Hobby or Business? | AccountingWEB

Hobby or Business?

Most tax preparers have encountered the client who can't quite distinguish that fine line between a hobby and business. It's up to the tax professional to explain the rules and, in many cases, help the client position what could be called a hobby so it can be considered a bona fide business activity in the eyes of the IRS. Ken Berry's article about a recent Tax Court case in which a documentary filmmaker with a day job as an attorney faced off with the IRS on the hobby loss rules.

The standard hobby loss rule requiring a profit in three out of five years is an excellent starting point for distinguishing a business from a hobby. But there's much more going on behind the scenes when the IRS makes a determination about the real nature of a business venture. Check out the nine factors that will help you and your clients decide how expenses should be classified.


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Caleb Newquist is the Editor-in-Chief of Sift Media US, overseeing content for both AccountingWEB and Going Concern.

Prior to this role, Caleb served as the editor of Going Concern since its founding in 2009. During his time as editor, Going Concern quickly became one of the most popular and talked about websites in the accounting profession. He has been named one of Accounting Today's Top 100 Most Influential People every year since 2011 and has been published on numerous websites, including Above the Law, Deadspin, Denver Business Journal, and the Huffington Post.

Caleb is an adjunct professor of journalism the Community College of Denver in Denver, Colorado, where he teaches Internet Media.

Prior to falling bass ackwards into the media business, Caleb spent over five years working in public accounting, with more than three of those years at KPMG. Caleb received a Master of Science in Accounting from Colorado State University and a Bachelor of Science in Business Administration from the University of Nebraska at Kearney.

Caleb spends a lot of time on a bicycle and reading, but never at the same time.

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