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Topic: Income Tax Question  (Read 1578 times)
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selainek
« on: August 25, 2005 07:44:35 AM »

I have been mulling around the idea of selling baby slings on either Etsy or Ebay (or both).  I was wondering if anyone knew how much money you have to make before you're required to report it on your Federal income taxes?  Does anyone from Missouri know about State income tax requirements?

I'll probably be lucky to sell anything at all but who knows, I might as well think positively right?  Right!
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jordanapaige
« Reply #1 on: August 25, 2005 10:20:32 AM »

I would verify this, but I think it is $3,000.
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selainek
« Reply #2 on: August 25, 2005 11:09:46 AM »

Thanks!  If only I could make $3,000! 

I tried going to the IRS website but what a bunch of muck.  How do they expect you to find anything?!
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meg4568
« Reply #3 on: August 25, 2005 11:11:27 AM »

they dont. so they can have your butt in a sling later.
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sweetpeahandcrafts
« Reply #4 on: August 25, 2005 11:25:22 AM »

My understanding of it is that you don't have to  "make"--ie, profit--anything, so long as you're *trying* to make a profit, you need a license and to pay (or at least try to pay--if you haven't made any money, you won't have much to report!) taxes.  This also means sales tax (mine are quarterly) and state income tax.  More or less everything revolves around the state level--I needed to get a business license from city hall, not from a federal office.  Then you're responsible for telling the feds whatever they need to know.

Jen
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LRS
« Reply #5 on: August 25, 2005 11:35:21 AM »

i"ll bet that a lot of states have the same kind of resources as Massachusetts offers.  The Attorney General's office offers information on starting a business in the state.  They have checklists and other information on the official state website.

LRS
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selainek
« Reply #6 on: August 25, 2005 11:56:56 AM »

I don't consider selling a few items on Ebay or Etsy starting a business.  I never even thought about getting a business license. 

Where is the line between starting a business and just making a little money on the side?  At what point do I stop testing the waters to see if there is a market for my product and start considering myself an entity?  I figure the difference is how much money I'm making.  If I sell three slings at $30 a piece, I don't think it's a business...sell 30 or 300 then that's a different story.  Know what I mean?
« Last Edit: August 25, 2005 12:05:32 PM by selainek » THIS ROCKS   Logged
sweetpeahandcrafts
« Reply #7 on: August 28, 2005 07:15:37 AM »

Yep,  I totally know what you mean.  My feeling is, if you're only doing a few, it's not a big deal.  That said, the technical definition of "business" is anything you are doing to try and make money.  It's in the boatloads of IRS paperwork you can read.  I got my business license when I set up my own site, and when I realized lots of craft fairs required you to collect sales tax.  The only way to collect sales tax is to have a tax number, and the only way to get a tax number is to get a business license.  Same applies for self-employment income tax.  Unless you are a legal entity, you don't pay tax on it.  Now that sounds a little backwards--I'm not saying don't get a license so you don't have to pay taxes--what I'm saying is that if you start reporting income without appropriate paperwork, you may be opening a can of worms Smiley

Check with your department of revenue (state) for details--ours is actually really helpful, once you find your way in Smiley

Jen
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jordanapaige
« Reply #8 on: August 28, 2005 08:23:39 PM »

You may want to contact your local SBA (http://www.sba.gov/) or SCORE (http://www.score.org/). They will be helpful in clarifying everything so you're sure your operating as required by law. SCORE allows you to send an email question to a counselor. I've found them to be very helpful.
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smokingmonkey
« Reply #9 on: September 01, 2005 08:27:55 AM »

Well, I'm still exploring how it works for retail sales, but as a longtime freelancer doing web design, one of the nice things about doing it the legit way is that you can write off expenses and purchases you make with your business. It's a few extra forms but the "profits and loss" paperwork for your federal income tax can really help. Every time I bought equipment, computers, cameras, office supplies, I kept track. Keep track of your mileage that's business related when you drive to a craft fair or even *fly* to a craft fair - you can probably write off the plane ticket. Just make sure you don't push it - have receipts for EVERYTHING and have proof that travel expenses and purchases were business related. I had an accountant that specialized in small businesses do my taxes for me for a few years and that helped a lot to learn what was possible.
 
I'm hoping this works the same with a crafting business. Keep track of materials and equipment and use that to offset your income. Does anyone else have other advice or experience with this?
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