Maybe you cater for your friends, maybe you make jewelry, maybe you sell your artwork, maybe you have a lemonade stand- regardless of what you do, do you know how the IRS views this? Here are some tips on how to tell if your activity is a business or a hobby and the tax implications of each.
1. The IRS has a checklist for determining if your activity is a business or hobby. The list is basically intent. Is this for fun or do you intend to make a profit? Do you want to depend on the income? What is the intent of your activity?
For the IRS list that discusses the difference between a business and a hobby click here.
Living in Las Vegas, a question I get all the time is “How do I deal with winning and taxes?” First off, congratulations on winning! The odds were definitely in your favor. Second, reporting gambling income so much easier than one would think. Here on some tips if you are lucky enough to win:
1. Winnings may or may not be reported on Form W-2G, but even if it is not, all winnings must be reported as “other income” on the 1040.
2. Good News! Losses can be deducted up to the amount of winnings. Bad news: Losses are reported on your Schedule A so you have to be able to itemize your deductions.
All over the television, and in your spam email box, there are advertisements for IRS settlements. These companies can help you lower your IRS debt for a fee, customers say they paid a minimal amount, blah blah. Is this a scam? Well, most likely. There is a possibility of a settlement for your IRS debt, but you definitely do not need to pay horrendous fees to a company to do it for you.
Here are some tips:
1.An IRS settlement is called an Offer in Compromise.
2. The IRS cannot accept a settlement if you can actually afford to pay your bill. If you know this is you, check out the payment plan options on the IRS website.