Best Tax Preparation Services in Bayonne, NJ

Hobby vs. For-Profit: What's the Difference? Remember Saturday morning Spiderman cartoons? Well, let's talk about hobbies and businesses! 🕷 What is a Hobby? Oxford defines a hobby as "an activity done regularly in one's leisure time for pleasure." Sounds innocent enough, right? But the IRS has a similar definition, with a twist: "there is no intention of making a profit." 💸 That's right, intent is key! The IRS looks at several factors to determine if your activity is a hobby or a business: • Books and records • Business-like manner • Intention to make a profit • Normal losses in your industry • Past success No one factor is more important than the others. It's all about your specific "facts and circumstances." 🤔 Hobby Loss Rules (IRC 183) If the IRS considers your activity a hobby, you'll face strict rules: • No deducting more expenses than income • Losses are capped and carried forward • Hobby income is reported as "Other Income" • Hobby expenses are itemized deductions only Some expenses, like home mortgage interest, may still be deductible! 🏠 IRS Audit Techniques Guide (ATG) The IRS has a 64-page guide to help agents audit hobby losses! 📊 They focus on traditional hobbies (like "rich men farming for pleasure" 🐴 and home-based craft businesses). If you're at high risk, ensure you have solid support for your business! 💼...