Sole Proprietor No earnings, a Loss or ignore?

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  • #14519
    Jannie
    Participant

    Sole proprietor- For past years have had a profit, First yr. will have a loss as everything 2020 that used my service canceled. Would it be better to ignore the business as there is No income some expenses I provide training & did some for a couple non-profits without charging. I other income that would be taxed. Unless things improve 2021 will also show a loss as things are not looking up.

    #14520
    Kaye Thomas
    Moderator

    It’s okay to claim a loss from a genuine business activity, which this appears to be given that it was previously profitable and is not a type of activity normally engaged in as a hobby. Having zero revenue in 2020 raises the question whether the activity has been abandoned, but the pandemic presents special circumstances, and offering services to nonprofits could be seen as demonstrating an intent to continue operations, working toward a resumption of profitability when circumstances permit.

    If the dim prospects for 2021 profitability are making you think of abandoning the business, you might want to think twice about claiming the 2020 loss because the lack of revenue could make it appear you abandoned it in that year. If you’re still actively pursuing the business, there should be no problem claiming the loss.

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