Business or Hobby?

IRS Fact Sheet reviews whether a hobby is actually a for-profit endeavor [Fact Sheet 2008-23]:

Taxpayers must follow appropriate guidelines when determining whether an activity is engaged in for profit, such as a business or investment activity, or is engaged in as a hobby, IRS said in a new fact sheet published on the agency’s Web site.

As described in the fact sheet, Code Sec. 183 –often called the hobby loss rule–limits deductions that can be claimed when an activity is not engaged in for profit. There are tax implications for incorrectly treating hobby activities as activities engaged in for profit, IRS stressed. The goal of the fact sheet is to provide information for determining if an activity qualifies as an activity engaged in for profit and what limitations apply if the activity was not engaged in for profit.

The fact sheet poses various questions to aid taxpayers in making an appropriate determination. It also provides details regarding deductions for hobby activities that are claimed as itemized deductions on Schedule A, Form 1040, U.S. Individual Income Tax Return.

The fact sheet can be found at https://www.irs.gov/irs/article/0,,id=186056,00.html

Have you been challenged by the IRS for schedule C? If you are facing an audit or a tax collection matter regarding your small schedule C business, we can help.