Keep the IRS from Saying Your Business is a Hobby

Posted: October 30, 2011

There's little doubt that most POMA media members have "fun" jobs. That's a negative in the eyes of the IRS. So, if you have fun writing, shooting pics or video or other pursuits and you file a schedule C with your tax return, becareful. If you claim to lose money five years in a row, beware.  If you're classified as a hobby... deductions fly right out the window. Don't let that happen.

There's little doubt that most POMA media members have "fun" jobs. That's a negative in the eyes of the IRS. So, if you have fun writing, shooting pics or video or other pursuits and you file a schedule C with your tax return, becareful. If you claim to lose money five years in a row, beware.  If you're classified as a hobby... deductions fly right out the window. Don't let that happen.

"If your business is reclassified as a hobby, you will be allowed to take deductions only to the extent of income," explained tax attorney Bonnie Lee, in an article for FOX Business, Small Business Center. "All the losses written off against your other income will be gone, not just for the current year but for all open years as well."

However, if you can prove that you have a profit motive, and you are treating the occupation as a business and acting in a business-like manner, then you will likely win the fight against reclassification, she said. Here’s how to do that.

 

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