Oct 22

Hobbies (October-2022)

I took most of this from the Internal Revenue Service Center Tax Tips.  This information is covering the question if your hobby activity is for-profit or a not-for-profit.  So of us, from collecting stamps and woodworking to crafting and quilting, we have all kinds of hobbies – and most of these hobbies will never turn a profit.  For hobbies that do earn income, you should know you are required to report it on your tax return.  You should also be mindful that your hobby might be a business.  You need to determine whether you should classify the activity as a hobby or a business and this can be confusing.  However, the bottom line is when a business operates to make a profit, it requires reporting. Most of the time where you hobbies for sport or recreation is usually not-for-profit.  With that, no single consideration is the deciding factor, but you should review all of these when determining whether your activity is a business.  Here are the things you should evaluate to decide whether you have a hobby or a business:  Is your activity carrying out the activity in a businesslike manner and you maintain complete and accurate books and records?  Does your time and effort in the activity show you intend to make it profitable?  Do you depend on income from the activity for your livelihood?  Are any losses due to circumstances beyond your control or are normal for the startup phase of this type of business?  Do you take the action to change methods of operation to improve profitability?  Do you have the knowledge or have consulted with another professional to attain the knowledge needed to carry out the activity as a successful business?  Have you been successful in making a profit in similar activities in the past?  Does the activity make a profit in some years and how much profit does it make?  Do you expect your activity to make a future profit from the appreciation of the assets used in the activity.  As you can see, it really isn’t easy to determine whether your activity is for-profit or not-for-profit and I would recommend you discuss your circumstances with your tax adviser in making your decision.  Next, I want to address a response from one of our readers, sent to the editor, since my last article.  I want to say thank you for providing your feedback.  After writing articles for something like 3 decades, it makes me feel good someone is actually reading what I offer each month.  So, with that, thank you for reading and I hope everyone continues to read it in the future.  God Bless America and the First Amendment - Freedom of Speech.  On another note – Medicare Annual Enrollment Period begins October 15, 2022, through December 7, 2022.  Anyone covered by a Medicare Advantage Prescription Plan or Prescription Drug Plans needs to determine if the one they have is still the best one for them.  All insurance companies make changes to the formularies, copays, and premiums and some issue new plans, every year.  Take my advice and consult with your insurance agent.  If you don’t have one, call my office for an appointment, it’s free.  This is only brief overview.  It is your responsibility to discuss anything in this article, prior to making any changes, with your professional advisor to assist you in evaluating your situation.  For details and specific assistance in applying the general information in this article, call us at your earliest convenience or contact your professional advisor.   Provided by Tracey C. Higginbotham, E.A., (321) 632-5726, a member of the National Society of Accountants.