Patrick Schlievert did not realize he was wandering down a dark alley of the tax world.
He thought he was starting a second business to fund his daughter’s breakthrough into the music industry.
Instead, he was walking a dangerous road where many successful businesspeople have gone before, right into the teeth of the “hobby activity” trap.
By the time the IRS released him, Dr. Schlievert had lost all his deductions for the music business and racked up additional penalties.
If you operate two businesses, one profitable and one with net losses, you might be following in Dr. Schlievert’s footsteps. This article helps you avoid Dr. Schlievert’s fate, change directions, and save your deductions.
Hobby Activity Trap
The hobby activity trap is aimed at business owners who don’t care about profits but run a business for the purpose of deducting personal expenses.
The hobby activity trap can hurt you badly whether your hobby shows a loss or ... Log in to view full article.