DESCRIPTION
When does a hobby become a business? It sounds like a simple question to answer, but that’s not always the case. The IRS has rules for what qualifies as a business, and your entrepreneurial idea might not be making the cut.
Whether your venture is a hobby or a business affects your tax liability. If the IRS declares it’s a hobby, you can’t deduct business losses and expenses on your tax return. You can only deduct your hobby expenses up to the amount of income you earn.
A huge audit target for the IRS is that of business losses. The IRS attacks small businesses that show a loss by claiming that such activities are “not engaged in for profit.” The IRS often misstates the rules controlling business losses and very few people understand exactly how to prove that a particular activity was carried out with a legitimate profit motive. As a result, untold millions have paid taxes they don’t owe over the years because of this confusion. This seminar will end that problem.
Every tax pro needs to know how to deal with these issues because of the growing number of small businesses. Moreover, the so-called hobby loss issue has been a high-priority audit initiative for years. Tax pros need to know how to handle these audits.
Area Covered in the Session:
- Background and understanding of business expense deductions
- How code section 183 works
- The key misunderstanding in 183(d) that leads to incorrect audit results
- What constitutes a legitimate “profit motive”
- Exactly how to prove a profit motive
- How to present oral testimony of key elements of evidence
- Protections of section 183(b) in event you cannot prove a profit motive
Who Will Benefit:
- Any person involved in tax preparation or planning for small businesses, including:
- Certified Public Accountants (CPAs)
- Enrolled Agents (EAs)
- Attorneys
- Financial Planners
- Other Tax Preparers