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Tax talk…in June?

The American Horse Council’s latest “Tax Bullentin” includes information about the recently released IRS fact sheet entitled “Business or Hobby? Answer Has Implications for Deductions.” The IRS says it is to remind taxpayers to follow appropriate guidelines when determining whether an activity is a business or a hobby, an activity not engaged in for profit. This fact sheet is directed toward all types of activities, not just horse-related endeavors. Generally, an activity qualifies as a business if it is carried on with the reasonable expectation of earning a profit (that may leave out quite a few of us).

Another item from the newsletter cautions about business activity conducted in states other than where you reside or are based. It is very important for horse owners to keep their tax advisors informed of any business activity they conduct in other states. Otherwise unnecessary costs can be incurred because in a lot of cases taxpayers who do not address the tax issues of nonresident states are not contacted by the state until years after the return should have been filed and the tax paid, if any. By that time penalties and interest have been assessed and in some cases additional professional fees are incurred in order to resolve the matter.

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