The IRS emphasizes importance of business plans | TSLN.com

The IRS emphasizes importance of business plans

John Alan Cohan, Attorney at Law

In recent years the IRS has ruled that a written business plan is important evidence tending to prove that you are operating in a businesslike manner. The Tax Court has said that in hobby loss cases you should have “some type of plan” for the venture. This applies whether you are involved in horse breeding, racing, other farming activities, classic car refurbishing, multi-level marketing, antique collecting, boat or aircraft chartering, and other areas traditionally under IRS scrutiny.

The IRS takes the view that a written business plan demonstrates your businesslike concern for the success of the venture. People engaged in a hobby do not have business plans. One of the most important things that distinguishes a business from a hobby is the existence of a written business plan.

There are numerous resources, some good and others not, to assist you in drawing up a business plan. It is advisable to have a business plan drafted by a professional, and the fee will depend on the complexity of the facts involved.

Keep in mind that a business plan is one of the best items of evidence to show your true intentions. The IRS Audit Technique Guide asks revenue agents to ask for a business plan in horse and livestock audits, and the absence of a plan is evidence that the taxpayer is not operating in a businesslike manner. In audits, most individuals are caught off guard when asked whether they have a business plan. Some will say that their activity is very basic, that they know what they are doing, and that they don’t “need” a business plan.

In recent years the IRS has ruled that a written business plan is important evidence tending to prove that you are operating in a businesslike manner. The Tax Court has said that in hobby loss cases you should have “some type of plan” for the venture. This applies whether you are involved in horse breeding, racing, other farming activities, classic car refurbishing, multi-level marketing, antique collecting, boat or aircraft chartering, and other areas traditionally under IRS scrutiny.

The IRS takes the view that a written business plan demonstrates your businesslike concern for the success of the venture. People engaged in a hobby do not have business plans. One of the most important things that distinguishes a business from a hobby is the existence of a written business plan.

Recommended Stories For You

There are numerous resources, some good and others not, to assist you in drawing up a business plan. It is advisable to have a business plan drafted by a professional, and the fee will depend on the complexity of the facts involved.

Keep in mind that a business plan is one of the best items of evidence to show your true intentions. The IRS Audit Technique Guide asks revenue agents to ask for a business plan in horse and livestock audits, and the absence of a plan is evidence that the taxpayer is not operating in a businesslike manner. In audits, most individuals are caught off guard when asked whether they have a business plan. Some will say that their activity is very basic, that they know what they are doing, and that they don’t “need” a business plan.

In recent years the IRS has ruled that a written business plan is important evidence tending to prove that you are operating in a businesslike manner. The Tax Court has said that in hobby loss cases you should have “some type of plan” for the venture. This applies whether you are involved in horse breeding, racing, other farming activities, classic car refurbishing, multi-level marketing, antique collecting, boat or aircraft chartering, and other areas traditionally under IRS scrutiny.

The IRS takes the view that a written business plan demonstrates your businesslike concern for the success of the venture. People engaged in a hobby do not have business plans. One of the most important things that distinguishes a business from a hobby is the existence of a written business plan.

There are numerous resources, some good and others not, to assist you in drawing up a business plan. It is advisable to have a business plan drafted by a professional, and the fee will depend on the complexity of the facts involved.

Keep in mind that a business plan is one of the best items of evidence to show your true intentions. The IRS Audit Technique Guide asks revenue agents to ask for a business plan in horse and livestock audits, and the absence of a plan is evidence that the taxpayer is not operating in a businesslike manner. In audits, most individuals are caught off guard when asked whether they have a business plan. Some will say that their activity is very basic, that they know what they are doing, and that they don’t “need” a business plan.

Go back to article