The Financial Puzzle Playbook

Is It a Business or a Hobby? How the IRS Decides (Ep. 29)

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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
      • ...more
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      The Financial Puzzle PlaybookBy Jim Sumpter
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