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Posted by rlsusenet@NOSPAMPUHLEEZschnapp on February 8, 2008, 1:45 pm
Please log in for more thread options ed wrote:
>> rlsuse...@NOSPAMPUHLEEZschnapp.org wrote:
>>> Can someone point me at the elements that distinguish a business
>>> (Schedule C) from a hobby (1040 line 21 "other income")?
>>> Here's the thing: I do a lot of contesting (participate in local
>>> radio/TV station promo programs, sweepstakes, etc.). I have some small
>>> expenses, primarily the costs of driving to the stations to pick up
>>> prizes. I could also make a case that a small proportion of my internet
>>> connection costs are attributable to this enterprise.
>>> I've made money at this enterprise for the last 3+ years, and would have
>>> still made money even if I had been able to deduct my expenses.
>>> I'm considering declaring this to be a Schedule C business so that my
>>> expenses are not unreasonably limited by the 2% AGI floor.
>>> Does anyone have any thoughts on this?
>> Here's what the IRS says:http://www.irs.gov/publications/p535/ch01.html#d0e885
>>
>> Don't miss the line that says: No one factor alone is decisive.
>>
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>
> You should have been doing this on a Schedule C since incedption.
> Sounds like it was your choice to put it on line 21. The "hobby" thing
> is a forced issue with the IRS, not something you should try to
> satisfy. If they can't prove you lost money in 3 of the past 5 years
> they can't force you into hobby status. You could lose money forever
> and not be a hobby if you are in business to profit, hopefully.
>
> The flip side is that on line 21 you didn't have to pay SE taxes of
> over 15%. Are you sure you don't want to be a hobby??
Another excellent point. If my regular consulting biz gets me above the
FICA ceiling, then the answer is "yes". Otherwise, you're right: the
deductible expenses will be wiped out by SE tax.
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<< ------------------------------------------------------- >>
<< The foregoing was not intended or written to be used, >>
<< nor can it used, for the purpose of avoiding penalties >>
<< that may be imposed upon the taxpayer. >>
<< >>
<< The Charter and the Guidelines for submitting posts >>
<< to this newsgroup as well as our anti-spamming policy >>
<< are at www.asktax.org. >>
<< Copyright (2007) - All rights reserved. >>
<< ------------------------------------------------------- >>
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