The Treasury Department's watchdog group thinks it smells a rat when it comes to reports of Schedule C losses on tax returns, and it's urging changes in the Tax Code to establish "bright-line" rules for determining when an activity is a legitimate business.

The Treasury Inspector General for Tax Administration issued a report this month estimating that about 1.5 million taxpayers filed a Schedule C showing no profits and only losses over four consecutive tax years for their businesses. Tax practitioners helped 73 percent of these taxpayers to prepare the returns.

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