I have attached a whole lot of
information to help you make your decision.
If there are expenses
associated with your income, it would not make sense to classify the work as
hobbies. The expenses would only be deductible as itemized deductions
subject to a 2% adjusted gross income floor.
The recordkeeping and tax
reporting is less with a hobby.
I also wanted to clarify a
point for you - if you earned less than $600 from a side gig,
the payer doesn't have to send you a 1099 form, but you still have to
report the earnings.
Discussion -
Hobby or Self-Employment
First, ask yourself if your hobby is a
recreational pursuit or a profit-making endeavor. Earning a living doing something you
love is a natural goal, but you must be clear about your intentions to claim
expenses come tax time.
The IRS defines a hobby as an
activity:
- You do
purely for the love of it, regardless of the cost.
- You
expect no profit in return.
This doesn't mean you're
prohibited from earning any money. For example, if you tinker with cars, it's
okay for a friend to pay you for an occasional oil change.
Generally speaking, your hobby
is a business if:
- Some or
all of your income comes from the hobby. For example, you sell handmade
candy on an e-commerce store, and the earnings account for half of your
annual income.
- Your
hobby experiences profits and losses. For example, you earn significant
profits from Valentine's Day sales, but you've spent too much on a flavor
of Halloween candy that didn't sell.
To add
multiple IRS Schedule Cs:
- go to
Business tab; then Continue
- choose
Explore on my own or I'll choose what to work on (if it comes
up)
- then
Business Income and Expenses
- then
Profit or Loss from Business, click Start or Update.
- you
should see the Business Summary page that lists your businesses,
- right
below the list you can Add Another Business.
To enter income
if you did not receive a 1099-Misc:
Type “Schedule C” in the Search
box and then select the “Jump to” link. This will take you to where you can
enter any cash, personal checks or credit card payments (Form 1099-K) related
to your self-employment. You may be asked some general questions about your
business. After you answer them, you’ll be taken to the Your Business screen
where you can enter this income as Additional Income under Business
Income.
Any related
expenses are entered in the 1099 MISC section:
- Log into
your TurboTax online account and click on the Business tab and
select Continue
- Select
“I’ll choose what I work on” and this takes you to “Let’s gather your
business info” screen
- The
first section down is Business Income and Expenses, choose Update
- You are
now at the “Here’s the business info we have so
far” screen where you should see your Business listed
- Click Edit next
to that business and on the next screen, scroll down to the fourth section
which should be Business Expenses and select “Visit All”
