form 3868 is the application for an extension of time for an individual to file their federal tax retu… More
Summary: You must establish profit motive to use the schedule C tax form. Learn how to report business losses on your Schedule C form to avoid a tax audit from the IRS in this free personal finance video from an experienced accountant.
Diana Crawford is a CPA with more than 20 years of public accounting experience. She is a graduate of Georgia State University with a bachelor's degree in accounting.read more
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"How to avoid an IRS audit. In terms of consistently deducting a loss on a self-employed business or sole proprietorship that you report on a schedule C, if you have losses in three of five years reported on a schedule C then this is going to give rise to whether or not consideration is for this business being a for profit business. You must establish that you have a profit motive. Code section 183 talks about the profit motive. You must establish that you're carrying on this activity as a business. Let's say that you're a woodworker and you've bought a lot of equipment, a lot of wood, and you've made a lot of very nice furniture for your home. You do have to establish that you have a profit motive in the purchase of this equipment, these supplies. Creating items for yourself is not a deductible business expense, it's not a business. You have to show that you have operated your business in a business like manner. That you have a separate business checking account, more than likely, and that you have gone about trying to establish customers, build relationships, go after business so that this is a profit making motive. That you are not in this purely for enjoyment, but that there is a profit motive behind that. Make sure that you keeping all of your receipts and that you have it documented, that you have all of your business information in place. This will greatly enhance the likelihood that, in the case of an IRS audit, you can establish that there is a profit motive, and that will certainly help you avoid an IRS audit."
eHow Article: How to Report Business Losses on Schedule C Tax Form
Meet Mark P Cussen, CFP, CMFC eHow's Personal Finance Expert.
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