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January 23, 2020
Question

My self employment income is saying it’s -9,000 are my expenses too high or I do not have enough deductions?

  • January 23, 2020
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1 reply

ColeenD3
January 23, 2020

If you have a $9,000 loss, your expenses are more than your income. If your expenses are ordinary and necessary to your business, then it is hard to say if they are too high.

 

Keep in mind that the IRS expects you to have a gain on your business every three out of five years. If they see more losses than allowed, they will consider it a hobby and disallow expenses. IRC § 183(d) provides a presumption that an activity is engaged in for profit if the activity is profitable for 3 years of a consecutive 5 year period.

 

To be deductible, a business expense must be both ordinary and necessary. So, if your mailbox rental is ordinary (common and accepted in your trade or business) and necessary (helpful and appropriate for your trade or business) you can claim it. 

 

An expense does not have to be indispensable to be considered necessary.