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Old 02-01-2011, 03:19 PM
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Default Showing A Loss Each Year

My question is what if you do show a loss each year?? I've did daycare for 10 years and have showen a loss I think for almost all 10 years, because I spend so much money each year- and all of my home expenses and such- what do you do- just not claim all your deductions so you show a profit- that really doesn't make sense to me- how ofter do they aduit a small daycare home provider- I save all my receipts and cancelled checks each year so I have everything so show if I did get aduited - I just don't want my tax preparer to show a loss each year on my taxes if it's going to cause a problem- also we actually don't show an overall loss between my husband and I just if you look at my daycare taxes then there is a loss - does that make sense-

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Old 02-02-2011, 05:09 AM
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Question Please Answer

Would someone please respond to my questions???????
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Old 02-02-2011, 06:14 AM
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DCMomOf3 DCMomOf3 is offline
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If you aren't getting answers there is a chance we don't know, I know I have no idea. If you could show some patience someone who does have an answer may respond.
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Old 02-02-2011, 07:02 AM
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I remember Tom saying something about how after more than a couple of years of a loss the IRS may seek for you to prove that you are trying in good faith to make a profit...I'm sure he'll respond when he gets a chance.
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Old 02-02-2011, 07:41 AM
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cillybean83 cillybean83 is offline Member
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a loss is acceptable and almost expect in the first year or 2, after that you should be showing a profit, and if you don't show a profit for 3 out of 5 years, you will more than likely be audited.
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Old 02-02-2011, 07:44 AM
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KEG123 KEG123 is offline
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Originally Posted by cillybean83 View Post
a loss is acceptable and almost expect in the first year or 2, after that you should be showing a profit, and if you don't show a profit for 3 out of 5 years, you will more than likely be audited.
I think I read in one of Tom's books that if there is no profit shown after 5 years that you would be then considered a hobby and maybe you can't claim expenses on taxes??? I'm sure he'll chime in once he notices this thread!
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Old 02-02-2011, 03:19 PM
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TomCopeland TomCopeland is offline
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Default Showing a Loss

Just got into a hotel after driving 6 hours north from the Bay Area to Eureka, CA.

The IRS assumes you are a business trying to make a profit if you show a profit three out of every five years. If you don't do this you could attract some attention from the IRS. They may think that you are operating a hobby, not a business and deny some of your deductions. However, I've never seen an auditor actually say that a provider is running a hobby. However, they can deny deductions when you are showing a loss by saying you aren't trying to make a profit.

If you do show a loss you cannot claim house expenses (property taxes, mortgage interest, utilities, house insurance, house repairs, and house depreciation).

My advice would be that if you have been showing losses for a number of years try to reduce your expenses and show a smaller loss each year if possible.
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irs, profit loss, red flag, showing a loss, tom copeland

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