Multiple Year Losses

[jhamlin]

I've been a part-time expediter for three years now, and have shown a loss on my Business Sched C for the last two years. The reason is that I do a tremendous amount of deadheading, so I've always used the standard mileage deduction.
My questions are:

If I show a (legitimate) loss for the third straight year (2013), am I likely to be thrown into what used to be called a "hobby loss" class.

I'm thinking about reducing the "miles for business" claimed, below what I actually put in - in order to show a small profit. Does this make sense or am I crazy? I keep all travel records, including start/stop odo readings, dates, etc.

 

[Ragman]

Does this make sense or am I crazy?

That's crazy! Why would you want to pay unnecessary taxes on a non-existent profit?

 

[zorry]

Seriously, it may save him money in the long run.
Deductions disappear once it becomes a hobby, or something bad like that.

 

[usafk9]

I've been a part-time expediter for three years now, and have shown a loss on my Business Sched C for the last two years. The reason is that I do a tremendous amount of deadheading, so I've always used the standard mileage deduction.
My questions are:

If I show a (legitimate) loss for the third straight year (2013), am I likely to be thrown into what used to be called a "hobby loss" class.

I'm thinking about reducing the "miles for business" claimed, below what I actually put in - in order to show a small profit. Does this make sense or am I crazy? I keep all travel records, including start/stop odo readings, dates, etc.

It makes perfect sense.

Sent from my DROID RAZR using EO Forums mobile app

 

[zorry]

It makes perfect sense.

Sent from my DROID RAZR using EO Forums mobile app

Andy, if Sarcastic, pls put smiley face.

I think you're serious, so please explain.

 

[sirgregory46]

Once you become a hobby business you lose all your decent deductions. The biggest Cv deductions you lose is the milage deduction. If you show 1$ of profit your good.

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[zorry]

Once you become a hobby business you lose all your decent deductions. The biggest Cv deductions you lose is the milage deduction. If you show 1$ of profit your good.

Sent from my SCH-I545 using EO Forums mobile app

That's kind of what I thought.
Wasn't 100% sure.
Never been lucky enough show a loss.

 

[xiggi]

I think showing one dollar profit would raise some flags.

sent from my Fisher Price - ABC123

 

[usafk9]

Andy, if Sarcastic, pls put smiley face.

I think you're serious, so please explain.

Nope, I'm serious. The KGB, er, IRS, looks at the first five years. If you're not profitable for three of them, your endeavor is a hobby, and those deductions won't be allowed.

OP's strategy is sound.

Sent from my DROID RAZR using EO Forums mobile app

 

[zorry]

I think showing one dollar profit would raise some flags.

sent from my Fisher Price - ABC123

Taking tax advice off this group should raise some red flags.

I travel far, and spend lots of money on a good accountant.
I believe it's paid dividends.

 

[BobWolf]

I'm not a real tax guy, but I did stay at a holiday in express...

I'm in the same boat often enough. The expenses vs income don't lie but make the legit filing close to raising the red flag. So, here is my advice.

1) Find a good FULL TIME accountant. By that I mean one that has a PERMANENT working office open 9-5 Monday thru Friday 52 weeks a year that way, if anything comes into question they are there to back you up as long as you are legit with the income and expense receipts.. Stay away from the store front seasonal outfits advertised on T.V. there gone come mid to end April. If you show a profit they can set up and file your taxes I think quarterly for you. Trust me its worth the 100 - 150 bucks to have him / her do the taxes for you. B.T.W. that's a deduction for next year.

2) You may need to scrap some deductions.
Try using real numbers by this I mean all the expenses. Fuel, oil, tires, insurance, maintenance, parts, hotels, work gear like clothing boots, gloves used for work. you might find you have a small profit or may show a larger loss.

3) Do you and can you file jointly? I file jointly with my wife, she works full time so she shows an income, with the usual deductions,. If you have a spouse or other someone who you can LEGALY file jointly with that may be a benefit.
4) Now, add up all your and your spouses / others income Include your business and any other work you do even if its cash, Then add your spouse. How dose the math come out now?
Again that's why I hire an accountant.

In the event you have a loss your Accountant will tell you what your minimum income has to be to avoid a problem. Last time I showed a total loss my accountant told me I would have to eat some losses and show a couple grand income for my business even though I didn't really have it in my pocket.

Rather pay Caesar what is not due than be hounded by the I.R.S.

PM me If you want the name and number of my tax guy.

Bob Wolf

 

[Dynamite 1]

See, there you go. Different tax advice from different experiences in the business. Rule we were always told was you had to show a profit 1 out of every 5 years or it was considered a hobby. We do show some profit every year in the business and then there are those pesky personal taxes and social security to pay on the personal side.

 

[Fkatz]

I've been a part-time expediter for three years now, and have shown a loss on my Business Sched C for the last two years. The reason is that I do a tremendous amount of deadheading, so I've always used the standard mileage deduction.
My questions are:

If I show a (legitimate) loss for the third straight year (2013), am I likely to be thrown into what used to be called a "hobby loss" class.

I'm thinking about reducing the "miles for business" claimed, below what I actually put in - in order to show a small profit. Does this make sense or am I crazy? I keep all travel records, including start/stop odo readings, dates, etc.

It seem that everyone has there own opinion. Since you are actually in a business that is recognized and played around by the IRS as far a audits, are concerned YES, there are some concerns when it comes to mileage, the main cause of question the loss that is is because you are suppose to show a profit in the last 2 of 5 years. and most of us including me when I was an O/0 myself from 1998-2005 have always showed a loss due to both mileage and Per Diem, of which we know we can prove, so don't be scared of the IRS, Remember, it depends on what business code you use on the Schedule "C". If you use 484120 that means that you are a Commercial Truck Owner and are " FOR HIRE", and the Standard Mileage Rate is a Big Red Flag for this Code, and legally not allowed no matter that you are in a Cargo Van, which is under 10,000 lbs GVW. or over. I use for all my Cargo Van Drivers the Courier Designation 492000, and mileage will be allowed up between 115000 and 125,000 miles used. but you must take roughly 20$ off for personal use. to stay clear of an audit. BUT THERE ARE NO GUARENTIES THAT YOU WILL NOT BE AUDITED, IRS AUDITS ARE RAMDOM, NOT SPECIFIC, if the IRS is on a war path for mileage, they there is a 75% audit rate, but since the shutdown that are focusing on Small Corps. Partnership LLC"S. The Sole Proprietor, they check out the mileage and if it is reasonable for the gross income they will allow it. Its the same thing with repairs if you take Actual Expense, if its between 8 and 15% its allowed, otherwise it might be audited and you have to prove the deductions. As As far as the Mileage deduction is concerned, you better have a record of each load, check out our website of what is required shown below. and download it. what they want to prove the mileage is Showing the mileage the time you left the house to pick up the load, to the pickup/Delivery, and then to the truck stop or where you are going to stay for the night. and then the next load received start over again. that is the way it can only be proved now. otherwise the mileage will not be allowed, Franklin Katz, RTRP, ATP, PA, PB

Frank's Tax & Business Service

315 E. King St.

Kings Mountain, NC28086

Local # 704-739-4039 Toll Free# 877-857-1040

E-Mail: [email protected])

Web: Kings Mountain, NC Accounting Firm | Home Page | Frank's Tax & Business Services

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[jhamlin]

Thanx for all your comments - I especially appreciated Franklin Katz' input, which was very informative and makes alot of sense. I'm actually filing a joint return (combining business & personal) with my wife, and have a refund coming after declaring all my business miles - even 'tho the business part shows a loss. I think I'll just reduce this number so that I show a profit on Sched C, and only give up a small portion of tax refund. Seems like the conservative thing to do!

Jim

 

[Fkatz]

hi jhamlin

if your only going to take mileage, you might be introuble due to no other business epenses are not being taken, like cell phone, tolls, per diem if your entitled to it, don;t settle for less than you are entitled to,
call me, it might be worth it in the long run

Franklin Katz RTP, ATP, PA, PB
Frank's Tax & Business
315 E. King St
Kings Mountain, NC 28086
704-739-4039
fax: 704-739-3934
website www.frankstaxbusines.com
IRS Circular 230: Pursuant to requirements ofpractice before the Internal Revenue Service, any tax advice contained in this communication (including anyattachments) is not intended to be used, and cannot be used, for purposes of(i) avoiding penalties imposed under the United States Internal Revenue Code or(ii) promoting, marketing, or recommending to another person any tax-relatedmatter.