Whether their hobby makes a few dollars a week or $60,000 a year, an individual needs to declare their hobby income on their taxes. Otherwise, they might be subject to penalties from the IRS. Here’s what people in Georgia need to know about declaring their hobby income on their taxes.
How can people declare their hobby income on their taxes?
Regardless of how much or little they make, tax law declares that people must declare all their hobby income on their taxes. If they’re using Form 1040, they can report their hobby income as “Other income” on Line 21. However, if their hobby stops being a hobby and becomes a legitimate business, they’ll have to report their income on a Schedule C form.
Once they’ve declared their hobby as a business, they might be able to deduct any losses they’ve experienced. According to a law expert, a hobby can be considered a business if it’s made a profit for three of the last five years. If a person wants to claim their deductions, they should consider keeping an activity law throughout the year that they can refer to during tax season.
Where can an individual go for help with preparing their taxes?
Filing taxes when hobbies, personal businesses and other sources of income get involved can be complicated. To make it easier, an individual might wish to hire an attorney. An attorney might be able to answer their questions and assist with the tax preparation process.
If the individual runs into trouble with the IRS, an attorney might be able to help them resolve their debts with a payment plan or an order of compromise. They might also be able to represent people who are being audited by the IRS. Additionally, they might be able to assist individuals who are being targeted by the IRS after suffering from identity theft.