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February 22, 2020
Question

I made 5040 last year in tutoring but after I put in my expenses and vehicle expenses my net income for tutoring is in the negative is that a problem, should I not report some of my expenses?

  • February 22, 2020
  • 2 replies
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2 replies

February 22, 2020

You should report all income and expenses you had for your self-employed tutoring job.  

 

It is not necessarily a problem to show a loss for a self-employed business.  It becomes more of an issue in the eyes of the IRS when it continues as a loss for a number of years.  At that point, the IRS could start to question whether you have a true profit motive, or if you are simply reporting some hobby income as a business.  

 

 

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February 22, 2020

if those expenses are properly allocated to your tutoring ( things like auto expense would have to be prorated.  for auto that would likely be based on mileage for tutoring vs personal), then leave them.     if your tutoring doesn't show a profit 3 out of 5 consecutive years, the IRS could disallow any losses under the hobby loss rules of IRC section 183.    this can be rebutted if you could show the IRS how you will end of with a net profit over the years the business is operating.