How many years can I lose money on my freelance job before I get into trouble with the IRS
AI accountant’s answer:
The IRS doesn't limit the number of years you can report a loss on your freelance job, but they do look closely at businesses that consistently report losses. The IRS follows a rule called the "hobby loss rule." If your freelance job or business shows a profit in at least 3 of the last 5 years, it will generally be considered a legitimate business for tax purposes.
If you consistently report losses for more than 5 years, the IRS may question whether your freelance job is a genuine business or just a hobby. If the IRS reclassifies your business as a hobby, you won't be able to deduct your business expenses to the same extent, which could lead to a higher tax bill.
To avoid trouble with the IRS, keep accurate records of your business activities, expenses, and income, and make a genuine effort to turn a profit. This will demonstrate that you're operating a legitimate business and not engaging in a hobby.
Correct.
Keeper’s AI Accountant V2
V2 is still a fine-tuned instance of GPT-4. Improvements over V1 include more comprehensive tax code embeddings, and a better chain-of-reasoning retrieval system.