business loss

[SHUBEE89]

client has shown a loss on his business for the last 3 years now with covid he has a loss again this year but the irs rule says he cant use the loss
because of covid can he claim the loss this year wondering if irs is making an exception do to covid-19

[BOB W]

The Loss rules you're referring to is Hobby Losses. Does the business have a characterization that could be classified as a hobby?

[TaxGuyBill]

client has shown a loss on his business for the last 3 years ... but the irs rule says he cant use the loss

That is not true.

The rule says the IRS will presume the activity is for-profit if there is a profit for 3/5 years. If there is a loss for 3+/5 years, then it isn't "presumed" to be for profit, and it is based on the actual facts-and-circumstances.

But that is only one factor. You and the client need to analyze if this is actually a "business" or if it is a 'hobby'. And that should be done regardless if there was a 3/5 year profit or loss.

https://www.irs.gov/faqs/small-business-self-employed-other-business/income-expenses/income-expenses