Business loss reducing W-2 wages?

[mikemann101]

I have a full time W-2 job, plus I have a business as an author.

My expenses in my author business exceed the author income. I thought the losses would be limited to the author income (net 0 tax impact) and the excess loss would be an NOL, but TurboTax is deducting it thru Sch. C line 10 into 1040 Line 8.

Is that correct??

[Bsch4477]

TurboTax is handling it correctly. You don’t deal with the net loss carryover until your carryover after subtracting the business loss from other income exceeds $300,000. 

[mikemann101]

Thanks!

Do I need to worry about the IRS looking at the author income and calling it Hobby Income (vs business)?  I expect to eventually come out with a profit on the business, but starting out I have had more expenses than income.  

[Bsch4477]

If an activity generates a profit in at least three out of five consecutive years, it is presumed to be engaged in for profit. However, if an activity fails to meet this test, it may be considered a hobby, and expenses related to that activity may not be deductible

[CatinaT1]

You do not have to carry on regular full-time business activities to be considered self-employed. You can file this as self-employment income if you have a profit motive.

Tax Tips for Freelance Writers and Self-Published Authors