[LinusKS]

I'm not an expert, but I am a small business person, and I've filed my own taxes, including Schedule C, for every one of the last seven or eight years.

A lot of the stuff that gets posted on 2+2 strikes me as somewhere between wrong and silly.

Anytime anybody starts a new business they're not going to be able to show profits on 3 out of the past 5 years, or whatever the number is. I've always shown a profit, and nobody ever asked about the past five years during the first five years I paid my taxes (or at any other time.)

You don't need a "business telephone listing," "business cards," or a "permit" to be a professional gambler. Nobody's going to be impressed because you have those things, when your business doesn't need them.

If you're a casual gambler, like 99.9% of all gamblers, gambling is not your business. The IRS doesn't want you deducting all your losses. Similarly, if you're an amatuer photographer, they don't want you deducting the cost of all your cameras and film. If you like to collect stamps in your spare time, they don't want you deducting the cost of the stamps. If you like to play video games... well you get the idea.

There's no magic formula for distinguishing between a business and a hobby, but there is one crucial distinction: whether you made a profit.

Most people don't make money off their hobbies.

If you made a profit, the IRS wants to get paid, and the Schedule C is probably the right place to do it.

Some other distinctions include whether you treat it as a business (keep records, for example), and whether you have an expectation of making a profit.

The only thing that makes gambling a little trickier than other hobbies is that occasionally recreational gamblers get lucky. If you go to Vegas once or twice a year, and happen to score one time, you probably shouldn't file a Schedule C, because you're still just a recreational player who happened to get lucky.

The bottom line is, any time you have a business, you can and should use a schedule C. A Scedule C allows you to deduct the costs of your business from your income, and record the result as your "profits."

IMO, most of the people in this forum should probably be using Schedule C.


Again, this is just my opinion, based on my own experience and knowledge of the tax code. If someone knows better than me, please correct me.


Oh, one other thing - the $500 thing is a widespread misunderstanding. Technically, you're supposed to report all your income, even if income from a particular source is less than $500.

The $500 thing, I believe, comes from the amount of money after which someone employing an independent contractor has to (or is supposed to) send in a W-2.