15. Watch Hobbies and Losses



Warning 15
The taxmen are now keeping a close eye on people who claim losses from other business activities, such as hobby farms or involvement in other types of crafts and hobbies. The IRS has seen a marked increase in such claims and is taking an interest in people who claim activities resulting in a loss, which is then offset against other income. This often happens with rental properties, which produce consistent losses.

The activities that will be monitored include all kinds where losses are incurred and the venture does not amount to a genuine business undertaking, or where it is a scheme or arrangement to avoid tax.