Hobby/Business Evaluation
OSU Beaver
unreimbursed miles. With the IRS $0.55 per mile rate they usually
show a loss and don't make the 3 out of 5 years profit milestone.
But since they already have a car and pay insurance and maintenance
the actual increased cost is just for gas and more frequent oil
changes, amounting to closed to 10 cents per mile. In their bank
account they are making a profit but on schedule C they show a loss.
Has anyone experienced an IRS audit where this topic comes up and
tried to argue that they really do have a business?
KentB
Not quite an enrolled agent
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Arthur Kamlet
OSU Beaver <osube...@gmail.com> wrote:
> A lot of my clients are independent contractors who drive a lot of
>unreimbursed miles. With the IRS $0.55 per mile rate they usually
>show a loss and don't make the 3 out of 5 years profit milestone.
> But since they already have a car and pay insurance and maintenance
>the actual increased cost is just for gas and more frequent oil
>changes, amounting to closed to 10 cents per mile. In their bank
>account they are making a profit but on schedule C they show a loss.
> Has anyone experienced an IRS audit where this topic comes up and
>tried to argue that they really do have a business?
Couriers and newpaper deliverers almost always showlosses and
I've never had a problem with that. That's probably a case where
the business code on the Sch C gets them a "free ride."
==========
So where are you on the EA SEE?
--
ArtKamlet at a o l dot c o m Columbus OH K2PZH
Brew1
> In article <76d1e958-73e9-46b8-aa73-f21e6f609...@n13g2000vbe.googlegroups.com>,
> OSU Beaver �<osubeave...@gmail.com> wrote:
>
> > �A lot of my clients are independent contractors who drive a lot of
> >unreimbursed miles. �With the IRS $0.55 per mile rate they usually
> >show a loss and don't make the 3 out of 5 years profit milestone.
> > �But since they already have a car and pay insurance and maintenance
> >the actual increased cost is just for gas and more frequent oil
> >changes, amounting to closed to 10 cents per mile. �In their bank
> >account they are making a profit but on schedule C they show a loss.
> > �Has anyone experienced an IRS audit where this topic comes up and
> >tried to argue that they really do have a business?
>
> Couriers and newpaper deliverers almost always showlosses and
> I've never had a problem with that. �That's probably a case where
> the business code on the Sch C gets them a "free ride."
>
> ==========
>
> So where are you on the EA SEE?
> --
>
> ArtKamlet �at �a o l dot c o m �Columbus OH �K2PZH
>
Schedule C showing maybe $1,000 profit, asked him if he thought it was
worth it (getting up at 3:00 a.m., etc.)--he enthusiastically replied
that it was a GREAT job--I guess that little Honda didn't cost much to
operate.
nick...@gmail.com
> << � � � � Copyright (2007) - All rights reserved. � � � � >>
> << ------------------------------------------------------- >>- Hide quoted text -
>
> - Show quoted text -
Do artists and writers -- who are independent contractors -- have to
show a profit three out of five years, too? I thought they had some
sort of exclusion or special partof the IRC.
Bill Brown
No one has to show a profit 3 out of 5 years. All that test does is
determine who has the burden of proof if the IRS audits a taxpayer on
that issue.
I am not aware of any different x out of y years test for determining
where the burden of proof lies when the taxpayer is a self-employed
artist or writer.
Arthur Kamlet
nick...@gmail.com <nick...@gmail.com> wrote:
>
>Do artists and writers -- who are independent contractors -- have to
>show a profit three out of five years, too? I thought they had some
>sort of exclusion or special partof the IRC.
There might be special rules for showing a profit, but I'm not
aware of that. There certainly are for horse racing.
But pleae understand that the 3 of 5 "rule" is not denying
your business motive and disallowing all deductions.
It is a method to shift the burden of proof from the IRS having
to prove no profit motive to you having to prove that profit motive and
a plan to get there.
And some businesses naturally can attract attention and be scrutinized,
such as photography, dog breeding and car racing, while others can be
losing money year after year after year and not attract IRS attention,
such as a courier or trash hauling or tax preparation :^)
--
ArtKamlet at a o l dot c o m Columbus OH K2PZH
--
paulthomascpa
"nick...@gmail.com" <nick...@gmail.com> wrote
> Do artists and writers -- who are independent contractors -- have to
> show a profit three out of five years, too? I thought they had some
> sort of exclusion or special partof the IRC.
Artists, writers, performing artists, etc all have the same rules in regards
to proving the activity is a business with a profit motive.
There's no requirement to show a profit in any year, but the burden to prove
there is a motive for a profit falls to the artist.
--
Paul Thomas, CPA
www.paulthomascpa.com
Mark Bole
>
> Do artists and writers -- who are independent contractors -- have to
> show a profit three out of five years, too? I thought they had some
> sort of exclusion or special partof the IRC.
>
Maybe you are thinking of the exception to UNICAP rules for artists,
writers, photographers when calculating their cost of goods sold.
-Mark Bole