There are sometimes when one may not want to file because he/she think they are going to owe the IRS. This should never be the case. Rather you owe or not it is your duty and/or obligation to file a return each year that you have income that is over your standard deduction. (If you don’t understand that statement call me) If you feel like you will owe the IRS instead of not filing always file an extension by using form 4868. This will allow you time to sit down with a tax expert like myself and see if you have any expenses that you can possibly use to reduce your taxable income which in the end will allow you to not owe back as much or even possibly get you a refund.
Did you know that the IRS allows you have a hobby? Do you understand what you can do with your hobby for up to 5 years? If you have a hobby that is making you income and you are buying things directly for that hobby then that hobby is now a for profit business and you can know use those expenses and income as apart of your return.
Deductions for hobby activities are claimed as itemized deductions on Schedule A (Form 1040). These deductions must be taken in the following order and only to the extent stated in each of three categories:
Deductions that a taxpayer may take for personal as well as business activities, such as home mortgage interest and taxes, may be taken in full.
Deductions that don’t result in an adjustment to basis, such as advertising, insurance premiums and wages, may be taken next, to the extent gross income for the activity is more than the deductions from the first category.
Business deductions that reduce the basis of property, such as depreciation and amortization, are taken last, but only to the extent gross income for the activity is more than the deductions taken in the first two categories.
Lets get educated and understand the tax laws and rules. Either way please don’t just not file because you think you may owe. Call me, Sandra Parks with SAP Taxes at 972.569.7938 or email me at firstname.lastname@example.org. Let me show you how and what you can do with your hobby.
Until the next time be blessed!