dricherson Posted January 21, 2020 Report Share Posted January 21, 2020 Hi I've searched a bit on this forum and not found an answer to my question, so maybe someone can help me, please. I am a "Hobby" potter, but last year I sold about $2500.00 (gross) of my own pottery on Etsy. I am 71 years old, a retired graphic artist and drawing social security. My husband still works. Am I, at some point, required to be a business and pay taxes as a business and all that involves? So far, I have not included any Etsy sales as income on my taxes. Any information would be really appreciated. I am totally ignorant about business things, I am just having fun with clay, but don't want to get in trouble with the IRS! Thank you Dianne Link to comment Share on other sites More sharing options...
GEP Posted January 21, 2020 Report Share Posted January 21, 2020 First of all, congrats on making $2500 in pottery sales last year! And yes you have to pay taxes for the income. For IRS purposes, you don’t need to register as a business, you can file as a sole proprietor, which means the pottery income will be part of your personal tax return. Use a Schedule C to report all of your income and expenses from the pottery. If your records are simple enough, you can use a Schedule C-EZ. You said your sales were on Etsy, did you make any sales within your own state? Then you also need to collect and file sales tax for your own state. Put this on your to-do list for 2020: get a sales tax license. Depending on your state, you may need to register as a business entity within your state in order to get a sales tax license. But this is separate from the IRS and income taxes. Link to comment Share on other sites More sharing options...
liambesaw Posted January 21, 2020 Report Share Posted January 21, 2020 Yes, if you're accepting payments, the payment processor is required to report your income to the IRS for anything over 20,000 and 200 transactions. As far as reporting sales on your income, yes, you are supposed to do that as well. Even bartered services are supposed to be reported at the cash value of the service/goods. Link to comment Share on other sites More sharing options...
neilestrick Posted January 21, 2020 Report Share Posted January 21, 2020 When in doubt talk to an accountant. Link to comment Share on other sites More sharing options...
liambesaw Posted January 21, 2020 Report Share Posted January 21, 2020 At some point it'll make a lot more sense to become a business since all your supplies, equipment, studio, show fees, etc become tax deductible. I formed my pottery business last year and because of the initial costs of equipment and weak sales I didn't owe anything extra. Link to comment Share on other sites More sharing options...
GEP Posted January 22, 2020 Report Share Posted January 22, 2020 42 minutes ago, liambesaw said: become a business since all your supplies, equipment, studio, show fees, etc become tax deductible. Not sure if you’re talking about forming an LLC or a corporation, essentially a separate tax entity from yourself. This isn’t necessary in order to deduct all of the expenses of a small pottery business. This can be done by simply adding a Schedule C (or a Schedule C-EZ) to your personal tax return. Link to comment Share on other sites More sharing options...
liambesaw Posted January 22, 2020 Report Share Posted January 22, 2020 2 minutes ago, GEP said: Not sure if you’re talking about forming an LLC or a corporation, essentially a separate tax entity from yourself. This isn’t necessary in order to deduct all of the expenses of a small pottery business. This can be done by simply adding a Schedule C (or a Schedule C-EZ) to your personal tax return. Sole proprietorship, which needs to be licensed here in Washington Link to comment Share on other sites More sharing options...
Roberta12 Posted January 22, 2020 Report Share Posted January 22, 2020 All states seem to have their own spin on things. In Colorado it is a misdemeanor to sell any sort of retail without a sales tax or special event license. So do get on your state Dept. of Revenue site and find out the rules for you. Mea and I aren't talking about forming an LLC, although you can if you wish, but just registering under your name and Soc.#. If you are selling through Etsy (Congrats by the way) I would think there will be a paper trail of some sort. Might as well be on the up and up. Roberta Link to comment Share on other sites More sharing options...
Stephen Posted January 22, 2020 Report Share Posted January 22, 2020 16 hours ago, dricherson said: Hi I've searched a bit on this forum and not found an answer to my question, so maybe someone can help me, please. I am a "Hobby" potter, but last year I sold about $2500.00 (gross) of my own pottery on Etsy. I am 71 years old, a retired graphic artist and drawing social security. My husband still works. Am I, at some point, required to be a business and pay taxes as a business and all that involves? So far, I have not included any Etsy sales as income on my taxes. Any information would be really appreciated. I am totally ignorant about business things, I am just having fun with clay, but don't want to get in trouble with the IRS! Thank you Dianne sounds like you've been doing it off the books for a while. I would go find an accountant to help me sort it out if last year is not your first year in business. If you get lucky and draw an audit then it would be a mess and you could get hit with penalties. I think anything over $400 is supposed to be reported. There are hobby business classifications where you cannot take losses for more than revenue and since you are selling on Etsy you are in my opinion more at risk than if you were selling face to face so liability insurance (few hundred bucks a year) and business structure might matter. You can form a single (or couple) person LLC and choose cash basis for the IRS and file the same as a sole proprietor. None of this stuff is expensive or that involved but you need to get on top of it and they do care, Audits are mostly random but a real hassle and can get expensive with them plugging in estimated income that you never even made. Link to comment Share on other sites More sharing options...
Mark C. Posted January 22, 2020 Report Share Posted January 22, 2020 In a perfect world the answer is yes you are a business . If this was a one off you may view it as a like a yard sale but since it sounds like the Etsy gig will continue you should check with your state (you did not tell us what state you are in)-collect state sales taxes and report the income on your return .Getting legitimate is a good thing. If you sold this pottety for cash as the farmers market my advice would be different. Your sales venue is all above board so you should be as well. Link to comment Share on other sites More sharing options...
dricherson Posted January 23, 2020 Author Report Share Posted January 23, 2020 Thanks to you all for your good advice! I really only wanted to make enough money to support my habit (pottery) :-) I will begin reporting my profits and ask our accountant for advice, too. For some reason I thought, at my age (71), the rules were different. I appreciate your experience and wisdom! Link to comment Share on other sites More sharing options...
oldlady Posted January 23, 2020 Report Share Posted January 23, 2020 there is a group of AARP volunteer accountant retirees who do taxes for seniors in many places. they have done my schedule C for me for many years. they do not do state taxes here but i do not know what they might do in alabama. try to find if this service is available to you. free is really good. Link to comment Share on other sites More sharing options...
Stephen Posted January 31, 2020 Report Share Posted January 31, 2020 On 1/23/2020 at 6:22 AM, dricherson said: Thanks to you all for your good advice! I really only wanted to make enough money to support my habit (pottery) :-) I will begin reporting my profits and ask our accountant for advice, too. For some reason I thought, at my age (71), the rules were different. I appreciate your experience and wisdom! I hear ya, it really dose seem like they tax everything to the extreme. If you want to just sell to offset cost then a hobby business classification may work well. Here's the IRS page on this: https://www.irs.gov/newsroom/hobby-or-business-irs-offers-tips-to-decide Hey enjoy and even if you have to do a little lite business bookkeeping its not too much hassle at tax time and a few grand in revenue against the cost isn't going to have a big impact on taxes so don't let this stuff cause negative feeling about an otherwise fun side hustle! Link to comment Share on other sites More sharing options...
Mark C. Posted February 1, 2020 Report Share Posted February 1, 2020 ( If you want to just sell to offset cost then a hobby business classification may work well) its to late for that for me but many can go this route- yes why its just a hobby business-I may run it by my account in a few weeks before the quarterlies come due. Link to comment Share on other sites More sharing options...
Stephen Posted February 1, 2020 Report Share Posted February 1, 2020 8 hours ago, Mark C. said: ( If you want to just sell to offset cost then a hobby business classification may work well) its to late for that for me but many can go this route- yes why its just a hobby business-I may run it by my account in a few weeks before the quarterlies come due. Ha ha, I think your side hustle is a little beyond the limits. Link to comment Share on other sites More sharing options...
Mark C. Posted February 1, 2020 Report Share Posted February 1, 2020 I looked up that IRS Link to a hobby and my gosh all the check offs applied to me so I guess I'm not going to be able to say I'm a hobbist. You know I started off just making pots for fun and it just got away from me. Link to comment Share on other sites More sharing options...
Callie Beller Diesel Posted February 1, 2020 Report Share Posted February 1, 2020 Mark, you keep using that word. I do not think it means what you think it means, lol. Link to comment Share on other sites More sharing options...
Cheryl H Posted May 12, 2021 Report Share Posted May 12, 2021 How about if someone lives in a retirement community and runs a ceramic club. It is only for personal enjoyment. Would the supplies and kiln repair costs for doing this be taxable? If not how does one get a tax exempt number? Link to comment Share on other sites More sharing options...
Mark C. Posted May 12, 2021 Report Share Posted May 12, 2021 1 hour ago, Cheryl H said: How about if someone lives in a retirement community and runs a ceramic club. It is only for personal enjoyment. Would the supplies and kiln repair costs for doing this be taxable? If not how does one get a tax exempt number? In California you apply thru the board of Equalization (BOE) recently renamed California Department of Tax and Fee administration (rolls right off your tongue right) In Florida it will be similar -tax permit means you do not pay sales tax on some resale items and you collect and pay tax on sales of pottery.Its a personal business permit not a club permit For example I buy clay and do not pay tax but sell the clay as clay or potttery and collect tax and then pay the stae tax yearly or quarterly depending on sales volumes. reapairs do not fit into this at all. Link to comment Share on other sites More sharing options...
oldlady Posted May 25, 2021 Report Share Posted May 25, 2021 @cheryl, contact the pottery club at Sun City near Sarasota. they have been active for many years. ask them how they handle taxes. Link to comment Share on other sites More sharing options...
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