Business Income Tax Calculator
April 5th, 2007
If you're new here, you may want to subscribe to my RSS feed. Thanks for visiting!
Question: Do I claim this income as hobby or business?
I have done a little software development work on the side. I really enjoy writing software, and because I write less and less for my job, I feel enthusiastic about writing for pleasure, plus working on different types of development is enjoyable. I have roughly brought in $15k (~270 hours of work). I have no deductions as I did this from my home using my laptop. Also this is the first year that I have done this.
I used H&R block tax estimator calculator. I put in my regular job information plus this income as a hobby and I get back money. When I put the same numbers in as a business I owe.
Do I claim this income as hobby or business?
Answer: It is self-employment income. The main issue is whether you are trying to make a profit through your work, which is a goal of businesses but typically not of hobbyists. So, if someone asked you to code for free, would you do it? Have you done it? These are the things the IRS will look at in determining if you have a hobby or a business.
If it is a business, you owe self-employement tax (15.3% for social security and medicare). If it is a hobby, you don't owe that tax... that's why you get a refund if it's hobby income and owe taxes if it is self-employement income.
I hope that helps.
IRS Tax Tips for the 2010 filing season - #9
Top 10 reasons to visit IRS.gov
Contractor Calculator -- Net 85% of your income
Related posts
Posted in Business Taxes | 
Tags: calculator, finance, money, small business income tax calculator, tax, taxes