Tax Musings of a Burbank CPA – Is Your Business Really a Business or a Hobby?

Now that tax season is over, I want to discuss the hobby loss rules a bit.  Is your small business really a business or is it a hobby (with the loss of any corresponding tax losses). The IRS has addressed the issue with a list of factors they use to determine if a business is a hobby or not.  Here is the list from the IRS website: Income & Expenses Question: How do you distinguish between a business and a hobby? Answer: In making the distinction between a hobby or business activity, take into account all facts and circumstances with respect to the activity. No one factor alone is decisive. You must generally consider these factors to establish that an activity is a business engaged in making a profit: Whether you carry on the activity in a businesslike manner. Whether the time and effort you put into the activity indicate you intend to make it profitable. Whether you depend on income from the activity for your livelihood. Whether your losses are due to circumstances beyond your control (or are normal in the startup phase of your type of business). Whether you change your methods of operation in an attempt to improve [...]

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Tax Musings of a Burbank CPA: New Federal Filing and Extension Dates for 2016 Business Entities

And a Happy New Year to you all. Well, now that January is here, just a reminder that the IRS has changed federal filing dates for various business entities (just to make life a little more interesting.) 1. YOU ARE A SOLE-PROPRIETOR OR A SINGLE PERSON LLC:   Your filing date is the same for 2016 returns – April 18, 2017 with an extension of six months to October 16, 2017. 2. YOUR ENTITY IS A PARTNERSHIP OR A REGULAR LLC:  Your filing date for 2016 returns is now March 15, 2017 with an extension of six months to September 15, 2017. 3.  YOUR ENTITY IS AN S-CORPORATION:  Your filing date for 2016 stays the same - March 15, 2017 with an extension of six months to September 15, 2017. 4.  YOUR ENTITY IS AN C-CORPORATION:  This is a little more complicated - -  If you have a calendar year C – Corp your filing date is April 18, 2017 with a 5 month extension to September 15, 2017 until 2026, when it changes to 6 months.  - If you have a fiscal year C – Corp with an year end of June 30, your filing date is September 15, 2017 with a 7 month extension to [...]

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Tax Musings of a Burbank CPA: Can’t Deduct Medical Expenses? Maybe You Can!

As most of you know, because of the 10% of AGI limitation, it has become harder and harder to deduct medical expenses on your individual tax return.  Well, in certain circumstances you can still get a medical deduction. If you have a business where you are self-employed, you have an option to deduct your medical insurance on page one of your 1040 instead of as an itemized deduction.  This is the “self-employed health insurance” provision of the tax code.  There are some provisions you have to follow to get the deduction as follows: 1. YOU ARE A SOLE-PROPRIETOR OR A SINGLE PERSON LLC:   If your business generates a profit, you can deduct your health insurance expense for you and your dependents on line 29 of your 1040 up to the profit of your business on line 12. 2. YOUR BUSINESS IS A PARTNERSHIP OR A REGULAR LLC:  The health insurance should be paid or reimbursed to you through the entity you are a partner of.  Once again, you can deduct the insurance on line 29 up the the profit from the business on your form K-1. 3.  YOUR BUSINESS IS AN S-CORPORATION:  If you are a shareholder of the corporation and [...]

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