In Canada there was a big test case involving a rich guy and his horse farm, which set the precedent. You need to have the reasonable expectation of making a profit and are allowed to operate at a loss until you can achieve a profitable operation, in a reasonable amount of time(which I believe is generally accepted as three years). Ditto on your needing a new accountant. At most, they should warn you that you are in a high audit group.

Quote from: jrwasserman on April 06, 2015, 17:04

In Canada there was a big test case involving a rich guy and his horse farm, which set the precedent. You need to have the reasonable expectation of making a profit and are allowed to operate at a loss until you can achieve a profitable operation, in a reasonable amount of time(which I believe is generally accepted as three years). Ditto on your needing a new accountant. At most, they should warn you that you are in a high audit group.

I don't think you're in a high audit group unless you're making $250,000-plus. The main people they go after are doctors, lawyers, accountants, construction contractors. They really like pummel contractors, especially ones who try to pay piece pay instead of a salary or hourly wage. Like $20 for every door your install instead of $20 an hour. 

The IRS is short-handed, thank God. Going after the little fish is too little reward.

And now I'll probably get audited this year even though I'm a tiny fish.

I called the IRS once to see if they had one of my tax returns on file, because I misplaced it and wanted my new accountant to look it over to see if I'd screwed anything up (I did my taxes myself for a couple of years). A few weeks later I got a letter (not my tax return) from the IRS. I opened it, feeling very queasy...and inside was a check for about $3,000. My call had obviously gotten them suspicious and triggered a review, and when they took a closer look they discovered I'd overpaid. It was either self-employment tax or Social Security, can't remember which. Ha! What a happy day that was. Still makes me smile.

Quote from: Shelma1 on April 06, 2015, 20:11

I called the IRS once to see if they had one of my tax returns on file, because I misplaced it and wanted my new accountant to look it over to see if I'd screwed anything up (I did my taxes myself for a couple of years). A few weeks later I got a letter (not my tax return) from the IRS. I opened it, feeling very queasy...and inside was a check for about $3,000. My call had obviously gotten them suspicious and triggered a review, and when they took a closer look they discovered I'd overpaid. It was either self-employment tax or Social Security, can't remember which. Ha! What a happy day that was. Still makes me smile.

Nice! If my business is not my main stream of revenue am I suppose to be paying social security? I already max out my social security tax with my main job.