Andrew Ewalt's Law Blog

Is Your Hobby Really A Business?

Is your hobby really a business?  The IRS may think it is. Once people start making money from their hobby, there may be a desire to deduct all of the hobby-related expenses.  If this happens the IRS may become very interested in the nature of the hobby because taxes may be due.

When the hobby generates some income it is generally okay to deduct actual hobby-related expenses up to the annual income the hobby generates.  There are a number of limitations so it is very important to discuss any deductions with a qualified tax professional.

Keep in mind that the IRS will not just take your word that the hobby is/isn’t a business.  Here are some questions to ask yourself:

1. Do you pursue the activity with the goal of making a profit?
2. Have you made a profit in three of the last 5 years?
3. Does your activity involve horse breeding, showing or racing?
4. Do you keep accurate books and separate your hobby and personal finances?
5. Do you spend a significant time conducting your hobby?
6. Does the hobby involve significant personal pleasure or recreation?

As stated before it is very important to speak with a qualified tax professional before determining the status of your hobby as a business.  If it is a business, besides the tax ramifications it may be important to consider protecting yourself by formalizing the business through the establishment of an entity like an LLC. 

Hobbies are a wonderful part of all our lives, and can become even more so as a business opportunity. However, it becomes very important to consider all of the tax and legal ramifications so that your hobby does not turn into your headache. 

Organ Donation

When I meet with estate planning clients one of the more interesting questions I must ask is whether or not the client is or wants to be an organ donor.  This is a very personal question. A question that nobody else can answer for us.  In Connecticut there is a process for notifying others that you are an organ donor.  Notice can be placed on your drivers license or state issued ID card.  The other way is through the Connecticut Advance Directives document, which includes several other very important legal statements about your health.

If you are considering donation of your organs here are a few questions and answers published by the Connecticut Coalition for organ and Tissue Donation.

Will my decision to become an organ and tissue donor affect the quality of my medical care?

No. Organ and tissue surgery takes place only after all efforts to save your life have been exhausted and death has been legally declared. The doctors working to save your life are entirely separate from the medical team that would be involved in recovering your organs and tissues.

Will donation disfigure my body?

Donation neither disfigures the body nor changes the may it looks at rest.

Are there any costs to my family for donation?

No. Donation costs nothing to the donor's family or estate. The donor's family is responsible for hospital charges not involved with the donation, and the donor's funeral arrangements.

Does my religion approve of donation?

All major religions approve of organ and tissue donation and consider it a gift, an act of charity

Who can become a donor?

Everyone should consider him or herself a potential organ and tissue donor. Your medical condition at the time of death will determine what organs and tissues Can be donated.

What organs and tissues can I donate?

Needed organs include the heart, kidneys, pancreas, lungs, liver and intestines. Tissue that can be donated includes the cornea of the eyes, skin, bone, heart valves, veins and tendons.

What will happen to my donated organs and tissues?

Patients who receive organs and tissues are chosen based upon many factors, such as blood type and medical matching. A national system is in place to ensure the fair distribution of organs in the United State. The buying or selling or organs is against the law.

For more information about organ and tissue donation call:

Connecticut Coalition for Organ and Tissue Donation, From area code 203 dial 1-800-446-6362, or from area code 860 dial 1-800-874-5215.

Business Owners # 1 Question

Often clients ask me if they should establish a legal entity when starting a business and if so what type of legal entity they should use (LLC, S-Corp, C-Corp, Not-for-profit).  The array of options and filing requirements can often be very daunting and because Connecticut’s Secretary of State (this is the government office where business filings are made) does not provide much direction to citizen business owner’s, often the choice is to wait (where there is no legal entity the business is called a “sole proprietorship” or “partnership” if there is more then one business owner). 

Unfortunately, waiting to establish a legal entity can cause the business owner many problems not the least of which is personal liability for the business. 

Whether you are interested in starting a new business, buying an existing business or have an established business it is a very good idea to consider setting up a legal entity.

Identity Theft: Part 3

In order to help prevent identity theft it is essential that you monitor your finances on a regular basis.  Here are some steps you can take to stop the thieves.

1.  Monitor all balances of your financial accounts.

2.  Look for strange or unexplained charges or withdrawals.

3. Monitor your credit at least yearly and determine that no loans are being taken in your name.

4.  Place passwords on all your credit, bank and phone accounts.

5.  Secure personal information in your home, especially from roommates, outside help or contractors.

6.  Shred your charge receipts, credit applications or offers.

7.  Limit the number of credit cards and debit cards.

Your computer can also be a porthole into your life.  Updating your virus protection software can be an effective deterrent.  Never download files from strangers. Never store financial information on your  laptop.

Identity Theft: Part 4

What if you have already been riped off?  What can you do to repair your identity?  The road to repairing your identity can be a very difficult one.  However, once you have determined that you have been the victim of identity theft it is very important that you limit your exposure going forward so that no additional damage will occur.  Here are some steps to repairing your stolen identity.

1.  Place fraud alerts on all credit reports and then review them.  Credit reports will can be available free of charge.

2.  Close all accounts that have been effected or opened without your permission.

3.  File a report with the police where the identity theft took place.

4.  File a complaint with the Federal Trade Commission.