Is Your Business A Hobby? The IRS Might Think So.

Blog Post by Robert B. Teuber.

This post is the start of a series on what are known as the Hobby Loss Rules. When audited, if the IRS determines that your business is really just a hobby, it can result in a substantial tax liability that you and your business simply cannot afford. However, knowing the rules concerning when an activity constitutes a “business” or a “hobby” (called an “activity not engaged in for profit”) can help you structure your business affairs to defend against a hobby loss audit. The IRS has stepped up its enforcement action in asserting that businesses are hobbies.

In fact, in mid-2009 the IRS released an updated publication for auditors to provide guidance in conducting hobby loss audits. Click here for the audit guide.

Disclaimer

The comments and opinions expressed in this blog are intended for informational purposes only and do not constitute legal advice. Reading or using the information in this blog does not create the existence of an attorney-client privilege. Due to the changing nature of the law, the blog posts may contain dated material. For an update on the current law and the application of the law to your particular facts and circumstances, consult a legal advisor. The information contained herein is not a substitute for obtaining legal advice from a qualified attorney licensed in your state.