The Hobby Loss Rule in the News Again

The Hobby Loss Rule is a presumption long relied on by the IRS to disallow expenses claimed by taxpayers who show losses on their Schedule C. A recent report from the Treasury Department’s Inspector General indicated the IRS should make increased efforts to enforce these provisions. In it’s response, the IRS agreed, but highlighted the fact that there are multiple provisions in Section 183 of the tax code (referred to as the “Hobby Loss” provision) and the Inspector General’s claim that $78 million in lost tax revenue was overinflated.

Regardless of the accuracy associated with the report and response, it is evident that the scrutiny on Schedule C will continue to increase. So if you haven’t already come to the conclusion, this provides additional impetus to formalize any for-profit activity and report it on a separate business return. In addition to opening up numerous favorable tax provisions, it represents an increasingly important safe haven from unwelcome IRS harassment.

If you need help determining whether an expense is tax deductible or whether your business activities need to be formalized, contact Nielsen Law Group. Our group of friendly professionals can create a customized plan specific to you. Call (480) 888-7111 to schedule your free consultation today.