Ask Maxi · Your return
My business lost money this year. Do I still have to file?
Yes, and you want to. A loss year is often worth filing carefully rather than quickly.
A loss on a sole proprietorship or a single-member LLC generally offsets your other income, which can mean a refund of tax withheld from a job or a spouse's job. Partnerships and S corporations file their own returns regardless of the result, and the loss flows to the owners on a K-1 within the limits that apply to them.
Two cautions. If the activity loses money year after year with no real attempt to make a profit, the IRS can treat it as a hobby, and hobby expenses are not deductible. And a loss you cannot use this year is not necessarily gone — the rules on carrying it forward depend on the type of loss and your basis.
Keep the documentation for a loss year as carefully as for a profitable one. It is the years with refunds attached that draw questions.
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