a hobby or a side business
The IRS defines a hobby as an activity that an individual pursues without intent to generate a profit. Almost everyone partakes in some sort of hobby without worrying about whether it will generate income. However, as soon as you take steps to attempt to generate a profit you’ve got a business on your hands. de hobby or a side business.
whereas a business
The IRS usually considers you in an activity for profit if you’ve made a profit for three of the past five years. Otherwise, you have to establish a profit motive. You will determine your profit motive based on factors like:
If you carry on the activity like a business
Your expertise
Time and effort you spend on the activity
Your success in carrying on other similar or dissimilar activities
Your history of income or losses for the activity
Amount of occasional profits, if any, that you earn
Your financial status
If the activity has elements of personal recreation
If the activity is a hobby, you will report the income on Schedule 1, line 8 of Form 1040. The income won’t be subject to self-employment tax.
Because of a change made as part of tax reform, you won’t be able to deduct expenses associated with your hobby.
You won’t be able to claim the home office deduction. You can only claim that deduction if you have business income.
if it's a business it gets reported on schedule C, you deduct expenses on the form and pay self-employment tax on the net income. if profitable you would get a QBI deduction you.
you can pay to use TT audit defense to help you in this situation. but if it's a business, you'll have to pay up.
The Audit Defense service is provided by TaxResources, Inc., also called TaxAudit.com, in partnership with TurboTax. If you paid for Audit Defense and you received an IRS notice, call TaxResources, Inc. at 877-829-9695, or report your IRS notice on their web site at http://intuit.taxaudit.com/. Do not contact the IRS until you have spoken to TaxResources. They may contact the IRS on your behalf. be prompt the IRS gives you a deadline to respond by. if you don't they take the position you agree with them so if payment isn't made paychecks are garnished, liens are placed on your property, etc.
