USA Schedule C Loss


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Are schedule C losses generally ignored by the IRS if it’s the first year of the business and the loss is small? I have bank transactions at a store that specifically sells things for my business to backup my deductions but lost a couple receipts.
 
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BIG E

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Can't you get the supplier to provide you with duplicate copies?
 
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Can't you get the supplier to provide you with duplicate copies?
I don’t think they would go that far back. The expenses were approx $1000 and the sales were approx $50. I went door to door at first but when I continued going door to door I got stopped by the cops. I tried continuously to get a permit from the city but because of COVID it was impossible to get in touch with a person. I could never get my permit to go door to door and that halted my revenue.
 
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Are schedule C losses generally ignored by the IRS if it’s the first year of the business and the loss is small? I have bank transactions at a store that specifically sells things for my business to backup my deductions but lost a couple receipts.
Schedule C losses or Excess business losses is are limited to 250K for a Single Filer or 500K for MFJ. If you fall in one of those filling status, and have business losses below the threshold same came be applied against other sources of income. However, any excess is suspended are carry forward for future year. Additionally, the Cares Act temporarily allows for a 5 year carryback to apply against prior years profit.

If the missing receipt are no material to the overall transaction, then I would not worry about it too much.
 
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Generally speaking IRS expects to see a loss the first year because of startup costs, Sec 179 and bonus depreciation. So if you are only missing a few receipts you can use alternative methods to substantiate those expenses. Also it depends on what category of expenses you lost receipts. A good example is food and entertainment that IRS takes a strong stance because they know you may be treating yourself and family instead of it meeting the strict business meals deduction rules.
 
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Are schedule C losses generally ignored by the IRS if it’s the first year of the business and the loss is small? I have bank transactions at a store that specifically sells things for my business to backup my deductions but lost a couple receipts.
 
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It is a well-known fact that most businesses lose money the first five years of existence. So you have a little leeway when it comes to reporting losses in your business when you first start out. But you want to be very careful about reporting losses for five consecutive years in your business. Why? Because the IRS could consider your business to be a hobby, thereby rejecting all of your expenses and deductions. I recommend that you might even forgo taking some legitimate expenses you can claim so that you show a small profit, even if it is only a couple of hundred dollars. This should keep the IRS from red flagging your returns due to constant losses being reported on your returns. I hope this helps you out.
 

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