Does it seem lately like every single client has some sort of side hustle requiring the filing of a Schedule C, Profit or Loss From Business? You’re not alone. More and more, we’re seeing taxpayers engaged in a wide variety of gig activities that might be considered a business for Schedule C purposes, or perhaps might more accurately be classified as a hobby!
This is particularly an issue when there’s a loss from the activity. The IRS is up in arms about the sheer number of taxpayers claiming losses on Schedule C that reduce the tax burden on other (often substantial) income.
As a result, we tax preparers have to be very careful about weeding out those activities that should be classified as hobbies, rather than as businesses. Even if the activity is making money, there are times when it should be classified as a hobby, rather than a business. The question of net gain or net loss is far from being the only determining factor.
It’s up to the tax professional to make the determination, as well as the determination as to whether the income is active or passive.
To help clear up confusion about this form, we've created an all new CPE course that examines the many gray areas that must be considered to correctly determine if an activity is a business or a hobby.
Key to this determination is the 9-factor test the IRS and Tax Courts use when considering this situation in an audit or court case. We’ll use case studies to show how that 9-factor test can help us make the call.
In addition, we’ll talk about the types of Forms 1099 that the tax preparer can expect to see for these clients and what information we can expect to see on those forms. We’ll also cover the qualified joint venture – what it is, when it’s useful, how to report it.
Our webinar will give you confidence in making the business vs. hobby distinction.
Interested in taking this course? Register below.
Amy M. Wall, EA, MBA, is a Canopy CPE/CE course instructor.READ MORE BY Amy
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