My understanding is that you have to get some serious, non-trivial part of your income from the business to avoid it being called a “hobby business”. For years, I've done extra consulting as a software consultant, which was substantial but not the bulk of my income, and I filed for it much the same way. I've never been audited. Perhaps I've made a mistake, but I am following the rules to my understanding.
To be clear, I was a pro in 2005, not a full-time one. I don't make enough yet to do it as my full-time endeavor; it's only a part-time one.
As I understand it, the IRS doesn't required your business venture to be so successful that it is your sole source of income immediately. My long term goal in life is to make enough as a poker player to be a full-time professional, and I'm carrying out my pursuit of that in a professional manner with substantial resources of my time both at and away from the tables. I am a professional now, just a part-time one. AFAICT, you are still allowed to file a Schedule C as a sole proprietor even if you only received a substantial portion, but not the bulk, of your annual income from that business. It's what I've done since around 1996 for other consulting work as well.
Anyway, I am not a tax accountant, and nothing I say can be considered advice from a USA tax expert. It's based on a single taxpayer's reading and understanding of his obligations under the law. I do know that the requirements that you carry out the activity in a professional manner, that you are seeking to make more doing it over time, and that you don't use it to hide unreasonable expenses are a big part of the IRS' judgement of whether or not it is a hobby business, and therefore prohibited from Schedule C land.
I'm very interested to read that book I mentioned elsewhere (I forget its name and author, but it's a tax accounting book for poker players), and will be posting a review of it this winter.
![[personal profile]](https://www.dreamwidth.org/img/silk/identity/user.png){kind=small}
Re: professional?
Date: 2006-09-02 04:11 (UTC)My understanding is that you have to get some serious, non-trivial part of your income from the business to avoid it being called a “hobby business”. For years, I've done extra consulting as a software consultant, which was substantial but not the bulk of my income, and I filed for it much the same way. I've never been audited. Perhaps I've made a mistake, but I am following the rules to my understanding.
To be clear, I was a pro in 2005, not a full-time one. I don't make enough yet to do it as my full-time endeavor; it's only a part-time one.
As I understand it, the IRS doesn't required your business venture to be so successful that it is your sole source of income immediately. My long term goal in life is to make enough as a poker player to be a full-time professional, and I'm carrying out my pursuit of that in a professional manner with substantial resources of my time both at and away from the tables. I am a professional now, just a part-time one. AFAICT, you are still allowed to file a Schedule C as a sole proprietor even if you only received a substantial portion, but not the bulk, of your annual income from that business. It's what I've done since around 1996 for other consulting work as well.
Anyway, I am not a tax accountant, and nothing I say can be considered advice from a USA tax expert. It's based on a single taxpayer's reading and understanding of his obligations under the law. I do know that the requirements that you carry out the activity in a professional manner, that you are seeking to make more doing it over time, and that you don't use it to hide unreasonable expenses are a big part of the IRS' judgement of whether or not it is a hobby business, and therefore prohibited from Schedule C land.
I'm very interested to read that book I mentioned elsewhere (I forget its name and author, but it's a tax accounting book for poker players), and will be posting a review of it this winter.