Do you have to file a scheulde C if.....?

Is Schedule C your only source of income. If so, you only have to file if your net earnings are $400 or more. See chart C of the 1040 instructions on page 9. But you might want to file in order to generate an NOL (net operating loss), which you can carryback to 2 or so previous years, and/or carryforward to the next 20 or so years.

If you have a Schedule C and also a W2, then you should file the Schedule C as it will reduce your AGI from the W2.

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Yes.

Filing the return is how they know that you lost money.

Besides, it starts the clock ticking.

It seems that I did not describe the issue accurately enough.

The situation that I have is with over $100,000 in AGI and a scheule C with gross reciepts of $1,100. Net profits show a loss of $50.

The question is "since profit is less than $400, is the taxpayer REQUIRED to file any of the schedule information for the business". I reconize that the loss will reduce AGI, but with such a small loss, the effort may not be worth, it if not required.

It's not required to take a deduction. There's a possibility, very remote in my opinion, that the IRS will come to learn that you had $1,100 in receipts. They make send you a CP-2000 asking for regular tax and self-employment tax on this $1,100, so then you would just write back and tell them that your expenses were more than your receipts -- which is kind of the Schedule C.

I disagree. In this case, "failing to take the deduction?" would be a failing to report the activity - and that's a strong indication of tax fraud. Furthermore, it is NOT optional to report self-employed business expenses. I believe you're confusing the ELECTION permitted to itemize vs. claiming the standard deduction as extendible to this situation - it is NOT.

You're probably right, but the IRS is not going to challenge you if you pay more tax. Now if you failed to take deductions and those deductions resulted you in paying less tax or getting more back, like when a higher income gives you a higher EIC, then that's a problem.