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    0 Replies Latest reply on Sep 26, 2009 3:24 AM by thesavingshig

    Savings Highway, Home Based Business or Hobby? Tax Savings

    thesavingshig Wayfarer

      The Savings Highway, Home Based Business or Hobby? How IRS Determines Tax Savings


      The Internal Revenue Service reminds all home based business
      operators to follow appropriate guidelines when determining whether an
      activity is a home based business or a hobby, an activity not engaged
      in for profit.


      In order to educate taxpayers regarding their filing obligations, the IRS guidelines explain the rules for determining if The Savings Highway
      qualifies as a business and what limitations apply if the activity is
      not a business. Incorrect deduction of hobby expenses account for a
      portion of the overstated adjustments, deductions, exemptions and
      credits that add up to $30 billion per year in unpaid taxes, according
      to IRS estimates.


      In general, taxpayers may deduct ordinary and necessary expenses for conducting a Savings Highway
      business. An ordinary expense is an expense that is common and accepted
      in the taxpayer’s trade or business. A necessary expense is one that is
      appropriate for the business. Generally, an activity qualifies as a
      business if it is carried on with the reasonable expectation of earning
      a profit.


      Auditors are being told to use several tests to
      determine if your “activity” is really a “hobby”
      or a “business.” Hobbies get a few tax breaks,
      but home-business owners get substantianly more!


      If they can reclassify you as a hobby, the IRS gets
      more of your money.


      IMPORTANT: As A Savings Highway representative. One of the tests that is not well
      understood, has to do with how much time you
      spend on the activity.


      You need to prove *“Material Participation*” in
      your Savings Highway opportunity. Here are seven ways to prove you qualify for the tax savings:


      1: If you work your business at least 500 hours
      per year. Tax Savings Allowed


      2. If you work your business at least 100 hours per
      year AND no one else working in your business
      puts in more time than you do.Tax Savings Allowed


      3. The taxpayer does substantially all the work in the activity.Tax Savings Allowed


      4. The activity is a significant participation activity (SPA), and
      the sum of SPAs in which the taxpayer works 100-500 hours exceeds 500
      hours for the year.Tax Savings Allowed


      5. The taxpayer materially participated in the activity in any 5 of the prior 10 years.Tax Savings Allowed


      6. The activity is a personal service activity and the taxpayer materially participated in that activity in any 3 prior years.Tax Savings Allowed


      7. Based on all of the facts and circumstances, the taxpayer
      participates in the activity on a regular, continuous, and substantial
      basis during such year. However, this test only applies if the taxpayer
      works at least 100 hours in the activity, no one else works more hours
      than the taxpayer in the activity, and no one else receives
      compensation for managing the activity.Tax Savings Allowed


      In order to determine wether the Savings Highway is a qualified home based business or hobby, taxpayers should consider the following factors:


      Does the time and effort put into the activity indicate an intention to make a profit?


      Does the taxpayer depend on income from the activity?


      If there are losses, are they due to circumstances beyond the
      taxpayer’s control or did they occur in the start-up phase of the


      Has the taxpayer changed methods of operation to improve profitability?


      Does the taxpayer or his/her advisors have the knowledge needed to carry on the activity as a successful business?


      Has the taxpayer made a profit in similar activities in the past?


      Does the activity make a profit in some years?


      Can the taxpayer expect to make a profit in the future from the appreciation of assets used in the activity?


      The IRS presumes that an home based business is carried on for
      profit if it makes a profit during at least three of the last five tax
      years, including the current year — at least two of the last seven
      years for activities that consist primarily of breeding, showing,
      training or racing horses.


      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. The limit on not-for-profit losses
      applies to individuals, partnerships, estates, trusts, and S
      corporations. It does not apply to corporations other than S


      Tax savings for
      hobby activities are claimed as itemized deductions on Schedule A (Form
      1040). These deductions must be taken in the following order and only
      to the extent stated in each of three categories:


      Tax savings that a taxpayer may take for personal as well
      as home based business activities, such as home mortgage interest and
      taxes, may be taken in full.


      Tax savings that don’t result in an adjustment to basis, such as
      advertising, insurance premiums and wages, may be taken next, to the
      extent gross income for the activity is more than the deductions from
      the first category.


      Tax savings that reduce the basis of property, such as depreciation and
      amortization, are taken last, but only to the extent gross income for
      the activity is more than the deductions taken in the first two


      As you can see from the guidelines established by the IRS qualifying as a legitimate home based business such as The Savings Highway
      are extremely straight forward. (Work at your business opportunity for
      100 hours a year, and intend to make a profit). Turn your everyday
      activities (Eating and Driving) into substantial tax savings when you
      join the Savings Highway today.



      Contact Me:


      Jim Roche NJ







      Skype Id= jim.roche3

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