Many people enjoy hobbies that are also a source of income. From soap making and pottery to calligraphy and designing jewelry, these activities can be sources of both fun and finances. However, taxpayers who make money from a hobby should know that they must report that income on their tax return.

Generally, if someone has a business, they operate the business to make a profit. In contrast, people engage in a hobby for sport or recreation, and not to make a profit.

Taxpayers should consider the following nine factors when determining whether their activity is a business or a hobby and base their determination on all the facts and circumstances of their activity. No one factor alone is decisive, however, and it is important to consider all of these factors when deciding whether an activity is a business engaged in making a profit.

1. Whether you carry on the activity in a businesslike manner and maintain complete and accurate books and records.
2. Whether the time and effort you put into the activity indicate you intend to make it profitable.
3. Whether you depend on income from the activity for your livelihood.
4. Whether your losses are due to circumstances beyond your control (or are normal in the startup phase of your type of business).
5. Whether you change your methods of operation in an attempt to improve profitability.
6. Whether you or your advisors have the knowledge needed to carry on the activity as a successful business.
7. Whether you were successful in making a profit in similar activities in the past.
8. Whether the activity makes a profit in some years and how much profit it makes.
9. Whether you can expect to make a future profit from the appreciation of the assets used in the activity.

If a taxpayer receives income for an activity that they don’t carry out to make a profit, the expenses they pay for the activity are considered miscellaneous itemized deductions and cannot be deducted for tax years 2018 through 2025. The taxpayer, however, must still report income they receive on Schedule 1, Form 1040, line 21.

If you have any questions about whether your hobby is actually a business in the eyes of the IRS, don’t hesitate to call us at:

San Jose: (408)-252-1800

Watsonville: (831)-726-8500

Wheeler is proud to announce Michael Chase as our employee of the quarter. Michael joined Wheeler back in July and has become an invaluable asset to the Watsonville office and admin team as a whole. Michael is always willing to take on any task he is presented and he never shies away from learning a new skill or procedure. He always has a positive attitude and has already begun to build a great rapport with many Watsonville clients. Congratulations to Michael!

It is with great excitement that we announce as of Monday, January 27^th Wheeler will open its doors in a new location. Our new address will be 17 Aspen Way, Watsonville, CA 95076. Our phone and fax numbers will remain the same as well as our email address.

The new building is a larger and newer space and aligns with our goals to not only continue to provide great service to existing clients, but to expand our clientele and have the opportunity to accommodate even more of Watsonville and the surrounding communities.

If you have questions regarding the new location, please reach out and we would be happy to help. We look forward to seeing you in our new building and as always thank you for giving us the opportunity to serve you.

There’s never an off-season when it comes to scammers and thieves who want to trick people to scam them out of money, steal their personal information, or talk them into engaging in questionable behavior with their taxes. While scam attempts typically peak during tax season, taxpayers need to remain vigilant all year long. For example, gift card scams are currently on the rise and there are many reports of taxpayers being asked to pay a fake tax bill through the purchase of gift cards.

Here’s a typical scenario:

• Someone posing as an IRS agent calls the taxpayer and informs them their identity has been stolen.
• The fake agent says the taxpayer’s identify was used to open fake bank accounts.
• The caller tells the taxpayer to buy gift cards from various stores and await further instructions.
• The scammer then contacts the taxpayer again telling them to provide the gift cards’ access numbers.

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It’s January and tax season is right around the corner. For many people that means scrambling to collect receipts, mileage logs, and other tax-related documents needed to prepare their tax returns. If this describes you, chances are, you’re wishing you’d kept on top of it during the year so you could avoid this scenario yet again. With this in mind, here are seven suggestions to help taxpayers like you keep good records throughout the year:

1. Taxpayers should develop a system that keeps all their important info together. They can use a software program for electronic recordkeeping. They could also store paper documents in labeled folders.

2. Throughout the year, they should add tax records to their files as they receive them. Having records readily at hand makes preparing a tax return easier.Continue reading

Every year, it’s a sure bet that there will be changes to current tax law and this year is no different. From standard deductions to health savings accounts and tax rate schedules, here’s a checklist of tax changes to help you plan the year ahead.

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