Sorry for no posts the last few days – was away doing some personal things and didn’t have time.
Do you have a hobby that you receive money for but never make a profit (Avon, breeding animals, etc)? BEWARE! Under IRS regs any money you make on a hobby is taxable on the front of your return and any expenses you incurr are only deductible as miscellaneous itemized deductions, which are reduced by 2 percent of your income and can only be taken if you itemize, plus you can only deduct the same amount of expenses as the hobby income. This is a horrible situation – you are probably going to be paying tax on money you didn’t make.
You have three choices:
(1) Stop doing the hobby.
(2) Turn it into a legitimate business so you can deduct all your expenses.
(3) Continue the hobby but don’t receive any money for doing it so you dont have to claim it as income.
(1) and (3) don’t need any explanation. Tomorrow I will talk a little about (2) and how to do it.