The IRS has a checklist to determine if a taxpayer’s activity is a business or a hobby. The results of that decision will impact the deductibility of certain expenses on your tax return.
The checklist includes
- How many years have been profitable on the tax return,
- Has the taxpayer taken steps to increase efficiencies and/or profitability of the activity,
- Does the taxpayer depend on the income from the activity
If the IRS determines the activity is not a business then certain expenses can be deducted only on a Schedule A and others may not be deductible at all.
Click here for more information from the IRS [http://www.irs.gov/uac/Business-or-Hobby%3F-Answer-Has-Implications-for-Deductions], or call us – we can help!