Do any "hobbyist" knife makers understand the US tax code?

JoeBusic said:
Yep. Hobby is black market. They want to kill it. Legalize your work. Talk to someone with knowledge about it. Try searching to legalize for donations, sole proprietorship and similar. I'm in EU and it's even tougher here. I went directly to LLC. Just keep the numbers right.
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This is what I do as well. Even a hobby business, straight to LLC. In Michigan at least, it's really easy to do and there are some liability benefits to having a business entity and a personal entity for things some people consider dangerous.
 
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matto6 said:
Right. I have the option of starting an LLC. But they have rules on that, like showing that you make regular profits, etc.

All I want to do is give away shit at cost, without LOSING money. And I can't see how to do it legally. So stupid.
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You have a certain amount of time to make a profit, not every year and especially not the 1st few years. I've been told itnwas 3 years to show a profit. And that doesn't need to be a huge profit, just some.
 
Stacy E. Apelt - Bladesmith said:
No, if you run it as a business filing a schedule C, and then shut it down because it was not profitable, those years were covered in tax returns.

I had a friend in the music business. He would start an LLC and run it four or five years with only one year making a small profit. Sometimes he would have to fudge the books by NOT deducting some legitimate expenses just to make it show a small profit of a couple hundred dollars. After those five years with only one profitable year, he would close the LLC. The next year he would start a new LLC and go for another four or five years This is completely legal.
The advantage to him was that his travel, lodging, meals, instruments, maintenance, studio percentage of his home, music subscription site fees, EVERYTHING music related was a legitimate deduction as long as he was performing or trying to sell his CDs and music. He would drop by every record shop and radio station when on a trip to give away a copy of his latest CD with his card.
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This is the advice my dad gave me, whose been self-employed , very profitably at times but not always, when I started a few small businesses to use up my spare time. Basically, make it "look like you're trying to make a profit" and they can't do much about it. Plenty of businesses fail every year, yours just happens to be one of them.
 
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Should we really be talking about tax evasion by operating under the radar? I mean, sure... the IRS has bigger fish to fry(not including the really big fish, who will never see the inside of a frying pan) but we are still giving advice to circumvent the system. BF is good with that?
 
Rick Marchand said:
Should we really be talking about tax evasion by operating under the radar? I mean, sure... the IRS has bigger fish to fry(not including the really big fish, who will never see the inside of a frying pan) but we are still giving advice to circumvent the system. BF is good with that?
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Yeah, not good advice.

The entire point of my post is to understand the tax law so I can operate within it 100% legally.
 
just track all your business sales and expenses, estimate current inventory and give it to your accountant, let them figure it out lol.
 
matto6 said:
Yeah, not good advice.

The entire point of my post is to understand the tax law so I can operate within it 100% legally.
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I know... you said it in your original post... lol. I'm surprised to see the moderation staff participating in that.
 
Last year Paypal contacted me and told me that they would end my service if I did not provide a Tax ID number. I read through all the IRS info and determined I fall under Gig Economy and got a tax ID number under that occupation.

Self employed taxes really suck!
 
matto6 said:
Oh that's not so bad then. You can start the LLC, and if the profits don't come later there's no penalty. You basically ran a non-profit for 5 years, then shut it down.


So there's no point in deducting more than you bring in though, right?

Or was the story that he had an office job making $50k/year, a business bringing in $1k/year, and he deducted $10k/year, lowering his tax burden on the $50k?
Because that's starting to sound shady.. and like audit material.
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wow. you are stating so many erroneous conclusions in this thread. I have been a sole proprietor for more than 30 years now. I'm not in any way dumb enough to give specific tax advice here other than consult an accountant or certified tax preparer.
 
stubbornforge said:
wow. you are stating so many erroneous conclusions in this thread. I have been a sole proprietor for more than 30 years now. I'm not in any way dumb enough to give specific tax advice here other than consult an accountant or certified tax preparer.
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So you chimed in just to tell me me I'm getting everything wrong, but that you're not willing any help in any way to point me in the right direction.

Thank you kind sir, for your positive energy and constructive contributions to this thread.
 
I think the takeaway here is that if you are seriously concerned with being 100% IRS compliant in your hobby and/or business you should hire a tax professional instead of soliciting internet advice on a knifemaker’s forum.

(No snark is intended in the above post, just sincere “advice” to point you in the direction you need instead of the direction you want. Good luck! )

***still want to see your taxable work!
 
Bühlmann said:
I think the takeaway here is that if you are seriously concerned with being 100% IRS compliant in your hobby and/or business you should hire a tax professional instead of soliciting internet advice on a knifemaker’s forum.
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Agreed and I will obviously get tax input from a professional before taking action.

But that doesn't mean you can't also ask around how other are dealing with this to get ideas.

***still want to see your taxable work!
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Hah. My taxable ideas are still drawings on paper at this point. I'm going to start by attempting to replicate a few of my favorite wood choppers / short machetes.
 
There is no right or wrong with the IRS. Only legal and illegal. Fixing sales to match your needs is not wrong. Tax deduction is not tax evasion. Just make the numbers right and all is OK. Legal advice is here gold. Knowing is freedom. Learning basic business models is key. CPA is your best friend.
 
If getting advice, I'd suggest getting advice from an accountant, not a tax professional (tp working under an accountant is probably okay though). CPA is a legitimate title requiring certain knowledge. Anyone who can get a ptin is a "tax professional".
(Source: I was a "tax professionl" at an accounting firm and H&R Block to pay for grad school. It takes almost nothing to get started. )
 
if you're doing something as a hobby, trying to expense your expenses is obviously illegal.
I love mountain biking, but I'm not keeping the receipts for my equipment so I can claim the tax back.
a hobby is a hobby because it costs you money.
 
Lorien said:
if you're doing something as a hobby, trying to expense your expenses is obviously illegal.
I love mountain biking, but I'm not keeping the receipts for my equipment so I can claim the tax back.
a hobby is a hobby because it costs you money.
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Sorry but you completely missed the point of what I'm trying to do.

I'm not trying to mountain bike and expense the cost of my mountain bike. I'm trying to build mountain bikes and sell them for the minimal cost of the materials, hence making zero profit and essentially giving people bikes.

That is not anything like trying to write off my mountain biking hobby. (I do mountain bike BTW!)
 
matto6 said:
Sorry but you completely missed the point of what I'm trying to do.

I'm not trying to mountain bike and expense the cost of my mountain bike. I'm trying to build mountain bikes and sell them for the minimal cost of the materials, hence making zero profit and essentially giving people bikes.

That is not anything like trying to write off my mountain biking hobby. (I do mountain bike BTW!)
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ok then, so building mountain bikes and selling them for the cost of the materials is the hobby. Still doesn't mean you're legally entitled to write off your expenses. Unless you're a registered charity of course.
if you're going for profit, you're doing business and that means you get to expense your expenses.
the whole point of the government allowing businesses to write off expenses is to give incentives to those who want to have a business, because private business is the backbone of the kind of society we like to live in.
There is no reason a government would provide the same allowance to hobbyists.

the point of what you seem to be trying to do is tilt at windmills!
 
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