That is "other income". To enter hobby income in TurboTax please follow these steps:
That is "other income". To enter hobby income in TurboTax please follow these steps:
Do keep in mind that if the band produces reportable income for about 3 consecutive years, then the IRS will no longer consider it hobby income, but self-employment income.
Thank you. Its confusing. I answer the questions and input the info and Turbo Tax is treating it as a business and asking me for expenses. Its not profitable at this point, but it could be some years. Its not my regular line of work though, so i am concerned the IRS would say "that's a hobby, not a business."
If you start making money consistently, it won't matter if it's your regular line of work or not, it will be a business in the eyes of the IRS. And it will benefit you to treat it as such at that point.
The fact you didn't make a profit doesn't matter. If you show "intent" to make a profit, then as far as the IRS is concerned, it's a business and you're self-employed.
OK that makes sense. This is the first year I have made any money, but after expenses I will not have any profit. Will probably have small loss. Since this is the first year and I may make small profit next year, can i go ahead and file as a business on schedule C. I have an EIN number and the 1099 is payable to that business name. Thank you again for your help. I hope my questions don't sound stupid.
If the 1099-MISC shows the income paid to the business name and you have an EIN for that business, then there's no question that you are "in fact" self-employed. Reporting any other way will raise eyebrows at the IRS. One doesn't get an EIN for a hobby. You need to report this as the business income it is. The fact the business may show a loss in 2018 because of expenses doesn't matter. By reporting your business income/expenses on SCH C and since the business has no taxable income, you will not have any increase in your total tax liability. But you do need to report it for the business income it really is now.
Also, unless you're a one man band, you need to look at forming a partnership for this band. Otherwise, since the EIN of the current business is tied to your SSN and "only" your SSN, that makes you alone personally liable for the taxes. Forming a partnership is fairly simple. But if your state taxes personal income you should seek the help of a professional in setting up the partnership on paper. Then for 2019 taxes you'd file a 1065 partnership return and each member of the partnership will receive a K-1 from the partnership so that each member can report their share of income/losses on their own personal tax returns. Then you don't have to bear the entire brunt of everything on the tax front.
Thank you so much! I was thrown off by the initial reply stating that I needed to put this down as a hobby. It is to my benefit financially to put this down as business income. I was afraid that the IRS would deem this a hobby since its not my regular line of work and its a very small fraction of the income I rely on. If that makes any sense. And I really appreciate the information about the partnership. I am in Florida, so we don't have state income tax. Thank you again!