Are you taking your business as seriously as you should be? According to the Internal Revenue Service (IRS), if you as a business owner have not shown a profit three out of five years on your Federal Tax Form Schedule C your business will not be taken seriously. In fact, it will be considered a “hobby business.” Also, if you have losses which are deducted from your income three consecutive years, you will invite an audit to be conducted, even if you have passed the “three out of five year” rule. As frightening as this sounds, do not be alarmed below are simple tips provided by Profit Sense Innovations that can prove your business is not a hobby.
In order to prove yourself to the IRS, there are several things you can do. In order to off-set your personal assets and build your personal credit, you should have a separate business bank card for all of your business needs. Another suggestion is to carry professional business cards. This will not only show the IRS the legitimacy of your business, it will also give your customers a chance to contact you for future and current purchases. Having a well-maintained set of business books can prove very beneficial to your business as well. When your business books are organized well, you can plan ahead financially as well as plan out what products you would like to sell in the future. Following these suggestions seriously will improve your chances of being taken more seriously by the IRS.
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