Does anyone run their quilting as a business and deduct all their fabric?
 

My MIL is a tax consultant. She has me get my checking account statements at the end of the year and I go over them and mark everything that has to do with quilting. I can see by the store how far I traveled to buy fabric and can deduct the gas and mileage on my rig. I deduct a portion of my mortgage payment because my quilt room is in my home. I sell some of my quilts and have a business so this helps me out tremendously on taxes. I keep most of my quilts (and give lots of family) but by having a business, I can write off a lot of my gadgets and fabrics and notions.

As a tax lady I don't think I'd do your taxes.

When I checked with my accountant I found that I would have to show enough profit in a few years. since I also do a lot of charity quilting this wasn't going to fly for me.

ali

So does your business always show a loss or an income?

I agree with scissors queen. I wouldn't put my name as a preparer on that return, either.

What does that mean? Is she doing it wrong? What should she be doing instead? I'm not running a business, but I have contemplated it, so any information you can give would be helpful.

As a previous tax preparer - I would want some backup to the information as well as a separation from business/personal expenses.

One of the biggest red flags for the IRS is the business deduction of a "home office." The regulation says "regularly and *exclusively*" for business use. Any personal use and it's not deductible for business use. And that's just one of the reasons I wouldn't do that tax return.

Yup, I'm standing with the rest of the accountants on this one. Wouldn't touch your taxes for all the fabric in Paducah. For starters, you can only deduct costs and expenses that are documentedly related to the business quilts (assuming that quilting is your business), not the personal ones, those you give away or keep. So, if you sell 5% of the quilts you make, you could possibly deduct 5% of the cost of that ruler you bought, not the whole thing. Same with all the other stuff you say you are getting a tax break on.

And the 'kept' quilts, to count as business quilts, must be available for purchase and promoted as such. They can't be sitting in a closet waiting for a buyer to just 'happen' to see them. The home office/studio deductions are very closely watched and can easily trigger an IRS audit. The regs on that deduction changed many years ago. Sounds like you need a new tax advisor to me...and fast, tax season is upon us!

As I understand it, when the IRS takes their share out of the money I get from quilting, I can deduct the costs involved in making that income. I can't deduct more than the income, so if I make $100, I can't claim it cost me $200 to make something and deduct it.

I don't remember if my accountant deducts for the sewing room, but if he does I can guarantee that it is only used for quilting unless you walk on four feet and need the litter box - the room doesn't double as a bedroom or storage room, and apart from the litter box, everything in it relates to quilting.

If I get audited, so be it, although it would be huge waste of time and taxpayer money. I have my receipts saved and I'll be glad to show them exactly what I spent. I'm not making much more than pin money, and even with the deductions I usually have to pay.

Janet