Business or Hobby
Do I have a business or hobby under Social Security
Social Security is not required to follow IRS
guidelines in determining whether an individual has a business. Filing a
schedule C for tax purposes is one indication that they use, however they can
and do deviate from the guidelines using POMS RS 01802.000. A single indicator
is not enough to determine that there is a business, but not all indicators have
to be present. There are four primary indicators of a business which follow:
The intention to make a profit or produce
income. The nature and extent of services are not important, if the person
derives their income from the activity, it is a business.
Ongoing operations, regular activities or
standard transactions (billing, purchasing, etc.) Length of time of the
operations is a factor however seasonality of the business also needs to be
It is an occupation.
Representing to the community that it is a
An illegal activity may be a trade or business and
must report and pay income and Social Security taxes.
Hobbies are activities in which there may be buying
and selling, but the buying and selling involved with a hobby is generally done
for the purpose of improving or otherwise furthering the hobby. The purpose is
not to produce income.
The following questions are quoted from POMS RS
01802.010 and are the questions SSA Claims Reps. use to determine if the
individual has a trade or business.
Has IRS issued a ruling to the individual
regarding the existence of a trade or business?
What documents has the individual executed?
(e.g., SS-4, tax reports or returns, . . . etc.)
Why does the individual feel the activities
constitute a trade or business?
Associating with other individuals? In what
capacity? (i.e. partner, helper etc.)
What business firms or other organizations did
the individual deal with?
How was income reported on tax return?
Business licenses, permits, registrations?
Place of business?
Indications of availability to others for
Member of business or trade association?
Other pertinent information?