The FIRE Hobby Income That Triggers an IRS Audit

Episode 126 of The FIRE Podcast tackles a hidden audit risk for early retirees: hobby income. Lucas and Luna walk through the IRS's nine-factor test for distinguishing a hobby from a business, using the example of a FIRE blogger who earned $12,000 from affiliate links and got audited after three years of losses. They explain why the 'presumption of profit' rule matters, how to document your side hustle as a business, and what happens if the IRS reclassifies your income—including back taxes, penalties, and losing the ability to deduct expenses. Specific numbers: the $25,000 net loss that triggered the audit, the three years of profitable activity presumption, and the 20 percent accuracy-related penalty. A must-listen for any FIRE enthusiast monetizing a passion project. #FIRE #FireMovement #FinancialIndependence #EarlyRetirement #HobbyIncome #IRSAudit #TaxAudit #SideHustle #BusinessVsHobby #PresumptionOfProfit #TaxDeductions #AffiliateIncome #ScheduleC #TaxPlanning #Finance #FexingoBusiness #BusinessPodcast #PodcastEpisode Keep every episode free: buymeacoffee.com/fexingo