# Will Uber be treated as a "hobby"



## LosYanquis (Jun 18, 2015)

I am preparing my tax returns for 2016, I have worked as ride share driver part time off and on since 2014, in both 2014 and 2015 I reported a tax loss on my returns, I am looking at a rough estimate based on my mileages and earned income from the ride share companies this year and I am projecting a loss for 2016 but I have really not dug into the details of any expenses, do I need to watch out having three straight losses on my taxes in 2016? Is it worth to try and dig up all my old expenses if it will tip me into a tax loss for 2016? Anyone been in similar spot, what are there approaches?


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## UberTaxPro (Oct 3, 2014)

LosYanquis said:


> I am preparing my tax returns for 2016, I have worked as ride share driver part time off and on since 2014, in both 2014 and 2015 I reported a tax loss on my returns, I am looking at a rough estimate based on my mileages and earned income from the ride share companies this year and I am projecting a loss for 2016 but I have really not dug into the details of any expenses, do I need to watch out having three straight losses on my taxes in 2016? Is it worth to try and dig up all my old expenses if it will tip me into a tax loss for 2016? Anyone been in similar spot, what are there approaches?


 Wow! I was just working on an article for my website about this exact topic. I'll give you the rough draft here:
The Hobby Tax is not a tax on hobbies as the name would imply. It is actually a separate set of rules that are different than the rules for businesses. Understanding what the IRS looks at when deciding whether an enterprise is a business or a hobby, can empower you to take proactive measures insuring your business remains a business in the view of the IRS.

Just the other night while watching Shark Tank on TV I heard Mark Cuban say that he has a personal rule for evaluating a business. He said that if a business loses money for three years it's not a business anymore. While that might be a good rule for a shark, luckily for the rest of us it's not a rule that the IRS follows.

While it's true that if your business does not turn a profit in 3 of the last 5 years the IRS might begin to suspect you have a hobby and not a business. It's not however the single factor in their decision. Even if your business never turns a profit you can still keep it a business under the tax law by being proactive and meeting as many of the IRS's requirements as possible. Along with this comes the ability to offset other income with the business losses. If your business comes under the IRS's hobby spotlight there are nine factors that will be evaluated. The nine factors are:

1. The manner in which the taxpayer carries on the activity. Do they complete accurate books? Were records used to improve performance?

2. The expertise of the taxpayer or his advisers. Did they consult with experts?

3. The time and effort expended by the taxpayer in carrying on the activity. Do they devote much of their personal time and effort?

4. The expectation that the assets used in the activity may appreciate in value. Is the plan to generate profits through asset appreciation.

5. The success of the taxpayer in carrying on similar or dissimilar activities.

6. The taxpayer's history of income or losses with respect to the activity.

7. The amount of occasional profits. Even a single year of profits can be a strong indication that an activity is not a hobby.

8. The financial status of the taxpayer.

9. Does the activity lack elements of personal pleasure or recreation? If the activity has large personal elements it is indicative of a hobby.

As factors 4 thru 9 are out of most business owners control, effort should be put into making sure your business complies with factors 1 thru 3. You don't have to have all nine, however the more the better. Generally, you should:


Treat your business as a business, keep records and use those records to evaluate your business.
 Seek knowledge and professional advice about your business
 Keep time records of your participation in the business.


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