Is It A Hobby, But A Business? Essay
As defined by the Internal Revenue Services, IRS, a hobby is an activity not executed with the hopes of making a profit. To determine the status of your activity, taxpayers are advised to follow appropriate guidelines to avoid misfiling an activity considered a business as a hobby. The IRS affirmed that there is almost $30 billion per year in unpaid taxes due to incorrect deductions when a business is deducted or exempted from taxes because they were claimed as hobbies.
So, is it a business or just a hobby
A business is any activity done with the intention of making a profit. While taxpayers may deduct necessary expenses for day-to-day business operation; this expense must be accepted and common in the business or trade. To determine what an appropriate expense is and to differentiate between a business and a hobby, you should take the following into consideration:
Is your income based solely on the activity or is it a source of income?
Is the activity done with the intention of making a profit?
Did you change your method of operation to increase profitability?
Did similar activity yield a profit in the past?
Have you ever…