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Remember: You Must Also Pay Taxes on Income From Hobby Activities

Whether it’s knitting, fishing, or reading books, we all need a hobby. However, if your hobby activity is a source of income, then you should make sure to report it on your tax return.

Paying Taxes on Income From Hobby Activities

Let’s begin with some basic definitions. A hobby is an activity you pursue for pure enjoyment, without intentions of making a profit.

While this seems like a clear-cut definition, things are not always so simple. For example, it happens often that people begin selling the products of their hobby. Do they have to report that income on their tax return?

The answer is yes. If you receive income from an activity you carry out with no intention of making a profit, then you should report it on your tax return, specifically on Schedule 1, Form 1040.

On the other hand, any income from for-profit activities should be reported on Schedule C.

When determining whether an activity is a hobby or a for-profit business, the following factors are taken into account:

  • Whether you carry out that activity like a business, and maintain complete and accurate books and records.  
  • Whether the time and effort you put into the activity shows you intend to make it profitable.  
  • Whether you depend on income from the activity for your livelihood.  
  • Whether any losses are due to circumstances beyond your control or are normal for the startup phase of their type of business.  
  • Whether you change the way you carry out that activity to improve profitability.  
  • Whether you have the knowledge needed to carry out the activity as a successful business.  
  • Whether you were successful in making a profit in similar activities in the past.  
  • Whether the activity makes a profit in some years and how much profit it makes.  
  • Whether you can expect to make a future profit from the appreciation of the assets used in the activity.

If you find it difficult to figure out whether an activity is a hobby or a business, don’t hesitate to contact a tax professional. They will help you figure out the tax strategy that better fits your unique situation.

Contact the Experts at JT Tax Services

Do you need help preparing your taxes? At JT Tax Services, we give you the peace of mind that comes with knowing that you are limiting your liability while staying compliant with all regulations.

We are located in Oxnard, California. Contact us today by email (info@jttaxservices.com), telephone (805-984-8890), or through our social media accounts on FacebookTwitter, and LinkedIn to schedule a consultation or to learn more about our services.

Some people will receive their Economic Impact Payments by debit card.

The IRS Will Deliver Some Economic Impact Payments by Debit Card

The Internal Revenue Service will deliver the Economic Impact Payments of nearly four million people by by prepaid debit card instead of paper check.

According to the official website for the cards, this method will be used to deliver the payments of taxpayers whose bank details the IRS doesn’t have.

This Is What Your Debit Card Will Allow You to Do

If you receive your Economic Impact Payment by prepaid card, you will get some benefits that include:

  • Making purchases online or at any retail location where Visa payments are accepted
  • Getting cash from in-network ATMs
  • Transferring funds to your personal bank account.
  • Checking you balance card by mobile app or by phone.
  • Enjoying the same consumer protections available to traditional bank account owners, such as protection against fraud and loss.

The prepaid cards arrive in a plain envelope from Money Network Card Holder Services. The Visa name appears on the front of the card, while the back of the card has the name of the Issuing bank, MetaBank®, N.A. Information included with the card specifies that the card is an Economic Impact Payment.

Users who receive their Economic Impact Payments by prepaid card will have to activate their cards calling the number 1.800.240.8100 and validating their identity providing at least their name, address and social security number.

As of this moment you cannot request the IRS to send Economic Impact Payment as a debit card. For more information about the Economic Impact Payment prepaid cards, visit www.eipcard.com.

Get Advice From the Experts

As you can see, the IRS’ response to COVID-19 changes constantly, so it’s important to stay updated. You can check the IRS website or this blog. It’s also a good idea to get advice from a reliable, experienced source.

Our knowledgeable tax experts at JT Tax Services will help you so you can take advantage of all the government relief initiatives you are eligible for.

At JT Tax Services we have the experience, the knowledge and the drive to assist you. With our advice, you can file your taxes with the peace of mind that comes with knowing that you are limiting your liability while staying compliant with federal and state tax regulations.

We are located in Oxnard, California. Contact us by email, telephone or through our social media accounts on FacebookTwitter and LinkedIn to learn more about our services.

We will be closed Saturday, Sunday and Monday (July 2nd - 4th)
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