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Posted by Leanne.GS on January 6, 2007, 12:21 am
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Hello - my husband and I are both NYC-based performing
artists, though not full-time - "rent jobs" are necessary.
Both of our rent jobs are hourly and non-full-time, but are
W-2 with all taxes withheld. Our performing contracts, as
we get them, are 1099. We've filed married status since FY
2004. 2004 was a loss year for both of us, 2005 was profit
for him and loss for me, 2006 will have been a loss year for
both. My last year that I filed as a single, 2003, was a
profit year, as was 2002 (really small profit, but profit).
I am not sure what my husband's loss/profit status for arts
work was in 2002/03. Since we've been married, my husband
has done our taxes on Turbo Tax, but prior to that I was
with a Manhattan-based CPA specializing in taxes for artists
and he always said you could not claim more than 3 years in
a row of losses without reorganization unless you want to
invite an audit. So my questions are:
- is this true? Do any accountants out there disagree?
- if so, does our marital status, or year we first filed
jointly, impact the start of the 3 years?
- also, if necessary, how does one reorganize? (Neither of
us is incorporated)
- I presume we can always choose to not claim certain things
to appearas though we turned a profit?
- If necessary, can we simply not file for self-employed
arts business one year if it will have been a loss? Also,
if we turn a profit the following year, can we begin
filing again for the self-employed arts business?
My husband says that he has asked accountants about this and
that as long as our documentation is sound, we prove
adequately that we have worked in the field for the required
amount of hours per year, and we are conservative in what we
claim as expenses, there is no need to worry about how many
years in a row we take a loss. I am paranoid, however, and
really want to be certain we won't have an audit. When we
do get contracts, they tend to be out of state, so our taxes
can get quite complicated.
Many thanks.
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Posted by Stuart A. Bronstein on January 7, 2007, 11:11 pm
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Leanne.GS@gmail.com wrote:
> Since we've been married, my husband
> has done our taxes on Turbo Tax, but prior to that I was
> with a Manhattan-based CPA specializing in taxes for artists
> and he always said you could not claim more than 3 years in
> a row of losses without reorganization unless you want to
> invite an audit. So my questions are:
>
> - is this true? Do any accountants out there disagree?
This is a rule of thumb, and I believe it's written into the
tax code.
> - also, if necessary, how does one reorganize? (Neither of
> us is incorporated)
The issue is, are you really trying to earn income from the
business, or is it a hobby? If you're really trying to earn
income you're ok. But if you don't make money for three
years and seem ok with it continuing that way, the IRS will
decide it's a hobby and you don't get to take a loss.
Stu
<< ======================================================= >>
<< 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 (2006) - All rights reserved. >>
<< ======================================================= >>
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Posted by Paul Thomas, CPA on January 7, 2007, 11:11 pm
Please log in for more thread options > Hello - my husband and I are both NYC-based performing
> artists, though not full-time - "rent jobs" are necessary.
> Both of our rent jobs are hourly and non-full-time, but are
> W-2 with all taxes withheld. Our performing contracts, as
> we get them, are 1099. We've filed married status since FY
> 2004. 2004 was a loss year for both of us, 2005 was profit
> for him and loss for me, 2006 will have been a loss year for
> both. My last year that I filed as a single, 2003, was a
> profit year, as was 2002 (really small profit, but profit).
> I am not sure what my husband's loss/profit status for arts
> work was in 2002/03. Since we've been married, my husband
> has done our taxes on Turbo Tax, but prior to that I was
> with a Manhattan-based CPA specializing in taxes for artists
> and he always said you could not claim more than 3 years in
> a row of losses without reorganization unless you want to
> invite an audit. So my questions are:
>
> - is this true? Do any accountants out there disagree?
On the face os it, it's not true. However, if you do get
audited, the responsibility to prove your activities are
profit motivated (and not recreational).
> - if so, does our marital status, or year we first filed
> jointly, impact the start of the 3 years?
It's a rolling number of years, and it would apply to each
activity (his and yours) separately.
> - also, if necessary, how does one reorganize? (Neither of
> us is incorporated)
I'm not sure what his comment was neant to imply.
> - I presume we can always choose to not claim certain things
> to appearas though we turned a profit?
And some people do that. I wouldn't recommend it though.
If you have strong records, not only of your performance
expenses, but that of your attepts at getting paying work,
that should suffice.
> - If necessary, can we simply not file for self-employed
> arts business one year if it will have been a loss? Also,
> if we turn a profit the following year, can we begin
> filing again for the self-employed arts business?
I wouldn't recommend that either. It might look like you
are a "part-time" performer who isn't in it for real.
> My husband says that he has asked accountants about this and
> that as long as our documentation is sound, we prove
> adequately that we have worked in the field for the required
> amount of hours per year, and we are conservative in what we
> claim as expenses, there is no need to worry about how many
> years in a row we take a loss. I am paranoid, however, and
> really want to be certain we won't have an audit. When we
> do get contracts, they tend to be out of state, so our taxes
> can get quite complicated.
I'd side more with his logic on the matter, but I would
recommend going back to the CPA firm you used in the past.
They probably can be more beneficial to you because of their
experience in the field.
--
Paul Thomas, CPA
paulthomascpapc@bellsouth.net
<< ======================================================= >>
<< 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 (2006) - All rights reserved. >>
<< ======================================================= >>
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Posted by Herb Smith on January 7, 2007, 11:30 pm
Please log in for more thread options Leanne.GS@gmail.com wrote:
> Hello - my husband and I are both NYC-based performing
> artists, though not full-time - "rent jobs" are necessary.
> Both of our rent jobs are hourly and non-full-time, but are
> W-2 with all taxes withheld. Our performing contracts, as
> we get them, are 1099. We've filed married status since FY
> 2004. 2004 was a loss year for both of us, 2005 was profit
> for him and loss for me, 2006 will have been a loss year for
> both. My last year that I filed as a single, 2003, was a
> profit year, as was 2002 (really small profit, but profit).
> I am not sure what my husband's loss/profit status for arts
> work was in 2002/03. Since we've been married, my husband
> has done our taxes on Turbo Tax, but prior to that I was
> with a Manhattan-based CPA specializing in taxes for artists
> and he always said you could not claim more than 3 years in
> a row of losses without reorganization unless you want to
> invite an audit. So my questions are:
>
> - is this true? Do any accountants out there disagree?
> - if so, does our marital status, or year we first filed
> jointly, impact the start of the 3 years?
> - also, if necessary, how does one reorganize? (Neither of
> us is incorporated)
> - I presume we can always choose to not claim certain things
> to appearas though we turned a profit?
> - If necessary, can we simply not file for self-employed
> arts business one year if it will have been a loss? Also,
> if we turn a profit the following year, can we begin
> filing again for the self-employed arts business?
>
> My husband says that he has asked accountants about this and
> that as long as our documentation is sound, we prove
> adequately that we have worked in the field for the required
> amount of hours per year, and we are conservative in what we
> claim as expenses, there is no need to worry about how many
> years in a row we take a loss. I am paranoid, however, and
> really want to be certain we won't have an audit. When we
> do get contracts, they tend to be out of state, so our taxes
> can get quite complicated.
Listen to your husband. As long as your actions and
recordkeeping show the intent to make a profit (whether you
do or not) - and not just pursue a hobby - you should be OK.
The 3-year period mentioned by your former accountant is
basically an urban myth, not substantiated by tax law.
<< ======================================================= >>
<< 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 (2006) - All rights reserved. >>
<< ======================================================= >>
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Posted by Benjamin Yazersky CPA on January 7, 2007, 11:30 pm
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> Hello - my husband and I are both NYC-based performing
> artists, though not full-time - "rent jobs" are necessary.
> Both of our rent jobs are hourly and non-full-time, but are
> W-2 with all taxes withheld. Our performing contracts, as
> we get them, are 1099. We've filed married status since FY
> 2004. 2004 was a loss year for both of us, 2005 was profit
> for him and loss for me, 2006 will have been a loss year for
> both. My last year that I filed as a single, 2003, was a
> profit year, as was 2002 (really small profit, but profit).
> I am not sure what my husband's loss/profit status for arts
> work was in 2002/03. Since we've been married, my husband
> has done our taxes on Turbo Tax, but prior to that I was
> with a Manhattan-based CPA specializing in taxes for artists
> and he always said you could not claim more than 3 years in
> a row of losses without reorganization unless you want to
> invite an audit. So my questions are:
>
> - is this true? Do any accountants out there disagree?
> - if so, does our marital status, or year we first filed
> jointly, impact the start of the 3 years?
> - also, if necessary, how does one reorganize? (Neither of
> us is incorporated)
> - I presume we can always choose to not claim certain things
> to appearas though we turned a profit?
> - If necessary, can we simply not file for self-employed
> arts business one year if it will have been a loss? Also,
> if we turn a profit the following year, can we begin
> filing again for the self-employed arts business?
>
> My husband says that he has asked accountants about this and
> that as long as our documentation is sound, we prove
> adequately that we have worked in the field for the required
> amount of hours per year, and we are conservative in what we
> claim as expenses, there is no need to worry about how many
> years in a row we take a loss. I am paranoid, however, and
> really want to be certain we won't have an audit. When we
> do get contracts, they tend to be out of state, so our taxes
> can get quite complicated.
The IRS uses the 3 yr rule as a rebuttalble presumtion. So,
if you have losses for 3yrs in a row, it could be a hobby
loss situation. In that case, you cannot deduct your losses.
However, if you can prove that you are operating your
"business" in a business like manner and can show a real
profit motive, you can overcome the hobby loss problem. I
have had success using this approach with artists, musicians
& other types of businesses that have shown losses &
attacked by the IRS under the hobby loss rules.
___________________________________
<<< Benjamin Yazersky, CPA [NJ & NY] >>>
-----> real address on hobokeni or hobokenx <-----
<< ======================================================= >>
<< 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 (2006) - All rights reserved. >>
<< ======================================================= >>
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