Is It a Business or a Hobby? How the IRS Decides (Ep. 29)
Have you ever wondered if your side hustle qualifies as a legitimate business or if the IRS sees it as just a hobby?
In this episode, Jim Sumpter, CFP®, unpacks the surprisingly high-stakes distinction between the two. With real-life examples, Jim walks through the IRS’s 9-factor test for business classification and why failing that test could cost you big.
Whether you’re freelancing, selling handmade goods, or launching a passion project, this episode will help you understand how to treat it like a business from day one.
Here’s what you can expect from this episode:
- The 3-out-of-5-year IRS rule that could make or break your deductions
- How to pass the 9-part business test (even if your work is part-time)
- What counts as “expertise” in your field—and how to prove it
- Common mistakes that turn business deductions into audit risks
- And more!
Connect with Jim Sumpter:
- 205-510-9074
- CMC Financial
- LinkedIn: Jim Sumpter
- LinkedIn: CMC Financial
- Facebook: CMC Financial
- Instagram: CMC Financial
- YouTube: CMC Financial
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