Episode 874 - Are You Operating a Hobby or a Real Business?

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Aug 07 2020 15 mins  
I have seen it many times where tax clients need to have a tax write off and they use Schedule C - Business or Profession to do it. They have very little income and a great amount of expenses that give them a net operating loss to reduce their taxable income on the tax return. The question is, are they conducting real business or is it just a hobby? A Hobby pretending to be a business. Are you focused on creating a real business or just looking for a made up tax deduction? The first question the IRS will ask and have you prove - does your business have a profit motive? How is the activity of the business carried on? Is it business-like? Are you using separate bank accounts, keeping good records? What is your expertise in your business? How much time are you spending on the activity. And there are a whole bunch of other things that need to be looked at and considered. If you have any questions or comments, send me a text to 818.252.5682 www.lodge-co.com