How long does the irs recommend a business continue not showing a profit?

Question

I have an ex husband who is self employed and has not shown a profit for 15 years. I am wanting to know if there are guidelines by the government to how long a business should stay open??

Answer 1

IRS doesnt make recommendations. generally a company should show a profit within 3-5 years. but remember, just because a company shows a loss (due to expenses, depreciation, inventory, etc) doesnt mean its not profitable. for the purposes of taxes if your income was 5000 but the depreciation on your equipment/vehicles etc were 6000, it looks like a loss, but the depreciation expense didnt actually come out of your pocket. its just an allowable expense. so u still technically had income of 5000 in this example. hope that helps.

BTW-if income was 5000 and salaries paid was 20000, eventually it would raise a red flag @ the IRS. I used 2 work 4 the IRS Cinti Service Center...saw it happen all the time.

Answer 2

The IRS recommends that you show a profit every year, they want taxes. If you don't show a profit in two out of five yaers the IRS might try to say you are not a business but a hobby. This attack can be overcome by a facts and circumstances test. If it is truely a business and you operate it like a business the service should back off

Answer 3

Yes in general it is three years, the exceptions are based on assets and employment. If the company purchases assets to increase business and if it gives employment to other people it is still contributing to the economy and the tax base even though it does not show a profit.

Answer 4

so long as he is paying his taxes, and the business is legal, it wont concern them.

Answer 5

4yrs

Answer 6

not their concern.