Do You Have a Hobby Business or a Real Business?

With tax time right around the corner, it is important that you ask yourself the following very important question: do you just have a hobby business or have you turned it into a real business? For many people, developing multiple income streams and side incomes starts as a hobby business.  For a few, these hobby businesses turn into real businesses.  Why does this matter? Well, it matters because the IRS taxes business income and hobby income slightly differently, and it is important that you know the differences so you don't get audited, owe penalties, and more.   Do I Have a Hobby Business or Real Business? Generally, an activity qualifies as a business if there is a reasonable expectation of earning a profit.  In order to make … [Read more...]