[stlcardsfan]

Originally Posted by glchen

It wasn't a full blown audit, but I also had the IRS question my schedule C for my baseball card revenue a few years back, and I basically just downloaded my ebay sales and sent it to them, and that was enough to satisfy the IRS in that case.

I don't know about your case, Bobby, but I think in general from what I've read here, is that if year after year, you are always reporting losses on your schedule C for your business, that's going to be a red flag for the IRS and get you audited. I'm not a CPA, so I probably have no clue what I'm talking about, but the IRS probably figures that if your business is always losing money, you would just close up shop and not continue anymore unless you are using it as an illegal tax shelter. Again, this is probably not you, and it just may have been an unlucky draw in this case.

This is known as the "hobby loss" rule. I believe if you lose money on a Sch C for 3 of the past 5 years the IRS can declare it a hobby and preclude you from taking such losses.