How Long Can I Claim A Loss On My Taxes?
Once you learn how to claim a loss on your taxes, you may claim a loss for as long as you would like. However, after three years you may become audited. Most business do not make profits for the first several years of getting started. The Internal Revenue Service is aware of this fact and tend to be more lenient on new business owners. After three years or so, your business should be making a profit. If you have had your company for many years and end up taking losses in consecutive years due to a slow economy, you may continue to claim losses. The only downside to this is that you are inviting an audit after filing losses for years in a row. If you have to file losses, keep all of your receipts for items you will be deducting. The Internal Revenue Service may eventually revoke your business status and consider your business a hobby. In that case the income from your hobby could be counteracted by the expenses. You would no longer be allowed to claim a loss, but your income would not be counted either.
- Add up all of the expenses you are claiming. Keep detailed receipts. Do not bother claiming deductions if you do not have a receipt for the expense. In case you get audited you will not be able to prove any loss unaccompanied by a receipt.
- Add up all of your income. Include income from every avenue. Even if you aren’t making very much money, it is better to claim something.
- Consider the risks to claiming losses. If you need a business loan and keep claiming losses, you might be unable to get financing. Continuously claiming losses may indicate a flawed business plan. Meet with the Small Business Association for help on how to turn your business into a successful one.