Learn how the IRS distinguishes hobbies from businesses, key criteria, tax implications, and strategies to prove a profit motive.
By attending this presentation on Hobby Loss Rules, participants will gain a clear understanding of how the IRS distinguishes between a profit motivated business activity and an activity that is for personal enjoyment and tax benefits. You will learn the tax implications of that classification and the potential financial consequences of misreporting. The session will cover key IRS criteria, real-world court cases, and practical strategies for proving a profit motive to ensure compliance and avoid costly audits or penalties. Whether you’re a small business owner, freelancer, or someone earning income from a passion project, this presentation will provide essential insights to help you maximize deductions legally and safeguard your financial interests.
Learning Objectives
- You will be able to identify when your clients activity might be at risk of being considered a hobby.
- You will be able to explain to your client the importance of demonstrating business with the intent to avoid the hobby limitations.
- You will be able to recognize the key attributes that can make a business activity legitimate
- You will be able to discuss the risks of poor documentation and recordkeeping with your client.
Agenda
Introduction to Hobby Loss Rules
- Overview of Hobby vs. Business
- Purpose of Hobby Loss Rules
Key Criteria for Determining Hobby vs. Business
- IRS - Key Questions Consider
- Relevant Court Cases
Tax Implications of Hobby Income and Expenses
- Income Reporting Requirements
- Deduction Limitations for Hobby Expenses
- Relevant Court Cases
Strategies to Prove Profit Motive
- Best Practices for Establishing Business Intent
- Case Studies and Court Cases
Risks of Non-Compliance
- IRS Audits
- Penalties for Misclassification
- Relevant Court Cases
Q&A Session
Conclusion and Takeaways
- Summary of Key Points
- Resources for Further Learning
Speakers
David P. Smith, CPA, MBA, CM&AA,
Smith Patrick CPAs- Managing Partner of Smith Patrick CPAs
- Experienced CPA and Business Advisor
- Specializes in financial strategies for business transactions and growth, helping business owners make informed financial decisions
- Recognized speaker, author, and media contributor, presenting on tax law, financial reporting, and business strategy at professional conferences and universities; published in Asset Magazine and featured on Saint Louis on the Air discussing complex financial topics
- Serves as Chair of the Missouri Society of CPAs (MOCPA) Legislative Committee, Treasurer of the Missouri Cannabis Trade Association, and is involved in the leadership of several community organizations, including the Old Webster Square Commission and Lighthouse for the Blind
- M.B.A. Degree in finance, Indiana University; B.S. Degree in engineering, Purdue University
- Certified Public Accountant (CPA), Certified Merger & Acquisition Advisor (CM&AA), and Registered Investment Advisor (RIA)
Who Should Attend
This live webinar is designed for presidents, CFOs, controllers, business owners and managers, bookkeepers, enrolled agents, and tax preparers.
