Recently, The Treasury Inspector General For Tax Administration (TIGTA) reviewed methods used by the IRS to identify businesses that may not be operating for profit, and recommended steps be taken to maximize the use of all relevant and available taxpayer information to better identify hobby losses. This is expected to pose a significant issue for some horse businesses.
The below is quoted from Highlights of Reference Number: 2016-30-031 to the Internal Revenue Service Commissioner for the Small Business/Self-Employed Division. The Treasury Inspector General For Tax Administration (TIGTA)'s review of a statistically valid sample of 100 returns determined that 88 percent showed an indication that Schedule C businesses were not engaged in for profit. TIGTA estimates that 7,511 returns in the total sample population of taxpayers may have inappropriately used hobby loss expenses to reduce taxes by as much as $70.9 million for Tax Year 2013. TIGTA recommended that the IRS: 1) make use of SB/SE Division research capabilities to identify high-income individual returns with multiyear Schedule C losses and other factors that indicate the taxpayer may not have a profit or capital gain motive for the activity and 2) emphasize the importance of required filing checks in the preliminary determination of whether to pursue a hobby loss issue and provide tools to assist examiners in documenting their conclusion. In response to the report, IRS management agreed with the recommendations and plans to take corrective actions. READ THE FULL REPORT
Photo Copyright: vikarus / 123RF Stock Photo
0 Comments
Leave a Reply. |
AuthorB. Paul Husband, avid horseman, author, tax attorney and legal representative for the entertainment industry. Archives
August 2018
|