{"id":4759,"date":"2016-11-10T08:00:06","date_gmt":"2016-11-10T14:00:06","guid":{"rendered":"http:\/\/taxprocenter.proconnect.intuit.com\/?p=4759"},"modified":"2019-03-06T08:08:26","modified_gmt":"2019-03-06T14:08:26","slug":"tigta-recommends-irs-step-up-hobby-loss-examinations","status":"publish","type":"post","link":"https:\/\/accountants.intuit.com\/taxprocenter\/tax-law-and-news\/tigta-recommends-irs-step-up-hobby-loss-examinations\/","title":{"rendered":"TIGTA Recommends IRS Step Up Hobby Loss Examinations"},"content":{"rendered":"

Under Internal Revenue Code Section 183<\/a>, business tax deductions are disallowed for any activity that is \u201cnot engaged in for profit.\u201d Better known as the \u201chobby loss provision,\u201d Section 183 states that an activity is for profit if it is profitable for at least three consecutive years of a consecutive five-year period; an exception is two of seven years for breeding, training, showing or racing horses.<\/p>\n

TIGTA\u2019s current audit<\/a>, issued April 12, 2016, was conducted to determine whether the IRS was maximizing its capabilities in identifying the most significant Schedule C noncompliance activities, and consequently, minimizing improper claiming of losses.\u00a0TIGTA found that the IRS can improve its methods to determine whether taxpayers are in compliance with these hobby loss provisions.\u00a0In fact, TIGTA estimated that 7,511 returns out of a sample of 9,699 individual returns (containing certain attributes) may have improperly used hobby loss expenses to reduce taxes by as much as $70.9 million for tax year 2013 (about $9,400 per return).<\/p>\n

TIGTA has recommended that the IRS do the following:<\/p>\n