Welcome Guest. Register Now!  



Reply
 
LinkBack Thread Tools Search this Thread Display Modes
  #1 (permalink)  
Old 05-01-2013, 06:24 PM
Junior Member
 
Join Date: May 2013
Posts: 1
Shouldn't have filed Schedule C - how to correct?

Hi,

We filed our taxes and included a Schedule C for my wife's expenses as an artist (her sole occupation). At first glance, the thought was she is in the "start up" part of her career and the expenses being incurred are reasonable, however, she is now concerned that she will not be able to show a profit over the next several years to meet the IRS's requirements and we would have been better off to not include the expenses at all as it would be considered a hobby by the IRS.

If we want to re-file and remove the Schedule C how would we go about doing that? I have seen the IRS 1040X but I'm not sure if that is the correct way to proceed or not.

Thanks in advance.



Digg this Post!Add Post to del.icio.usBookmark Post in TechnoratiFurl this Post!Reddit! stumble!bookmark in google!Share on Facebook!
Reply With Quote
  #2 (permalink)  
Old 05-02-2013, 03:27 AM
Moderator
 
Join Date: Oct 2010
Posts: 5,258
“however, she is now concerned that she will not be able to show a profit over the next several years to meet the IRS's requirements and we would have been better off to not include the expenses at all as it would be considered a hobby by the IRS.============> This is an important question to ask yourself when you incur losses. If the IRS determines that your business is indeed a hobby, they can come back and prevent you from deducting your losses on that business. Small business taxes must be declared by filing a Sch C with income tax Form 1040; Hobby income merely requires a notation on line 21 of Form 1040. Write off hobby expenses on Sch A as miscellaneous expenses when itemizing deductions with a Form 1040 The irs reminds taxpayers to follow appropriate guidelines when determining whether an activity is a business or a hobby. If an activity is not for profit, losses from that activity may not be used to offset other income. An activity produces a loss when related expenses exceed income. Typically, the IRS would presume that you had a profit motive if you had profits in any three out of five consecutive tax years ending with the tax year in question. Of course, it is typical that new businesses lose money for the first few years and it may be hard for Joe to satisfy this guideline. Because of this, the IRS has developed several factors that they will look at to determine if you have a profit motive. None of these factors alone will determine whether or not the IRS considers your business a hobby. The IRS will look at all the factors and assess their opinion on whether or not you had a profit motive with your business. I guess you can contact the IRS for more info in detail.

“If we want to re-file and remove the Schedule C how would we go about doing that? I have seen the IRS 1040X but I'm not sure if that is the correct way to proceed or not.”===================>yes; you need to file 1040x; An amended tax return generally allows you to file again to correct your income/exp or etc. as you owe additional 2012 tax, you need to file Form 1040X and pay the tax before the due date to limit interest and penalty charges that could accrue on your account. Interest is charged on any tax not paid by the due date of the original return, without regard to extensions. Your state tax liability may be affected by a change made on your federal return. For information on how to correct your state tax return, contact your state tax agency. Access Form 1040X on the Internal Revenue Service (IRS) website. You cannot file an amended return electronically.You must include on your tax return hobby income on 1040 line 21. Tax deductions for expenses related to hobby income are limited to the amount of hobby income you report on your tax return, and can be taken as tax deductions only if you itemize your tax deductions on Form 1040, Sch A. The tax deductions are subject to the 2% AGI floor.However, if you sell items from your hobby collection at a loss, you cannot deduct a net loss on your tax return.



Digg this Post!Add Post to del.icio.usBookmark Post in TechnoratiFurl this Post!Reddit! stumble!bookmark in google!Share on Facebook!
Reply With Quote
Ads
Reply



Posting Rules
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts

vB code is On
Smilies are On
[IMG] code is On
HTML code is Off
Trackbacks are Off
Pingbacks are Off
Refbacks are Off


Similar Threads
Thread Thread Starter Forum Replies Last Post
How do you correct a previously filed Form 941 if you have found an error? TaxGuru Miscellaneous 0 09-24-2009 08:19 PM
How to correct a misfiled 1099/W-2 BradleyChuck Income 2 08-20-2009 12:18 PM
How do I correct a 1096 Form Jill C-Corporation 3 02-14-2009 01:54 AM
How do you correct a tax return that was not correctly filed? aron Miscellaneous 1 04-04-2007 08:19 PM
How much of Tax preparation fees are deductible on Schedule A & Schedule C? awkan Sole-Proprietorship 1 03-23-2007 11:28 PM

Follow us on Facebook Follow us on Twitter Google Buzz Rss Feeds

» Categories
 
Individual
 » Income
 » IRA/Sep
 » Medical
 
Corporations
 » Payroll
 
Forum for CPAs
 
Financial Planning
 
 
 

» Recent Tax Q&A
No Threads to Display.