Business Services ? Home Business or Hobby? Avoid The IRS Audit

We know this is not the most exciting topic ? but it just might save you some money and real frustration later on.

Let?s say you have worked hard to get your ?work from home online internet marketing business? up and running and you are finally starting to make some money.

You have been filing your 1040 tax form each year with deductions for using a portion of your home as an office, supplies and equipment including a new computer, lots of information products and software used in your learning cycle.

You have been diligently deducting these expenses against income each year all the while keeping accurate records as you have been told to do.

But now out of the clear blue you get a notice of audit from the IRS in year 5 of your work from home online internet marketing business. You are shocked to be informed that the IRS is disallowing all of the deductions you have taken on your home business going back to day one and all of a sudden you owe the government a bunch of money.

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This is being done on the basis of IRS Regulation Section 1.183-2 which is a little known area of the code that can give you a nasty surprise.

Internal Revenue Code Section 183 (Activities Not Engaged in for Profit) limits deductions that can be claimed when an activity is not engaged in for profit. IRC 183 is sometimes referred to as the ?hobby loss rule.?

It would be wise to set up and run your business from the beginning in a manner that will protect you from the unhappy scenario outlined above. Be advised, the IRS is very active in pursuing this examination of small business under IRS Regulation Section 1.183-2. If the IRS determines that you are not engaged in activities to make a profit, then no deduction for losses is allowed.

We recommend checking the IRS website (IRS.gov) and going to Code Section 183 or just put ?hobby loss rule? in the search box.

As if you don?t have enough to do in running your online internet marketing business from home.

Hopefully, this information will help you stay out of trouble with the IRS!

For complete information visit ?? IRS ? Business or Hobby?

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Diversified Business LLC and Diversified Business Online provide information and resources to small business? ? visit? Diversified Business Online

Source: http://www.advancedoptic.com/2011/10/home-business-or-hobby-avoid-the-irs-audit/

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