Tax Tips for Hobbies
Many people think that income earned from a hobby does not need to be reported on your tax return. Here are four tax tips you should know about hobbies:
1. Determine if your hobby is a hobby or business. IRS publication 535 sets forth nine factors to help you determine whether your activity is a hobby or a business.
2. Hobby deductions. You can usually deduct ordinary and necessary hobby expenses as long as it is necessary and common for the activity.
3. Limits on hobby expenses. Generally you can only deduct your hobby expenses up to the amount of your hobby income. You cannot deduct a loss from your other income.
4. How to deduct hobby expenses. You must itemize deductions on your tax return in order to deduct your hobby expenses.
Tax Tips When you Owe the IRS
If you owe the IRS any money, here are a few tips that you might be able to use to remedy your situation:
1. Payment in full. This one is pretty straight-forward. If you pay your tax bill in full, you won’t owe them anymore.
2. IRS direct pay. This option allows you to automatically pay the IRS from your checking or savings account.
3. Get a short extension to pay. Sometimes you can qualify for 120 days or less as an extension if you can pay your taxes in full.
4. Apply for a payment plan. If you owe $50,000 or less, our office can usually get you a payment plan over five years.
5. Try an Offer in Compromise. This option allows you to offer a settlement to the IRS to pay an amount that is less than the full amount of taxes that you owe. If you want to try this option, contact our office.
6. Change your withholdings. By increasing the amount of taxes taken out of each paycheck, you can help alleviate your tax burden come tax time.
Feel free to contact our office at 816-524-4949 or visit our website at www.Hoorfarlaw.com.