Whether it's something they've been doing for years or something they just started to make extra money, taxpayers must report income earned from hobbies in 2020 on next year's tax return.
What is the difference between a hobby and a business? A business operates to make a profit. People engage in a hobby for sport or recreation, not to make a profit.
Here are nine things taxpayer must consider when determining if an activity is a hobby or a business:
The IRS has many resources to help taxpayers report their income correctly. See the more information section below for additional guidance.
Source: IRS
Alfredo Gaxiola has worked on numerous IRS problem cases and has successfully settled with the IRS to release liens on houses, bank accounts and wages and, if needed, setting a payment installment plan that is not burdensome for the client. He has conducted appeals before the U.S. Tax Court and obtained favorable resolutions in reducing the tax debt of his clients. Mr. Gaxiola served as Treasurer of Camara de Empresarios Latinos, one of the largest and strongest Hispanic organizations in the city of Houston. He has conducted financial and accounting seminars for the Houston Small Business Development Corporation, as well.
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