The actual stats on audit rates might make you feel better. For small Schedule C filers (under $100k), the audit rate is around 0.9%. Even with multiple years of losses, unless you have other major red flags, your chances remain relatively low. Make sure you can document that your expenses were legitimate business costs, not personal expenses, and you should be okay.

Has anyone here actually been audited for a small business with losses? I'd love to hear a firsthand experience about what happened and how it went.

WARNING: Be careful about reasonable cause. My husband tried this last year for his consulting business and it got REJECTED. He had to file as a sole prop for half the year and then as an S-corp, which meant TWO different tax returns and a ton of accounting headaches. The IRS is getting stricter about these late elections. Make sure your reasonable cause is actually reasonable and not just "I didn't know about it." We learned the hard way that "I was busy with client work" isn't good enough. If you're serious about making this work, talk to an actual tax pro who specializes in business formation, not just random internet advice.

I went through this exact situation 2 years ago as a freelance web developer. Here's what I wish someone had told me upfront: The timing is crucial, but you have more flexibility than you might think. You can form your LLC in August and still get S-corp treatment for your entire 2023 income, BUT you need to act fast once the LLC is formed. My recommendation: Form the LLC immediately in August, get your EIN the same day (you can do this online), then file Form 2553 within 2-3 weeks. Even if you're technically "late" by a few days, a simple reasonable cause statement explaining you're a first-time business owner unfamiliar with the election deadlines will likely be accepted. The key advantage is that once approved, you'll file a single 1120-S for the entire year instead of splitting between Schedule C and S-corp returns. This saves you significant accounting complexity and costs. One important note: Make sure you have reasonable justification for the salary vs. distribution split once you're an S-corp. The IRS expects you to pay yourself a "reasonable" salary for the work you do, with the remaining profits taken as distributions (which aren't subject to self-employment tax). Don't overthink this - thousands of freelancers make this transition successfully every year. Just don't wait until December to start the process!

Just wanted to add some perspective as someone who's been doing gig work for a while - the tax situation isn't as scary as it seems once you get organized! The key is treating this like a real business from day one. I use a simple spreadsheet to track my daily earnings, miles driven, and any expenses. At the end of each week, I calculate roughly 30% of my profit and transfer it to a separate "tax savings" account. For tracking mileage, I highly recommend using an app like Stride or MileIQ that automatically tracks your drives. Manual tracking gets tedious and you'll inevitably forget to log trips. One thing that surprised me: even though you're paying self-employment tax (which feels like a lot), you're also earning Social Security credits that count toward your future benefits. So it's not just money disappearing - you're building toward your retirement too. The $600 threshold just determines whether DoorDash sends you a 1099 form, but you're technically required to report ALL income regardless of whether you get a form. Keep good records and you'll be fine!

As someone who's been dashing for about 8 months, I'd say it's definitely worth it if you approach it right from the start. Here's what I wish someone had told me when I was at your stage: First, don't stress too much about the $600 threshold - others have explained it well, but just know you're still a ways from hitting it based on your current earnings. What I found most helpful was setting up systems early: 1. Download a mileage tracking app immediately (I use Stride - it's free and designed for gig workers) 2. Open a separate savings account just for taxes and transfer 25-30% of your weekly profit there 3. Keep a simple log of any equipment you buy (phone mount, insulated bags, etc.) The tax situation seems overwhelming at first, but it's really manageable once you get organized. I actually ended up owing less than I expected because the mileage deduction is pretty generous - I drive about 70% of my total earnings in deductible miles. One tip: don't just focus on gross earnings when deciding if it's "worth it." Track your profit after expenses for a few weeks to see your real hourly rate. That'll help you decide if you want to continue and which times/areas are most profitable for you. You're smart to think about this stuff early rather than scrambling at tax time like a lot of people do!

I filed my Form 7202 amendments in late January 2025 for both 2020 and 2021, so I'm about 10-11 weeks into the process now. Reading through all these detailed experiences has been incredibly reassuring - I was starting to worry that something was wrong with my filing since I hadn't heard anything yet, but it's clear that I'm still well within the normal timeframe. Like most of you, I'm self-employed (run a small accounting practice) and qualified for the family leave credits when I had to stay home with my two kids during the virtual learning periods. The potential credits are substantial - around $8,900 for 2020 and $11,200 for 2021 - so the waiting has been pretty anxiety-inducing. The "Where's My Amended Return?" tool still shows "received" for both years, but based on everyone's shared timelines, it sounds like that's completely normal until around week 15-16. I'm planning to start checking more frequently once I hit that milestone. One thing that really stands out from reading everyone's experiences is how consistent the 16-22 week timeline seems to be, regardless of when people filed. It's frustrating that it takes so long, but at least it appears to be a predictable process rather than just random delays. Carlos, since you're at the 3-week mark, it sounds like we're all in this together for the long haul! Thanks to everyone who shared their detailed timelines - it really helps to know what to expect and that legitimate claims do eventually get processed and paid out.

I'm about 8 weeks into this process myself - filed my Form 7202 amendments for both 2020 and 2021 in mid-February 2025. Like many of you, I'm self-employed (freelance IT consultant) and qualified for the family leave credits when I had to care for my kids during school closures. Reading through everyone's detailed timelines has been incredibly helpful and reassuring! I was starting to get worried since I haven't heard anything yet, but seeing the consistent 16-22 week pattern from people who actually received their payments gives me much more realistic expectations. The potential amounts for me are around $9,400 for 2020 and $12,800 for 2021. The "Where's My Amended Return?" tool still shows "received" for both years, but based on all the experiences shared here, that seems completely normal until around week 15-16. I'll stop checking it obsessively and wait until I'm closer to that milestone! One thing I really appreciate from this discussion is how everyone emphasizes that legitimate claims do eventually get processed - it just takes patience. The waiting is definitely stressful when you're talking about substantial amounts, but knowing there's a predictable timeline helps manage the anxiety. Carlos, thanks for asking this question - this thread has become such a valuable resource for all of us going through this process! We're definitely all in the long wait together, but at least now we know we're not alone and that the process does work.

One more thing on this topic - capital loss carryovers can potentially be used on back-to-back separate and joint returns. Like if you filed as single with carryover losses, then got married, you CAN bring those losses to your joint return. But what's weird is if you file jointly with losses, then get divorced, each spouse gets half the carryover. My ex and I had about $18k in carryovers when we split, and we each took $9k to our separate returns.

For the divorce question about splitting capital loss carryovers - yes, this is covered in IRS Publication 504 (Divorced or Separated Individuals). When spouses who filed jointly get divorced, any unused capital loss carryovers from the joint returns are generally allocated 50/50 between the former spouses on their subsequent separate returns, unless they agree to a different allocation in their divorce decree. However, if one spouse can demonstrate they were responsible for a larger portion of the losses (like if they managed all the investments that generated the losses), they might be able to claim a larger share. But absent specific documentation or agreement, the IRS default is 50/50 split. The key thing is to make sure this gets addressed in your divorce settlement so there's no confusion later when you're both trying to claim the carryovers on separate returns.