I would like to know how much money would an artist/craft person have to make
in a year before having to pay federal or state tax. That would be after
deductions. I am also retired. Does that have any bearing on the taxes? I see
most of this information for people who are really setting up a serious
business. I will be doing craft shows and selling through a few shops. What
would be my tax obligations and what would they be based on?
I agree BizResearcher and JGabriel. If your net income from your business or
hobby meet or exceed the filing requirement for federal tax purposes with the
IRS, you will generally have to pay income taxes. AND/OR if your retirement
income plus your hobby business income exceed the filing requirement, you may
have a tax liability. For 2011, the filing requirement for persons 65 and
older was $10,950.
You must report all income for tax purposes, even if it is small and even if
you are retired (that has no bearing on tax reporting). Whether you choose to
be considered a business or a hobby business will depend on the frequency of
your sales and whether you want to deduct expenses if they exceed income. If
you choose to be a hobby business, you can deduct expenses only equal to
income; you cannot take a loss on your taxes.
If you will have enough sales to consider creating a business, you will need
to register your business name and entity type with your state, secure a
sales tax permit and possibly a local business license if your city licenses
all business activities. You will also need a separate bank account. As a
business, you can then deduct all your expenses even if they exceed income.
However, you will be expected to make a profit at some point. Otherwise, you
raise a red flag and could be audited by the IRS.
JGabriel | Community Moderator |
11/28/2012 - 4:03 pm
You may find the following blog useful. SBA has resource partners like SCORE, Women’s Business Centers and Small Business Development Centers located across the country that provide free business counseling to individuals looking to start or expand a small business. Visit our local assistance guide to find your local SBA resource partners by entering your zip code.
alexisk | Window Shopper | 12/10/2012 - 8:28 pm
hobby meet or exceed the filing requirement for federal tax purposes with the
IRS, you will generally have to pay income taxes. AND/OR if your retirement
income plus your hobby business income exceed the filing requirement, you may
have a tax liability. For 2011, the filing requirement for persons 65 and
older was $10,950.
BizResearcher | Window Shopper | 12/4/2012 - 1:25 pm
you are retired (that has no bearing on tax reporting). Whether you choose to
be considered a business or a hobby business will depend on the frequency of
your sales and whether you want to deduct expenses if they exceed income. If
you choose to be a hobby business, you can deduct expenses only equal to
income; you cannot take a loss on your taxes.
If you will have enough sales to consider creating a business, you will need
to register your business name and entity type with your state, secure a
sales tax permit and possibly a local business license if your city licenses
all business activities. You will also need a separate bank account. As a
business, you can then deduct all your expenses even if they exceed income.
However, you will be expected to make a profit at some point. Otherwise, you
raise a red flag and could be audited by the IRS.
JGabriel | Community Moderator | 11/28/2012 - 4:03 pm
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