Bobbielinks

This is interesting, I will be watching this thread. Years and years ago, I tinted photos (this was before colored prints became popular) to earn a little extra money. At that time my tax preparer told me I couldn't claim the cost of my paint and other supplies as a deduction as what I was doing was considered a "hobby"; however, I needed to report any monies over $50 I earned in a year.

happysteve

it is not that most people don't think they owe tax, but they are probably selling them for a lot lot less than they are worth, considering the amount of time put in to make them.

WMUTeach

Can we use those we donate to known non-profit organizations as a contribution if we have the appropriate record of the donation? Any one know? Of course then comes the question of the value of a contribution? Interesting post.

sweetana3

your tax preparer was incorrect. "Hobby" income is reported and the costs applicable to earning the income is deductible. Now it might change where the income and expese is reported on the return and might be subject to limitations (which might be what your preparer was telling you in simpler terms).

There have been several preparers in just our state who were subject to jail time for falsifying returns and one favorite was hobby income and expenses. It was the people who went to them that really got hurt. I know as I audited hundreds of them over several years. Very few people actually make a significant profit from their hobby. I knew a longarmer who spent probably tens of thousands on supplies (she had over 7000 computer patterns, hundreds of spools of thread, bolts and bolts of batting and lining, etc. Not to mention the $30,000+ Statler Stitcher). She could not support herself doing quilting and got so tired of all the work so she sold the whole thing.

She said she paid off the machine but when all was said and done she had no taxable income from the business.

damaquilts

"This form will only be sent to sellers who processed over $20,000 in goods and services sales and completed 200 transaction".
"I sure am not going to have worry about it. My income (disability) is already 5 grand under the poverty level and I sure didn't make 20 grand last year . If I could make that I wouldn't mind paying taxes. Even when I was working the most I made was 18 grand. Good thing prices then were not like now.
Its coming they are going to find a way to tax the air.

mhollifiel

I donate all my pieced tops to PL. I rarely finish a quilt anymore unless I just happen to need a wedding gift or a baby is coming. Lately my line is dwindling so all have been going the PL direction. I did learn to keep receipts for EVERY Little Thing. My fabric receipts fill a gallon sized ziplock.
I learned to do this from my dad. Funny story here about his being audited in the late 50s. Two IRS men came to our dairy farm to audit his tax records. They questioned some tiny deduction for feed. He went to the cupboard and pulled out a paper sack, dumped it and plowed through the receipts until he found it. They didn't ask again. He even got more money back for the years they reviewed. I keep everything that the IRS might possibly want to see and then some.

ghostrider

If you have receipts for the materials used in the donated quilts and a confirmation of the donation, then yes, they can be listed as charitable contributions. The value is the cost of materials only, not your time or 'expertise'.

sewbizgirl

It's called "self-employment tax"... and it's 15%. Whenever you do work for someone and they don't withhold, but prefer to pay you directly and report it on a 1099 form, they come out better financially, but you will owe 15% on the income. So if someone is paying you under a 1099 reporting, be sure to charge them that extra 15%...

sewbizgirl

Funny story here about his being audited in the late 50s. Two IRS men came to our dairy farm to audit his tax records. They questioned some tiny deduction for feed. He went to the cupboard and pulled out a paper sack, dumped it and plowed through the receipts until he found it. They didn't ask again. He even got more money back for the years they reviewed. I keep everything that the IRS might possibly want to see and then some.

I had a similar situation. Was called in for an audit after I wrote a letter to Bill Clinton, telling him what I thought of some of his policies, back when he was president-- (don't tell me THAT was a coincidence...). Once the IRS examiner saw that I had detailed records for every bit of income and expenditure, she pretty much concluded the audit and said I didn't owe any more money. They won't waste their time once they see that you have kept good records.

It's a shame we have to spend so much of our life doing that, tho!

Scissor Queen

No you won't. You may or may not get a form from Paypal depending on how much you sell. The only time you "hear from the IRS" is when you're getting audited or there's a mistake on your return.