Could The Self-Employed Be Barred From Deducting Some Losses?
Many sole proprietors–people who run unincorporated businesses and report their results on Schedule Cs–cheat on their taxes, and there’s only so much the Internal Revenue Service can do about it, government auditors say. 
In a report released Tuesday that might both embolden tax finaglers and alarm honest self-employed folks, Congress’ Government Accountability Office says the IRS estimates 70% of taxpayers who report net losses on their Schedules Cs exaggerate, mainly by overstating expenses.
Moreover, 92% of the 5.4 million taxpayers who reported Schedule C losses (real or inflated) in 2006 deducted reported losses against income from other sources, such as day jobs and investments. In all, sole proprietors claimed $40 billion of such losses against other income in 2006, resulting in “billions of dollars of lost tax revenue,” the GAO said. Read more:
