Discussion:Hobby vs Business
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| Revision as of 16:40, 15 October 2009 Kevinh5 (Talk | contribs) (the guy at McDon) ← Previous diff |
Revision as of 16:45, 15 October 2009 Solomon (Talk | contribs) (The OP is too sc) Next diff → |
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| + | {{ForumReplyPost|UserID=Solomon|Date=15 October 2009|Text=The OP is too scanty on details - as usual. If there is a large depreciation factor in addition to the home office, there might be a good cash flow which then should present no problem.}} | ||
Revision as of 16:45, 15 October 2009
Discussion Forum Index --> Basic Tax Questions --> Hobby vs Business
Discussion Forum Index --> Tax Questions --> Hobby vs Business
| 15 October 2009 | |
| My client hasn't made a profit on his business for the last four years. He has a "home office operating loss carry forward" from 2007 which will guarantee that he won't show a profit for years to come, assuming that his income & expenses remain about the same. Without using that carry forward, he will show a profit on the 2008 tax return. Is it likely that the IRS would see that the business would be profitable if it weren't for the carry forward? Or is it more likely that the IRS would simply look at the fact that the client continues to show no profit and he would eventually be targeted for an audit? I have provided the client the IRS publication differentiating hobby vs. business and he is convinced that his activity would qualify as a business if he were audited. However, he doesn't want to be audited by the IRS since he would have to pay me to represent him. Any thoughts on this issue? | |
| 15 October 2009 | |
| "...he is convinced that his activity would qualify as a business if he were audited. However, he doesn't want to be audited by the IRS since he would have to pay me to represent him."
If he is familiar with the nine criteria and has that high of degree of certainty, it is his call. Form 5213 might come into the picture if in fact he does hear from them - think 60 days to file after notified. | |
| 15 October 2009 | |
| This guy doesn't want to pay you to handle an audit, but he wants to do things that may get him audited. Carry on.... | |
Death&Taxes (talk|edits) said: | 15 October 2009 |
| If his business efforts are legitimate, and not simply some personal whim, I believe he would have little to fear, especially if revenues have grown. The idea that IRS has a person sitting there tracking losses sounds fallacious; when a return is selected for audit, they ask you to bring in prior years as they don't have copies on hand. | |
| 15 October 2009 | |
| he could also stop doing this unprofitable activity and go get a job | |
| 15 October 2009 | |
| What job? Medical office assistant? We probably got 14% unemployment if you count the people who've stopped looking.
As long as his marketing/advertising expenses are in line, he shouldn't have any problems in this economy, but for him to say that he's trying to be so careful that he won't get audited is rather ridiculous under the circumstances. | |
| 15 October 2009 | |
| the guy at McDonalds is making more than this guy, though. If there is no light at the end of the tunnel, don't keep going further into the tunnel.
You know what a rut is, don't you? A grave with both ends kicked out. | |
| 15 October 2009 | |
| The OP is too scanty on details - as usual. If there is a large depreciation factor in addition to the home office, there might be a good cash flow which then should present no problem. | |
