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Thread: tying commercially

  1. #31
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    All very true concerns Gretchen, Thank you. I am not sure what the level of income is for a "hobby" vs "Business" so have a conversation with your tax person before you take the plunge. Also know that this is the first year that Uncle Sam is requiring that paypal report your income to the IRS, so even ebay sellers must now register as a business for 2011. Regardless of what you do...keep accurate records. I keep monthly folders for sales, shipping, purchases, etc. ( match receipts with paperwork ), then check and re-check everything.

  2. #32
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    Quote Originally Posted by Gigmaster View Post
    Yeah. China knocks out several million Adams, Woolly Buggers, Clousers, and stock patterns, most likely tied by children in sweat shops, and they sell them over here for next to nothing.
    It could be argued, with no small amount of validity, that what tiers get here, stateside, is tantamount to a sweat shop wage. I think most would be stunned at how well the flies from China are made. Some of the worlds best tiers have their pattern made in China. I buy bugs all the time...sometimes because the guy behind the counter helped me. Most of the time because try as I may, I cannot tie all the patterns I would like to use.
    Harry Mason
    www.troutflies.com

  3. #33
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  4. #34

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    Quote Originally Posted by DaveMac View Post
    All very true concerns Gretchen, Thank you. I am not sure what the level of income is for a "hobby" vs "Business" so have a conversation with your tax person before you take the plunge. Also know that this is the first year that Uncle Sam is requiring that paypal report your income to the IRS, so even ebay sellers must now register as a business for 2011. Regardless of what you do...keep accurate records. I keep monthly folders for sales, shipping, purchases, etc. ( match receipts with paperwork ), then check and re-check everything.
    If Im not mistaken..
    anything under $5000 "In profit" is a hobby..
    anything over is a business...

    But in the state of Missouri you have up to 3 years to show you profit of over $5000..
    so I have to show my profit in fly tying (Over 5000... total profit... minus all cost of materials)... also in guiding...
    for either one not to be considered a hobby

  5. #35
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    That number sounds right. There is a big difference between the taxes you pay for a hobby and the taxes you pay for a business.

  6. #36
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    Hobby or Business?

    Check this link to the horses mouth.

    http://www.irs.gov/newsroom/article/...169490,00.html

    fishbum

  7. #37

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    Dave,

    Actually, the biggest difference between a 'business' and a 'hobby' are related to what you can DEDUCT, not what you PAY.

    They'll allow you to 'break even' with a hobby, but not use losses there to offset other income. For a business, you can use losses to offset other income, but only for so long....

    The concept is that the start up costs are usually high for any given enterprise, thus losses are expected until that is overcome.

    I know of no 'table' or 'rule of thumb' that attaches a dollar amount to whether or not your enterprise is a business or a hobby. What I learned over the years is that if you take in money for anything, you have to report it as income. It's how that amount you take in compares to the expenses you deduct that determines this. Basically, if you make a 'profit' you have to report it and pay taxes on it.

    If you want to keep yoiurself out of the clutches of the evil IRS, find a good tax expert and be SURE you know what you are doing before you do it. Yes, you'll have to pay for this advice, but it IS deductable as a necessary business expense .

    Buddy
    Last edited by Buddy Sanders; 02-20-2011 at 03:16 PM.
    It Just Doesn't Matter....

  8. #38

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    Here's an 'example' that I'm familiar with that illustrates the difference between 'business' and 'hobby':

    A friend of mine had a well paying job that he'd been doing for many years. He was also a pretty good weekend tournament bass fisherman. Doing that at a high level is VERY expensive. Boat, gas, gear, etc. really add up. But, he does occasionally win some prizes. Thus he has reportable 'income' from his hobby.

    He's allowed to 'duduct' the expenses of his 'hobby' up to the point where he offsets his 'earnings' from it. But, since the value of his winning in most years does not exceed his 'expenses', he can't duduct the 'loss' incurred in his hobby from the income he earns in his 'real' job.

    If, in an occasional year he actually makes a 'profit' from his hobby (he's won a couple of boats and such), he does have to report it as income and pay applicable taxes on it.

    He's not using the money from his 'hobby' to pay his bills or other living expenses. He pays his withholding taxes and Social Securtity, etc. through his 'real' job. He doesn't have to report and/or pay quarterly withholdings on his 'hobby'.

    The beauty of this is that he can do this for as long as he wants without having to show business growth or efforts at it.

    Would work for a fly tyer? I don't know, you'd need to consult a tax expert to be sure.

    Buddy
    Last edited by Buddy Sanders; 02-20-2011 at 03:35 PM.
    It Just Doesn't Matter....

  9. #39
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    Quote Originally Posted by Buddy Sanders View Post
    Actually, the biggest difference between a 'business' and a 'hobby' are related to what you can DEDUCT, not what you PAY.
    Exactly..... I pay my excise taxes on rods that I build for people and I report all of those expenses (including my fly tying expenses) but most of them I do not claim as a loss for a business, I simply claim them as income most often time atthe end of the year I am in the "hobby" section but I have had to pay out a couple times. Also do remember that you can use your time as a cost...... if you spent time you have to figure what your time is worth.

    Steve

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