Have a Tax Question? Ask a Tax Expert
Hello and thank you for using Just Answer,If you called it a hobby you would not be allowed to claim all expenses. In general, taxpayers may deduct ordinary and necessary expenses for conducting a trade or business.The IRS presumes that an activity is carried on for profit if it makes a profit during at least three of the last five tax years, including the current year. You have shown a profit for the past 2 years. f an activity is not for profit, losses from that activity may not be used to offset other income.If you did not file and report the activity in 2012 then you need to amend the 2012 return. You said you had a loss, I am not sure if you mean that after expenses were counted your Net income was a negative $1000 or you had true expenses that totaled $1000.
If you claim that the activity was a hobby and you had a true loss of $1000, you could not carry that forward but you woudl still be required to amend and report the activity.
Hobby expenses are shown on Schedule A.
You should not ignore the activity and the reporting that is required whether you have a hobby or a business.
You need to amend your 2012 and report the income then show your expenses either way. It is always better to make your own declarations of income then to have the IRS question you later.
Filed with TurboTax. Amend with them also or get an acct at this point? Will it tell me penalties?
Most penalties are based on the amount of tax owed. You can use TT to amend the return. If there are penalties the system would advise on the amount.
Thank you for your excellent responses.
You are most welcome
You may wish to continue with the activity so reporting now is easier.