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Question

If IRS decides your business is a hobby, does that mean audit and/or a penalty?

Forum|Forum|1 year ago
October 13, 2024
1 reply
0 views

If IRS decides your business is a hobby, does that mean an audit and/or a penalty?

Or do they just send you a letter disallowing your Schedule C business deductions, without penalty and without audit?

Not A Product Question

Employee

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RegsaAuthor

Thanks Champ. My estimated tax payment is large enough to cover the tax if my deductions are disallowed. I am more concerned with the audit and penalty. Are these likely and is the penalty large? My business is very small and in a foreign country. And if I decide the risk of penalty is not worth it, and decide not to take the deductions, what do I do? Do I just not file a Schedule C at all? Or list the loss in Schedule C but then don’t take the loss on Schedule 1 (Form 1040), line 3, and on Schedule SE, line 2? Thanks again.

Employee

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