Question

IT consultant business not making money in 2021

Forum|Forum|4 years ago
October 27, 2021
3 replies
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Hello, I started an IT consultant business in July 2020, and my business has yet to make funds. I was informed that the IRS would like to see new businesses making money within the first two years of business incorporation. please advise if there are any regulations for new starts to make money within a particular timeframe

thanks in advance

O

OpeA1

No, there is no regulation for new start-ups to make money within a particular timeframe.

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BarbL

Just to clarify - there are expectations of a profit motive if you are actively operating your business.

The IRS wants to see that you have a profit motive, and expect to see a profit in three of five consecutive years. If you don't meet that standard, they may reclassify your business as a hobby and disallow any losses. If you have been claiming business losses without ever showing a profit, it may raise a flag for them.

Please see this TurboTax article for further information: When the IRS Classifies Your Business as a Hobby

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BarbL

(duplicate post)

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