I really appreciate how A.J. presents a detailed plan with options. This makes all the difference in the world to me. The difference between A.J. and others is that he is way smarter and actually cares about what’s happening with his clients.  John D.

For-Profit Business or Hobby, Facts and Circumstances

Generally, a business is considered “For Profit” if the business generates a profit in at least three out of five consecutive years.  For training, showing, breeding, or racing horses, then the business needs to generate a profit for two out of seven years.  What if the business does not meet this test?
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Tax Consequences for Determining if a Business is For-Profit or Hobby

It’s important to understand the hobby loss rules when starting a side business.  For the first couple of years, it is common for a start up business to lose money.   If the side business loses money for several years, the business may be a hobby.  The tax consequences of reporting a business as “for profit” versus a hobby can be significant.
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Trust Fund Penalty – Rules for DBA and Single Member LLC

Generally, the IRS has to assess trust fund penalties to make individuals in a corporation personally liable for unpaid payroll taxes.  The word “corporation” has meaning in tax law.  If the business is not considered a corporation, then the owner is automatically personally liable for unpaid payroll taxes.  Read this blog for more information on the trust fund recovery rules for DBAs and Single Member LLCs.  Continue reading…